"The unemployment rate is at its worst in 14 years. October retail sales were the worst in 37 years. The ISM manufacturing index is at its lowest level in 26 years. And the service sector index is at its lowest level ever."This is the economy that John McCain, repeating from George W. Bush, says is "fundamentally sound."
This actually is an economy that has turned down and shows no indication that it will even find the bottom any time in the foreseeable future.
The Monetarists suggest that the interest rate be lowered and the money supply be expanded more, but the inflation rate is already higher than the interest rate, meaning that the interest rate is effectively below zero. The credit crisis is all about the banks not lending money, and it is that lending of money that expands the money supply. The Monetarists are out of tricks.
Now it is time for Keynesian solutions. There needs to be a rapid stimulus program that will replace some of the jobs that are being lost. It won't stop the downward arc of the economy very soon, but it may make the bottom a little easier to find.
Politically it is clear that the Republicans who have survived in Congress primarily believe that government has no business trying to prevent economic collapse.
Thanks to the Reagan Revolution we are now headed into the worst economy since the Great Depression.
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