Tuesday, September 25, 2007

Bubblin'

In the American Prospect, Robert Kuttner offers his diagnosis of what's wrong with the economy: a short exegesis about excessive financialization, an overdependency on asset bubbles, out-of-kilter stabilization mechanisms, and, above all, a ridiculously permissive regulatory environment.

Considering each, Kuttner hopes the current downturn will only result in a mild recession. He's clearly worried, though, and notes, with some trepidation, that crisis aversion is almost wholly in the Fed's hands because of the systemic nature of the problems. In the end, he hopes that the high wire act can be pulled off, but he's not terribly optimistic.