That’s the takeaway from the wankfest on the gas tax holiday, for those of you following along at home. Expect no help from Obama or his “creative class” [cough] supporters. That’s an important message for you to internalize now, because it’s only going to get worse, and they don’t want you asking for other help later. RGE Monitor:

In mid-March – at the peak of the crisis - the Fed did not just partially bail out the Bear Stearns shareholders who would have been totally wiped out in the case of a disorderly collapse of Bear Stearns; more importantly the Fed effectively bailed out JP Morgan that had – like Bear – and still has a massive exposure to the CDS market; it bailed out the creditors of Bear Stearns who would have suffered massive losses if the Fed had not outright bought $29 billion of toxic securities held by Bear; and it effectively bailed out Lehman, Merrill and a good chunk of the shadow financial system as the Bear Stearns bailout – together more importantly with the new TSLF and the PDCF facilities – ensured – for the first time since the Great Depression - that systemically important broker dealers would have access to the lender of last resort support of the Fed. Without these new facilities and the Bear bailout a generalized run on many institutions of the shadow banking system would have occurred.

While the extreme tail risk of a systemic financial meltdown – and we were in mid-March one epsilon away from such a generalized run on most of the shadow banking system – was avoided by the trifecta of the Bear Stearns bailout, and the creation of the TSLF and the PDCF facilities the stresses in the financial markets – liquidity and credit crunch - remain severe as even the FOMC had to admit in its latest statement.

You’ve heard about the 200 economists who think Hillary’s gas tax holiday is the worst idea since Social Security? Where were they when the subprime debacle was going down?

Sure, collecting consulting fees in the Village, everybody does that, but did any of them — besides Duncan, who called his shot on the big shitpile in 2003, IIRC — blow the whistle? Oh wait. It’s not like economists are supposed to have anything to do with the real economy. Sorry. My bad.

oday instead the most extreme traditional and non-traditional monetary actions have done little to ease the liquidity crunch almost 10 months since it started. The reason is that the economy faces not only an illiquidity problem but also a credit and insolvency one: millions of households are underwater and bankrupt; hundreds of subprime - and now some near prime and prime lenders have gone bankrupt, dozens of home builders have gone bankrupt, dozens of highly leveraged financial institutions have gone belly up, many municipalities are under severe financial stress and even a fat tail of the non financial corporate sector is highly indebted, marginally profitable and will go into financial distress during the ongoing recession (business bankruptcies are already 50% above their 2007 level). Thus, monetary policy can address illiquidity problems but cannot resolve credit and insolvency problems. And this US economy now suffers of a virulent strain of illiquidity and insolvency problems.

So the liquidity crunch remains severe in spite of all of the extreme policy actions by the Fed and other central banks. In forthcoming note we will show why the recent stock market rally is just a bear market sucker’s rally; and why the credit crunch is getting worse rather than getting better. The worst is still ahead of us both for the real economy that is spinning into a more severe recession and for financial markets where unrecognized losses are much larger ahead than the losses that have been already recognized.

More cake, vicar?