I May Be a Credit Crunch "Denier" Too
As most of you already know, I am an anthropogenic global warming skeptic, aka “denier”. Well, a new paper by the Federal Reserve Bank of Minneapolis has turned me into a credit crunch skeptic too.
The maintstream narrative on why we need a bailout is that credit is “frozen”. We can’t just let the financial sector sort itself out because it provides the credit “grease” that lubricates the rest of the economy. The graphs in this paper make it pretty clear that the wheels of Main Street have plenty of grease. So it looks to me like the bailout is corporate welfare plain and simple. It also means that Paulson and Bernanke talking about how bad things are to justify the bailout may have actually exacerbated any real recession by magnifying the psychological salience of the crisis.