Choosing Recession

Lakshman Achuthan and Anirvan Banerji, Forbes

The 2008 recession guarantees many months of job losses that will boost foreclosures and feed the credit crisis. But if fiscal stimulus had reached consumers quickly, it would have forestalled a recession, helping to stabilize the housing market. Such a soft landing would have bought some breathing room in which to resolve the credit crisis until the lagged effect of monetary policy kicked in.

There is a raging debate about how the economy got into recession, and who is to blame. Many have concluded that the housing and credit bubbles guaranteed recession. But because this debate will influence policy for the next economic cycle, the right lessons must be learned from this series of unfortunate events.

An essential point is being overlooked--that this recession was actually avoidable as recently as several weeks ago.

Panic Time at the Fed

Steve H Hanke, Forbes

U.S. Treasury Secretary Henry Paulson's blundering is becoming more breathtaking with each passing week. At the end of March he rolled out a grand plan to crown the Federal Reserve as the nation's new financial stabilizer. The Fed a stabilizer? That's who created the financial mess we're in.

If this wasn't bad enough, Secretary Paulson then donned his cheerleader's uniform and encouraged Beijing to let the Chinese yuan appreciate against the greenback. All the while favoring in this fashion a debasement of the U.S. currency, Paulson proclaimed that we should remain calm and confident because the economic fundamentals are sound. He reminds me of the stockbroker who performed a valuable service to his partners by always being wrong.