We seem to be living in interesting times. Every thinking person seems to have noticed that the US financial position is untenable, but as Adlai Stevenson pointed out, that isn't enough. (ref) In today's New York Times, Krugman breaks it down on Greenspan's massive bubble swap. As the daily reckoning observes often these days, bubbles always go higher and last longer than you expect. To be fair, I find myself thinking more and more that the Fed has a major problem in that the government long ago gave them a very good screwdriver, and now every time there's a loose nail, leaky pipe or flickering light, the country calls them to fix it. That is, you can't control precisely or independently many of the financial numbers we discuss (jobs, stocks, real estate, deficit) with the Federal Funds rate. So the Fed tries to adjust only the problematic number and winds up adjusting three or four of them. Greenspan could argue to Krugman that each comment should be read in the context of that moment, but an economist with Greenspan's experience looks silly claiming that imbalancing government revenue and spending represents good strategy. So now we face a likely collapse in prices in 30-50 hot housing markets, a probable drop in the dollar, and have only 3 points of Federal Funds Rate dropping available to combat it. Good!