Krugman Misses the Boat Again

This from Krugman in the NY Times:

"The core of our economic problem is, instead, the debt — mainly mortgage debt — that households ran up during the bubble years of the last decade. Now that the bubble has burst, that debt is acting as a persistent drag on the economy, preventing any real recovery in employment. And once you realize that the overhang of private debt is the problem, you realize that there are a number of things that could be done about it.

"For example, we could have W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads — which would also, by raising incomes, make it easier for households to pay down debt. We could have a serious program of mortgage modification, reducing the debts of troubled homeowners. We could try to get inflation back up to the 4 percent rate that prevailed during Ronald Reagan’s second term, which would help to reduce the real burden of debt.

"So there are policies we could be pursuing to bring unemployment down. These policies would be unorthodox — but so are the economic problems we face. And those who warn about the risks of action must explain why these risks should worry us more than the certainty of continued mass suffering if we do nothing."

All this earnest seeming palaver of Professor Krugman misses the only real means to tackle the speculative debt that is dragging all the globe's economies into the cesspool. What is required is an end of "too big to fail." And contrary to the blackout by the media there is legislation already introduced in the House of Representatives that would do just that. It is Marcy Kaptur's HR 1489. This would return our nation to the Glass-Staegall principle of separation of commercial banking, which is necessary to sustain the actually productive economy, from investment banking, which is what lead to the lunacy of the speculative bubble of derivative securities like mortgage indexed derivatives. This would mean a return to FDR's virtuous fight against the city of London and Wall Street investment banking houses, instead of the lick-spittle fawning of President Obama's favorite Treasury Secretary Geithner...