FORGET THE DEFICITS . . . SPEND

Let's assume that you're in battle and you get wounded. Do you do the hard scrub and clean out the mess before it gets infected, or do you take some penicillin and hope it clears up on its own?

After pulling us through a recent Martin Wolf (the UK's Financial Times) article, this is the question posed by Yves Smith over at Naked Capitalism. Looking at the economic challenges we face, Wolf makes it clear that we're screwed. From private expenditures to balance of trade deficits, to falling industrial output and corporate debt loads, things are looking really bad . . . long into the future. Things are so bad that Wolf thinks (and I agree) that Barack Obama needs a stimulus package at least 2.5 times bigger that what he is asking for.

The rationale is quite simple.

With corporations and almost everyone else in America overextended we can do one of two things. We can force a "slow bleed" of $350 billion stimulus packages every 6 months on America (which will piss everyone off). Or do we do the bold thing and spend the $3-4 trillion we need to buy out homeowners and consumers who are sitting on a pile of bad debt that has the financial industry fretting over their future bottom lines? (which will only piss off the few remaining "free marketeers" and their fellow Flat Earth Society members).

There's more to this story, but I say we forget deficits for now (we've done it before) and spend. Let's do the hard scrub and clean out the mess before Bush's Economic Debaclypse spreads and turns our economy gangrene.

I'll discuss how we should spend on this Saturday's program.

- Mark