I have been mulling over this subject for a couple of weeks.  Reading as much as I could to see just what went wrong.  May I see a show of hands of those who still do not know what the whole thing is about?

The question has been asked, whose fault is the crisis?  And the fingers began pointing as soon as the problem was known.  And no one was safe for the accusations Some blame Clinton as his policies, others blame all Dems, some say it was the policies of the conservatives and then there are those that lay the problem at the feet of old GW.

So who or what is to blame?

Let me try and explain it as best I can as as best as I understand it.  How about fiscal policy?  Expansionary fiscal policy to be exact.  This is when the Federal government decreases taxes and increases spending.  The purpose is to stimulate the economy and push it in the direction of growth.  Deficits occur during a recession because of the use of expansionary fiscal policy.  Now, does any of this sound a bit familiar?

When a government is in deficit it will borrow (remember that word) money from loanable fund markets (credit).  When it does that increases the demand for money in the economy.  When the government does borrow money it crowds out or takes funds from the private sector.  Thus the private sector must compete for fewer and fewer funds.

The credit markets have tanked.  Could the deficit have helped cause our current prioblem?  If there is less money available would the market not constrict?  Does that sound familiar?

Now to help this situation the president needs to ask Paulson and Bernanke for their resignations.  Why?  They were stomping out individual fires while the market was blazing out of control.  They threw money at the markets that should have been ignored and focused on the commerical paper market.  Instead they let Paulson convince everyone that the banks and the hedge funds were the problem and the solution.  All talk about saving Main Street, but they offered the bailout to Wall Street.  They should have attacked the commercial paper market, that is where Main Street is, not on Wall Street or in the board rooms of banks.

This crisis is far from over and as long as Paulson is in place to help his brothers on Wall Street it will last longer than most anticipate.

I realize that I will never be nominated for the Nobel Prize for Economics, but hopefully my readers will have a better grasp on the crisis and what is happening..