The Panic of 1825: We Are Live at The Week
If We Fix the Banks, Do We Fix the Economy?

Too Many or too Few Narratives

Paul Krugman:

Too many narratives: Brad DeLong lists three possible explanations for the Obama administration’s bank policy, and expresses angst that officials don’t seem to be clear about what they’re actually up to. Matthew Yglesias points out that the president seemed to offer a fourth narrative yesterday. I’d add that in the past we’ve heard yet another narrative — that we can’t imitate Sweden because we have too many banks — that happens to be all wrong.

Can I say that this very proliferation of narratives is disturbing? I don’t want to claim moral equivalence with the Bushies, who were utterly cynical about such things, but the ever-shifting rationales for an unchanging policy do bring back unhappy memories of the selling of the 2001 tax cut, and for that matter — again, no moral equivalence! — of the selling of the Iraq War.

Well, I am not so much complaining about the proliferation as the absence of narratives. You can be (a) agnostic about the world, but believe that current policies are a necessary initial step because of political constraints in getting to whatever the long run policy is going to be; (b) confident that markets are irrationally depressed and think the government should push prices to fundamentals through the world's largest risk-arb operatin; or (c) think that we have no choice because the bankers have us by the plums. I favor (b) myself, but what distresses me at the moment is that the Obama administration doesn't seem to have a position, or a narrative, or an explanation.

I wish that they would pick just one, rather than zero.