Alright, one of my favorite bloggers. And props to Kelly
for responding to Scott Sumner. And now getting into bheads. Journalism has changed a lot.
I'm going to dissent on Lehman. From Scott Sumner's take on market behavior, things were already heading south and Lehman was the result rather than cause of that drop in NGDP. The Fed's failure was in allowing things to get so bad in the first place. If the rest of the economy was receiving helicopter drops while Lehman failed, it would just have been tough to be them.
Karl said if borrowing costs were not a problem, Greece would not have a problem. My impression was that this was true of Italy, but not Greece. So if Italy revalued it's currency, it could resolve its problems through inflation. But Greece is screwed no matter what (though default is probably the better option for them).
Scott Sumner is not a traditionalist, and constantly harps on how low interest rates don't mean "easy money" but often mean money is so tight people expect there to be little growth. Karl's timid statement is no Chuck Norris
. Scare the pants off people about losing their savings if they are hoarding cash.