Nassim Taleb, the author of "The Black Swan", said during a CNBC interview on July 2nd, "We're in the middle of a crash" when referring to the economy and banking system. In other words, the crash is still happening and we have further to fall.
And while most reasonable people would come to the conclusion that the economy is still falling based on rising unemployment (yes, I know unemployment is a lagging indicator, but losing 467,000 in June tells you something) and the deterioration of the consumer credit markets and the housing market.
What Taleb did say that was interesting was that the government needs to, "stay out of monetary policy to get out of this". This is after all a crisis that was in large part caused by a decade long loose monetary policy in which the Federal Reserve provided the conditions necessary for this credit bubble. And yet here we are with the bubble bursting, and the Fed continues to pump trillions back into the system.
But Washington has a habit of doing the insane.
The first tranche of TARP didn't stimulate lending? Let's release the second $350 billion.
The first $7,500 first time home buyer tax credit in 2008 didn't work? Let's do another $8,000 first time home buyer tax credit. The seasonally adjusted rate of home sales has declined year over year for the past two years despite these tax credits.
The Fed's efforts to plunge mortgage rates and stimulate demand for real estate by buying $500 billion worth of mortgage backed securities didn't work, let's throw another $750 billion at it?
Monetary policy can't solve this economic crisis any more than the new PPIP will get banks to lend. New and agressive fiscal policies focused on the housing market, consumer, and small businesses are what is needed.