Here are some videos from the Consumer Reports sit down session with the good doctor. The first three sessions are up in video form with the other parts to follow in the next few days.

Part 1) It's not all Bad News

Part 2) On surviving the next year

Part 3) On falling prices and deflation

The videos run between 2 1/2 to 3 min each.

(hat tip The Consumerist)

I am not an economist, but I can do arithmetic.

hat tip: calculated risk

On deficit spending and the need for boldness in addressing our economic woes:

Jamie Galbraith responds to the question posed by the National Journal, "Is the deficit a threat to future recovery?"

James K. Galbraith, National Journal: No. The question is grossly misconceived. Right now and for the immediate future, the budget deficit is the only source of demand that can fuel a recovery. Our present problem is not that it is too big, but that it is too small. Far too small.

Joe Stiglitz in the NY Times:

A $1 Trillion Answer
By JOSEPH E. STIGLITZ
Published: November 29, 2008

WHAT President-elect Barack Obama will need to do is horribly complicated but also very clear.

First, he must stop the economy from going deeper into recession. Then he needs to bring about a robust recovery, preferably in ways that support the long-term needs of the United States: by repairing our neglected public works, invigorating our technological leadership, making our society greener, fixing our health care problems, healing our social and economic divide, and restoring our social compact.

 Read more…

Posted on the run: no time to summarize. But Go! Read!

Radical Solutions for a Crazy Crisis by Nouriel Roubini [Forbes].

Yes, he used the R-word. In Forbes!

Nouriel Roubini has some advice:

U.S. should enact $400 billion stimulus [Bloomberg].

The U.S. government should enact an economic stimulus package of between $400 billion and $500 billion before the end of the Bush administration in January, New York University professor Nouriel Roubini said.

But what a stimulus!

“The only way to increase aggregate demand is going to be through” government spending on roads, bridges and other infrastructure, Roubini said at a Bloomberg conference in New York. “We need a huge plan, $300 billion is not going to be enough. I think we’re going to need a plan of $400 billion to $500 billion.”

 Read more…

Here.

MORTAL ECONOMISTS WILL CRINGE WITH FEAR AS THEY REMEMBER THEIR WORDS AT DAVOS 2007!

[I'm leaving this sticky because I think it's still the litmus test, and because of the impassioned comment thread. --lambert]

Here's a litmus test for whatever Congress comes up with as they huddle with the finance boiz over the weekend: HOLC good, RTC/RFC bad.

I may not understand this class warfare finance stuff, but I can sure quote people who do! Nouriel Roubini:

The most important policy action ... is rather the realization that a generalized debt and solvency problem required a solution that leads to significant debt reduction.

Let me explain in detail how we now need bold policy action to resolve this most severe financial and economic crisis…

Households in the US have too much debt (subprime, near prime, prime mortgages, home equity loans, credit cards, auto loans and student loans) while their assets (values of their homes and stocks) are plunging leading to a sharp fall in their net worth. And households are getting buried under this mountain of mounting debt and rising debt servicing burdens. Thus, a fraction of the household sector – as well as a fraction of the financial sector and a fraction of the corporate sector and of the local government sector – is insolvent and needs debt relief.

When a country (say Russia, Ecuador or Argentina) has too much debt and is insolvent it defaults and gets debt reduction and is then able to resume fast growth; when a firm is distressed with excessive debt it goes into bankruptcy court and gets debt relief that allows it to resume investment, production and growth; when a household is financially distressed it also needs debt relief to be able to have more discretionary income to spend. So any unsustainable debt problem requires debt reduction. The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession - with a sharp fall now in real consumption spending – now worsening. The fiscal actions taken so far (income relief to households via tax rebates) and bailouts of distressed financial institutions (Bear Stearns creditors’ bailout, Fannie and Freddie and AIG) do not resolve the fundamental debt problem for two reasons. First, you cannot grow yourself out of a debt problem: when debt to disposable income is too high increasing the denominator with tax rebates is ineffective and only temporary; i.e. you need to reduce the nominator (the debt). Second, rescuing distressed institutions without reducing the debt problem of the borrowers does not resolve the fundamental insolvency of the debtor that limits its ability to consume and spend and thus drags the economy into a more severe economic contraction.

So of the five possible uses of fiscal policy – income relief to households (the 2008 tax rebate), rescue/bailout of financial institutions (Bears Stearns, Fannie and Freddie, AIG), purchase of assets of failed institutions (an RTC-like institution), recapitalization of undercapitalized financial institutions (an RFC-like institution), government purchase of distressed mortgages to provide debt relief to households (an HOLC-like institution) – the last option is the most important and effective to resolve this severe financial and economic crisis. During the Great Depression the Home Owners’ Loan Corporation was create to buy mortgages from bank at a discount price, reduce further the face value of such mortgages and refinance distressed homeowners into new mortgages with lower face value and lower fixed rate mortgage rates. This massive program allowed millions of households to avoid losing their homes and ending up in foreclosure. The HOLC bought mortgages for two year and managed such assets for 18 year at a relatively low fiscal cost (as the assets were bought at a discount and reducing the face value of the mortgages allowed home owners to avoid defaulting on the refinanced mortgages). A new HOLC will be the macro equivalent of creating a large “bad bank” where the bad assets of financial institutions are taken off their balance sheets and restructured/reduced; thus it will be the macro equivalent of the “bad bank” that Lehman tried to create for its bad assets.

Creating a new HOLC mechanism is likely to be more effective than creating a new RTC (whose purpose was to buy and dispose over a number of years of the assets of already failed S&Ls): we need to provide debt reduction to households well before hundreds of banks failed as working out the bad assets only after banks have failed is costly.

Bottom line: Households first, then the banks (which, in the end, turns out to be better for the banks, too).

And HOLC, while Obama is still waiting for word from his finance guys to scroll up on his teleprompter, is the solution Hillary has already advocated: