Very similar to Noah Smith, Mark Thoma is an academic economist who writes opinion pieces for the lay public. And again the mystery is this: why would we need economists to tell us things we already know?
In The Biggest Policy Failure Of The Great Recession Thoma comments on Geithner and another book. He makes exactly one point:
Unfortunately, households didn't get the same amount of help [as big banks] in large part due to the opposition of Geithner's Treasury. That's why I concur with Mian and Sufi that this is "the biggest policy mistake of the Great Recession." A policy that would have provided households with mortgage debt relief could have made a big difference to those trying to rebuild their balance sheets and eliminate debt.
No shit, Sherlock. What told you that?
It's important to understand that recessions can have many different causes, and the optimal response from policymakers depends critically on the type of recession that occurs. Recessions can be caused by oil price shocks, Fed-induced interest rate spikes, a fall in business and consumer confidence, a drop in productivity, housing bubbles, financial meltdowns and other factors that cause either a reduction in aggregate demand or supply.
Really, why is that important to understand that? What if we take out the economics jargon? We get the following: Politicians trying to help when lots of people are unemployed should do different things under different circumstances. If there is a huge jump in oil prices, you might do one thing and if interest rates are really high you might do another.
We're still waiting for the insight...
We have just experienced what's known as a "balance-sheet recession" caused by a popped housing bubble and severe problems in the financial sector. In this sort of recession, the balance sheets of households are impaired due to the loss of housing equity and the loss of retirement, education and other savings as stock and other asset values crash. Household balance sheets are also eroded as households that experience job losses dip into their saving to try to make ends meet.
The need for households to rebuild their balance sheets is one of the reasons it takes so long to recover from a balance-sheet recession. When the value of assets like housing equity, stocks and bonds fall while liabilities -- the high debt levels households accumulated prior to the crash -- remain, households begin trying to restore what was lost by reducing consumption and increasing saving.
This process is very slow, taking years for households to pay down debt and rebuild what was lost, and the reduction in the consumption of goods and services as savings rise is a drag on the economy that makes it harder for a recovery to take hold. A "lost decade" like Japan has experienced is more than possible.
The balance sheets of financial institutions were also severely damaged as the assets they held lost value during the crash. Many of these institutions became illiquid and insolvent as a result. The government's response was to institute programs such as TARP that helped to restore the balance sheets of financial institutions, and these programs were very successful. Banks had a tough time to be sure, but the bailout worked, and today the banking sector has largely recovered from its ills.
Aren't you people famous for doing lots of math? Where's the math? Again, take out the gobble gook and you get:
When people have a lot of debt they go bankrupt and don't spend money. This hurts the economy. We should have helped but we didn't. Therefore, we hurt the economy.
When in this chain of reasoning does the need for a PhD occur? So lame.