Not So Dismal

Making Economics a Little Easier to Understand

Posts Tagged ‘Bush

The Power Vacuum

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In response to today’s Politico Arena question:

Is there a potentially disastrous economic policy power vacuum, as Paul Krugman suggests this morning? What can be done about it?

What’s disastrous is the lack of transparency in the Treasury Department as led my Hank Paulson. What confidence remained in his office evaporated when he announced recently that he had known “all along” that simply buying distressed assets wouldn’t help the current situation. This means that either he deceived the Congress and the American people when asking for the massive emergency bailout bill or that he was trying to cover for an error of judgment after the fact. Neither spurs confidence in Treasury’s operation.

The reality is that there is a perception issue that is gripping us all at the moment. I firmly believe that we’re nearing the bottom and, as I predicted in early October on Arena, the Dow will settle somewhere between 7000 and 7500. Meanwhile, fear has swept away any sense of logic in the pricing of securities and the perverse effects of tax laws and various mutual fund regulations can only serve to further distort the market picture. This isn’t to say that there aren’t true issues with the economy. Rather, people turn to leaders in times of challenge. The Bush administration has gone on permanent holiday and Obama is reluctant to fill the gap. One is left to hope that the market can simply take care of itself.

Written by caseyayers

21 November, 2008 at 9:44 am