Legal Commentary

Economy Contracts By 3.8% In 4th Qtr Of 2008

By Big Tent Democrat

The bad news continues:

The economy shrank at a 3.8 percent pace at the end of 2008, the worst showing in a quarter-century, as the deepening recession forced consumers and businesses to throttle back spending. The new figure, released Friday by the Commerce Department, showed the economy sinking at a much faster clip in the October-December period than the 0.5 percent decline logged in prior quarter.

This information makes clear that the stimulus plan proposed by the Obama Administration is simply inadequate for the crisis we face. Unlike in other recessions, the instruments of monetary policy are not available. As the NYTimes reports (and as Krugman has been explaining for months now (google liquidity trap + Krugman)), Fed rates are already at virtual zero. We need a huge fiscal stimulus in excess of a trillion dollars. The Obama plan is entirely too timid. In my opinion, it will fail.

Speaking for me only

Full post as published by TalkLeft on January 30, 2009 (boomark / email).