The threat of deflation is so big in the UK, where they have found their version of the financial crisis worsened by the weakness of sterling and the size of government, that a former Treasury adviser is suggesting they need to think about printing money.
Meanwhile, Rich Lowry quotes AEI’s Peter Wallison about Hank Paulson’s latest u-turn:
The problem is that these shifts in direction have caused investors and others to lose confidence that Paulson knows what he’s doing, and that in itself could be causing some of the distress in the markets. The whole idea of TARP was to increase confidence, and that’s now been frittered away. If you go to Congress with a plan, it better be the plan you are actually going to carry out, or you better have a good explanation for why it isn’t going to be implemented. If Paulson has lost faith in his original plan, he has to explain why, and his failure to do so is probably worse than his constantly shifting objectives. When you’re Treasury Secretary, you don’t have the luxury of saying “Oh, never mind.”
We here have never thought that Paulson knew what he was doing, except helping out his cronies in Wall Street. If we don’t get some people in government willing to bite the bullet (and that is unlikely), we may well end up having to print money too.