Bob Rubin told us so! Paul Krugman:
I’m saddened but not really surprised by Robert Rubin’s declaration that we don’t need more stimulus. It has seemed to me from early on in this crisis that Rubin and his disciples wanted to believe that this world crisis was something like the 1997-98 Asian crisis, and amenable to similar solutions.
For what the Committee to Save The World did in the Asian crisis was … not much. Some emergency loans to ease liquidity problems, some declarations that they were highly confident, a bit of interest-rate cutting; and once the panic was over, things recovered pretty much on their own.
Hence the view that fiscal stimulus was just an insurance policy, that the big thing was to stop the economy’s headlong descent, and then unemployment would come down mostly of its own accord.
I tried — Lord, how I tried — to get through the message that this wasn’t a safe bet, and that if the initial intervention wasn’t big enough it would be perceived as a failure, and there would be no second chance. Others made the same point. But we never did get through.
And Rubin is still insisting that plan A was right.
And why not? After all, his world hasn’t changed.