Go read and recommend Stirling _{MR SUBLIMINAL Fucking Brilliant} Newberry (who links to The Incredible HOLC), New Deal Democrat, and Stoller. Stirling's executive summary, which goes beyond HOLC, frames the question correctly, IMNSHO, as a change in the Constitutional order:

These events are not a short term bump on the road, but the culmination of the decision a generation ago to use paper to buy oil, to inflate that paper by allowing those at the very highest reaches of a social elite to engage in a "race to the top" with the suppliers of oil. This system was accepted by both parties, and it created a neo-liberal era where any restriction to creating paper wealth had to be removed. This was not a matter of left or right, everyone was a neo-conservative, and every one was a neo-liberal.

The failure of this system has been widely predicted, but there was neither a holistic replacement, nor the political will to replace it. Criticism of it was outside of the mainstream, or channelled into the form of arguing over the margins of the benefits of it. It accumulated massive debt, and that debt is the heart of the financial pressure.

In 2000 Bush entered office with the plan of bailing out those in the US who had bet badly on the stock market, and invading Iraq to break the impasse over control of oil. Both of these policies failed. The back stop for failure was the Greenspan/Bernanke plan of creating a housing bubble, and then when the burst came, to inflict the costs on the American public. This is "Japanification."

We are now at the point where Japanification is the question, and Paulson is trying to enforce it at gun point: do this or I will do nothing and let everything fall apart. Since the result of this will be a political catastrophe for the Republicans, the Democrats should propose an alternate bill, make no compromises, and let the Republicans Hooverize the name of George W. Bush.

The correct response is to expand the FDIC, begin taking over institutions as a whole, providing immediate debt relief through an HOLC, and declare a national emergency to enforce austerity and prevent any short term attempts to profit from the financial chaos. A windfall profits tax on oil companies isn't a bad idea either, since it would bring in tens of billions of dollars right when they are needed the most.

This solution, or some version of it, is in line with proposals from economists and political figures such as Robert Reich, Peter Davidson, Nouriel Roubini and others. It also leads to the correct solution to the larger fiscal crisis, which is removing the oil bottleneck to the growth of wealth, and therefore the growth of wages to pay financial instruments, and the cramming down of instruments which claimed the profits of a new economy, while at the same time tried to prevent it.

In that future come a great drive to reduce consumption, increase savings, increase exports, globalize opportunity for all and not just for some, and create a very different system of work. But that is another day. Today's purpose is to say no to dictatorship, and to craft a counter which is yes to insurance and accountability.

He's talkin sense, Merle.

Back to painting.

UPDATE Stirling updates to include quotes from Obama's Charlotte speech today, which, as Stirling points out, is utterly incompatible with Paulson's approach. After FISA, I'll wait for the legislative outcome, though I'm encouraged. Heck, I might even vote for the guy if he does the right thing! You never know... Of course, with stories like this already emerging, I'm even more skeptical.