"But the most important thing we should be doing is building a real financial system."

A couple of interesting posts on Interfluidity:

"Steve Randy Waldman (mail) (www): IA — I'm a big fan of Mencius Moldbug's financial writing. I think he called a lot right about how this credit crisis would play out (he insisted early on that there would be no feasible option but to guarantee everything in sight, regardless of what he thought about that). We've argued a bit over what a good monetary system would look like, and I have small differences with him about what good banking would look like, but our views are much more alike than different, and I view hime as one of the most thoughtful and provocative writers about this stuff.

(He wants maturity matching banks, I want narrow banks that are restricted to gov't securities for the guaranteed sector and a requirement that liquidity risk be explicitly be shared with investors rather than silently borne by intermediaries for the unguaranteed sector. Fundamentally, the shared idea is to end the practice of banks making implicit promises beyond their capacity to keep even when no risk that depositors have knowingly assumed goes bad.) "

So, the big revolution is full disclosure of risk. After all, if you're exposed to risk, surely you should know about it. Period. Couldn't agree more. And this wasn't expected? Sorry. Don't buy it.

Another good point:

"By the way, as a policy matter, in this world as it is, I don't mean to criticize either Krugman or Cowen. I think they are both right. Per Krugman, for now we have little choice but to have government do a lot of spending, since we have no financial system to convert present savings into real investment. But, for the reasons that Cowen highlights, I think we should channel any stimulus towards basic consumption by those facing hardship (e.g. unemployment benefits, food stamps, etc.) and obviously necessary infrastructure investment (fixing bridges, dams, power grids, etc.). In any reasonable future, everybody will eat, so offering money to those struggling to put food on their table or a roof over their heads will create less uncertainty about future tradeoffs than subsidizing discretionary consumption by those better off. And it's a cliche, but a true cliche, that our public infrastructure is crumbling. Pulling forward restoration projects that will be necessary unless there are radical changes in the structure of American life also introduces relatively little noise.

But the most important thing we should be doing is building a real financial system."

I tend to agree here, but I'm damned bothered to do so. I really worry about debt and inflation. I know, I know, hardly anyone else does.

Finally, I believe that it all comes down to human agency, and systems talk is a recipe for disaster, as does interest rates alone, amounts of money, etc.