This time the Journal doesn´t sound like the Journal. David Wessel writes about Liaquat (Lords of Finance) Ahamed´s musings:
There is an optimistic scenario for the U.S. economy: Europe gets its act together. The pace of world growth quickens, igniting demand for U.S. exports. American politicians agree to a credible compromise that gives the economy a fiscal boost now and restrains deficits later. The housing market turns up. Relieved businesses hire. Relieved consumers spend.
But there are at least two unpleasant scenarios: One is that Europe becomes the epicenter of a financial earthquake on the scale of the crash of 1929 or Lehman Brothers 2008. The other is that Europe muddles through, but the U.S. stagnates for another five years, mired in slow growth, high unemployment and ugly politics.
No one would intentionally choose the second or third, yet policy makers look more likely to stumble into one of those holes than find a path to the happier ending.
Correction: We´re already inside the “hole” and some seem to like it there!
At the end:
A senior U.S. policy maker, a fan of Mr. Ahamed’s book, called me the other day. “Promise me,” he said, “that if you write a sequel about the Great Depression of 2012 that you’ll note that I was one of the guys really trying to head it off.” It was, in a way, one of the few encouraging things I’ve heard lately. It conveyed a welcome appreciation of how large the stakes are. We’d be better off if more policy makers realized that.
Who could that policy maker be? The only one that comes to my mind is Charles Evans of the Chicago Fed:
Last year about this time economic conditions deteriorated to the point that we undertook discussions on how to provide further monetary accommodation—and we ended up with our second round of large scale asset purchases. Now, one year later, we again find ourselves with a weakened economic outlook and again trying to decide what further accommodation to provide. I’m sure everyone will agree that we seriously don’t want to be in this position again at this time next year. I believe that means we need to take strong action now.