A second great article from you, Taplin. That's two more than most people ever publish. I didn't think you had it in you. My apologies. This is definitely the kind of stuff we should be seeing and discussing...even though I often disagree with you on facts and interpretations.

I know this isn't even remotely possible but congress or the WH should force the banks to renegotiate every last one of the loans from the bubble period. Without fees. And tell them to go piss up a pipe.

Mortgage lenders precipitated these loans and in all probability knew full well the home values wouldn't hold.

what are they snorting?

Like dogs, each others' asses.

Actually, re:

And as for the inflation hawks on Wall Street, what are they snorting?

That said, there is a big problem with the Bush debt. (Obama's current spending is not the problem, or not yet at least; it's the existing debt.) There are only two ways to get rid of it: pay it off, or default on it. There are only two ways to pay it off: raise taxes, and/or, cut spending. There are only two ways to default on it: outright, and/or, inflate it away.

All four choices are unappealing, but the amount of "unappealingness" varies from one player to the next. Which one(s) will actually happen, and when, is anybody's guess.

One thing... I don't think the inflation hawks see inflation RIGHT NOW, except that the run-up in oil from $30 to $70 in a short period of time is worrisome. It's that they don't trust the Fed's ability or will to mop up excess liquidity when the time is right. If Greenpan's willingness to keep rates low even as real estate and the stock market took off again, even as the dollar fell and commodities prices inflated is to be taken as evidence, the skepticism is warranted even if I don't happen to buy it.

These concerns, in both posts, are very interesting.

Many of the comments on economy from Krugman, Reich, and others, both on the web and in papers and radio, are interesting and point in a similar direction -- there needs to be much more done by way of further stimulus, with a ground-up, aggressive approach by the federal government taking the lead, to stop communities and states, as well as the international economy, from really going into a prolonged depression. Indeed, the notion of worrying about inflation seems to suggest -- when what you do is bail out the banks etc bigtime, once they've gotten what they want, they turn back to the same slump-inducing logic they have always pursued. If the recovery were from the bottom up, with the big institutions getting their larger bailouts indirectly through grassroots economic recovery, they might be less insistent on "anti-inflationary" (1936-37 type premature backoff) economics.

As for this and other charts, my thoughts are the same two that always come to my mind:
(1) What exactly do we need to do about it (and who might draw up plans with sufficient specificity so that it could really be the basis of effective and focused political mobilization)

(2) CLEARLY THE LEFT-OF-OBAMA ECONOMISTS AND PROFESSIONALS NEED TO GET TOGETHER TO HAMMER OUT SOME KIND OF COLLECTIVE PROGRAM, THEN WORKED INTO A OONSENSUS OF THE MAIN PROGRESSIVE ORGANIZATIONS AND LEADERS (eg labor unions) AND THEN BUILT INTO A SERIOUS MOVEMENT. It seems that the pundits are more like splendid gurus attracting personal followings, but without the kind of political impact that goes beyond discussion that ONLY a mobilized and unified progressive alternative movement can make possible