We’ve embodied a lot of wealth in non-liquid forms, and our policies are trying really hard to keep it that way. Financial crises can either be in solvency or liquidity. The latter is easier to address. The housing aspect of the crisis was clearly one of solvency. This is a bigger problem because those insolvent assets are also illiquid. We did a much better job of addressing that sort of issue with the S&L crisis of 25 years ago. At the time we bitched a lot about the inadequacies that were obvious in unraveling those positions, but our current approach is a cluster**** by comparison (I hope I can be free to use that military lingo for emphasis).
There’s an arthouse film called Thirty-Two Short Films About Glenn Gould. You’re getting Twenty-Six Short Posts from Dr. Tufte. :) These are on why it’s difficult to understand the current macroeconomic situation.
Joe Baker is not a macroeconomist, but we all do a little bit of everything at SUU, so he has to teach principles of macroeconomics sometimes. The other day he asked for pointers about summing up for his students why we can’t quite figure out what’s wrong with the economy. I came up with 26 reasons, most of which have been discussed in class, and all of which are now required.