Stimulus Package: a Nightmare?

Everything is supposed to be transparent in the new administration. People will be informed because they are assumed to be intelligent. And yet, here we are: very confused!

The more you read, the more confused I become. There are economists supporting essentially every point of view. If very intelligent people based on their credentials can differ so markedly, how can we expect the politicians to agree? How can we be enlightened?

Into this morass, Niall Ferguson brings even more ominous ideas with solutions that are markedly different than anything I have yet read.

First, he assaults those who adhere to Keynesian precepts because the situation is so different than anything yet faced by this nation and the world. At the time of Keynes, the economies were essentially closed. Now, they are global. Secondly, the amount of indebtedness is significantly different than anything in the past. The degree of indebtedness makes a road to further indebtedness more deflationary. The values of our economy will be less and consequently, the products will be less valued.

While various commentators of the various stimulus plans suggested include both ideas of Ferguson, he is different in indicating that ONLY these two actions are warranted:
(1) banks should be restructured to assess the real value of their assets and whatever capitalization of the banks by the United States should be time limited with re-privatization to occur at a fixed time, e.g., ten years.
(2) mortgages in danger of foreclosure should be refinanced at lower rates and for longer periods of time. This will put more money in the pockets of mortgage holders to be spent and secondly, it will support the housing market that continues to falter. He downplays the moral hazard aspects of such a strategy because there is no chance that the causes of the problem will be repeated, e.g., subprime loans.

I read Ferguson's ideas and they make all the sense in the world, until I read someone else's perspective, e.g., Krugman who indicates that his problem is that a trillion dollar plan is too LITTLE! But, I admit that Ferguson's now hold sway with me (for the moment) because he addresses the problems clearly and simply. The potential benefits are great and the costs are less.