Is that they kind of intellectual rigorous debate that David Frum is promoting around here?

LOL!

They track fairly well.

The Fed has caused numerous recessions by tightening credit. Every time there has been a negative yield curve, there has followed an economic slowdown.

The Fed has stimulated the economy by pouring money into the system.

The growth of the money supply is by far the biggest factor in why the economy is the way it is.

Which leads to financial crisis which is excascerbated by CDS gambling.

And the mess we’re in.

Regulated out of the market.

I don’t think money drives an economy – more like an essential lubricant.

And its worse if you run out – not only do you grind to a stop, but its not as simple as just pouring some in to get things going again. You may need your heads resurfaced, at best.

What we have today is a “wealth effect” in reverse: Americans look at how little their home is worth on today’s market, and they look at how much their 401(k) has shrunk. And they feel poorer. And they’re spending less money.

That’s going to take years to reverse.

We need patience.

Look past the unemployment numbers and concentrate on what REALLY drives an economy: MONEY.

And I love this suggestion: “Some of that $75 billion would have been better spent pushing the banks to refinance loans of borrowers who have an ability to pay their loans.”

I hope the author realizes that this was, in part, what TARP was for. To shore up balance sheets and unfreeze lending–which it did–but only when the banks were ready to start lending again. Before that they were tightened up and credit was dry. $75 extra billion advanced to “incentivize” banks would have been nothing.

You would’ve had to order them to loan money, but then that would be socialism, wouldn’t it? So we can’t have that either.

The dilemma that always plagues good governance.

If your neighbors house catches fire, you want the fire department to put it out – because that fire creates a risk to your house. And you don’t want the fire department to have to be debating whose fire they put out and whose they don’t – so you make fire protection a public good, and everyone pays for it.

But that’s not enough. Having faulty electrical wiring installed greatly increases the chance that someone’s home will burn down. So we now add building codes to mandate that someone can’t go cheap on the wiring in order to afford an extrawide garage. So in reality – a homeowner’s “freedom” to purchase a crappy wiring system has been taken away by the state for the general good.

How’s that tie in here? The middle is getting beaten up in no small part today because of excessive risk taking – in our financial sectors, and by homeowners who took out mortgages that had the potential to go upside down. The margins, as you put it. We clearly have a public interest in putting out the fires started by that risk taking – because they can spread to burn down our own lifes – but if we’re going to consider that part of the government role, then government also has to make sure the wiring isn’t faulty.

And in America over the last 8 years … in some ways, the last 28 years … the idea that electric codes hamper innovation and electric code inspectors are a blight on the free market has dominated much of the public debate. (Metaphorically, of course, for the overly-literal)