Six Degrees of Separation . . . may mean failure!
Lately, I’ve become increasingly skeptical that the steps being taken in Washington are close enough to the source of our economic problems to be successful. A recent New York Times article reflects on the new consumer aid program, for example. The TALF program (Term Asset-Backed Securities Loan Facility) will lend $200 million to private investors who will buy securities backed by auto loans, credit cards, etc.
In theory, this will keep credit flowing freely from lenders to borrowers but I’m dubious of this trickle-down expectation. If Keynes is right that the locus of economic turbulence is insufficient demand, there are just too many places “twixt the cup and the lip” for these incentives to go awry and for the stimulating effect to dissipate.
