I think there's traps no matter which way we turn, Lux. Look at the traditional read on this thing we're in. 1) Run up the deficit, and risk a downgrade, a run on the dollar, having to shove up interest rates. 2) Don't run up the deficit, and you could be staring serious deflation in the eye - probably worse.

The official dilemma right now is that even IF the financial situation is stabilized, we're ALREADY seeing the real economy fall, hard and fast - with more unemployment, tightening of belts, corporate downsizing and shuttering on its way. And once consumption stops rising (which it has), the big motor that's 60%-70% of GDP stalls, what takes up the slack? Investment is limited by all the debt out there, depressed markets, etc. Exports? They're slow to gear up, and probably not a big enough engine. So what's left? Government spending. That's gonna be the official consensus, right? Because there's no other lever to pull.

If you go that route - run BIG deficits, risk a run on the dollar - you still might be able to pull off enough international coordination to handle the downside risks. e.g. Everybody run deficits, coordinated support of exchange rates, etc. But there are a LOT of external, uncontrollable factors out there.

If I think within the box, I think there's probably room to make some budget cuts to things that cost a lot, but offer only a little domestic stimulus. I suspect there's also room to raise some revenue by going after the piles of wealth stashed away by the new hyper-rich. Pull that money out, and spend it. And US debt as a % of GDP still has some room before hitting post-war highs, maybe 2-3 years of $1 trillion deficits. So.... maybe those things could do it. I'd give it a 50/50 at best.

But I just keep asking myself, who in their right minds would buy US debt over the longer term. Sure, people have parked money in the US while the financial crisis ratchets around... but would YOU park hundreds of billions MORE - beyond existing levels - in a country in this position, once finance calms?

This is part of the reason I want to see some REALLY new voices kicking around on the economic advisory teams. Because I'm just not seeing the big established guns laying out any serious case on HOW the economy can be revived, a really bad recession avoided, the $ protected, etc. Muddling through, balancing the various traditional ways of thinking about this, just doesn't seem to me to be a recipe for very much at all.

Except lost TIME. And that's a danger in itself.