Reviving "Animal Spirits"

Less Trust = Simpler Financial System

"The more complex the transaction, the more trust is needed to sustain the transaction."

--Robert Shiller, "Animal Spirits Depend on Trust"; The Wall Street Journal (1/27/2009)

Robert Shiller, the Yale economist who made his name calling the 2000 Stock Market Bubble, has an excellent piece in Tuesday's Wall Street Journal explaining where the financial system is right now, and exactly how it got there.

In an era when trust has been shattered, securitization and derivatives are out, "plain vanilla" debt and credit -- and a lot less of them -- are in.

Obama's "Goldilocks" Approach

Obama's Fiscal Stimulus
Splits the Difference

"Obama's economic plan falls well short of what's needed."
--Paul Krugman, "The Obama Gap" (NYT, 1/9/09)

"Obama has vowed to do everything at once . . this will be the most complex piece of legislation in American history."
--David Brooks, "The Confidence Surplus" (NYT, 1/9/09)

Depending on who you believe, President-elect Obama has devised a $1 trillion(!) fiscal stimulus plan that either: a) is much too modest in scope; or b) wildly overreaches.

So far, so good . . .