The Economist this week (25 October 2008) claimed that the U.S. national debt is at 38% of GDP (page 40, column 2). I'm still scratching my head over that one. Apparently it thinks U.S. GDP is like $30 trillion or the national debt is only about $5 trillion. No wonder it won't review my book. (It also unfairly ripped Abington, Pa. a few weeks ago.)
More importantly, The Economist also reported (p. 92) that "a growing number of economists, and now the Bush administration, believe that the credit crunch also has to be addressed at its source -- in America's housing market, where prices have fallen almost one-fifth from their preak, and foreclosures have soared." Perhaps there is still hope for the Wright Rescue Plan! Unfortunately, the magazine again ignores my work, though it mentioned plans by Feldstein, Zingales, Hubbard, and Mayer. It recommends Zingales' plan, which entails forced loan renegotations, but notes, correctly, that such a policy could "well lead to a higher cost of credit in the future." No kidding! No other scheme that I have yet seen has hit upon the key insight of the Wright Rescue Plan, that if lenders can mortgage foreclosed property mortgage backed securities can be priced and balance sheet uncertainty will end. And that will be the beginning of the end of the crisis.
