On the economy | Arkansas Blog

On the economy

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There just doesn't seem to be much good news these days.  The national unemployment rate hit 8.9 percent in April.  The New York Times reports that the numbers indicate the pace of lay-offs may be slowing but is no where near stalled-out. 

Also from the NYT, Paul Krugman, who has recently seemed to lighten up on the administration, if only just a bit, continues his criticism here, saying the Obama administration is implementing a "muddle-through" approach to the economy:

It’s not at all clear that credit from the Fed, Fannie and Freddie can fully substitute for a healthy banking system. If it can’t, the muddle-through strategy will turn out to be a recipe for a prolonged, Japanese-style era of high unemployment and weak growth.

Actually, a multiyear period of economic weakness looks likely in any case. The economy may no longer be plunging, but it’s very hard to see where a real recovery will come from. And if the economy does stay depressed for a long time, banks will be in much bigger trouble than the stress tests — which looked only two years ahead — are able to capture.

Finally, given the possibility of bigger losses in the future, the government’s evident unwillingness either to own banks or let them fail creates a heads-they-win-tails-we-lose situation. If all goes well, the bankers will win big. If the current strategy fails, taxpayers will be forced to pay for another bailout.

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