The column is entitled: "Finding the Mess Behind the Mess." The key line is:
The fundamental [macroeconomic] problem in the American economy is that, for years,
people treated rising asset prices as a substitute for personal
After discussing some adjustment problems, here are comments on policy:
One path that is likely to prove
counterproductive is further fiscal stimulus in the form of tax
rebates. Such stimulus can raise consumer spending and bolster the
economy in the short run, but it works – if it works at all – only by
pushing consumers to spend rather than to save. It merely postpones
needed adjustments by providing a grab bag of goodies at exactly the
Here is the conclusion:
Have you ever tried to undo a bunch of tangled wires or cords? If
you don’t pull on the right wires in the right order, the mess becomes
worse. If you pull too hard, the whole thing can break. But if your
first pulls are good ones, the untangling becomes easier with each
That’s like our economy’s situation today. If we expect
too much too quickly, we’ll make matters worse. But there is a way out
of the mess, and it lies in our hands.
Be careful, and start pulling.
I’ve become increasingly interested in how an economy can be "tangled up," a notion I first learned from Axel Leijonhufvud. The literature on self-organizing critical systems considers this idea, but I don’t think it has been expressed in simple, intuitive form and in a manner that can be integrated with other macroeconomic ideas.