At the time it was proposed, many liberals thought the stimulus plan was too small. Or to be more precise, I think what we thought was that it was imprudently small. A fiscal expansion that turned out to be “too big” would waste some money and require the Fed to counteract the error with higher interest rates. Not great, but not so terrible either. By contrast, a too-small stimulus while we’re already up against the zero-bound on interest rates could cause significant problems if the underlying economic situation turns out to be worse than anticipated. And as Neil Irwin and Annys Shin write in The Washington Post that’s exactly what seems to be happening as job loss numbers come in at a frightening pace.

Similarly, Martin Feldstein makes the case that we need another stimulus package. Meanwhile, though, House Republicans aren’t listening to conservative economists like Feldstein, they’re reading Atlas Shrugged and talking about a spending freeze.

One interesting thing from the aforementioned Michael Lewis article on Iceland that gets a bit buried because he’s trying to be funny is this thing about gender and banking:

One of the distinctive traits about Iceland’s disaster, and Wall Street’s, is how little women had to do with it. Women worked in the banks, but not in the risktaking jobs. As far as I can tell, during Iceland’s boom, there was just one woman in a senior position inside an Icelandic bank. Her name is Kristin Petursdottir, and by 2005 she had risen to become deputy C.E.O. for Kaupthing in London. “The financial culture is very male-dominated,” she says. “The culture is quite extreme. It is a pool of sharks. Women just despise the culture.” Petursdottir still enjoyed finance. She just didn’t like the way Icelandic men did it, and so, in 2006, she quit her job. “People said I was crazy,” she says, but she wanted to create a financial-services business run entirely by women. To bring, as she puts it, “more feminine values to the world of finance.”

Today her firm is, among other things, one of the very few profitable financial businesses left in Iceland. After the stock exchange collapsed, the money flooded in. A few days before we met, for instance, she heard banging on the front door early one morning and opened it to discover a little old man. “I’m so fed up with this whole system,” he said. “I just want some women to take care of my money.”

This has, of course, nothing in particular to do with Iceland. Indeed, the Nordic countries all lead the world in gender equity. All around the world, though, finance and banking remains a very male-dominated pursuit. I think we’re accustomed to not thinking too hard about how weird that is because bankers are so rich, so it just seems to be another aspect of general patriarchal conditions where the tippy-top social roles are still very much commanded by men. But there’s something especially weird here. That aspect of finance is all about making sound assessments of risk. And yet, both popular stereotype, social science, casual observation, and fairly rigorous neurology all agree that, in general, men are much more inclined than women to take unwise risks (ask a car insurance company about this if you don’t believe me).

If you see an institution that’s working in the professional risk-taking business and it has a wildly disproportionate number of men in key risk-taking institutions, then it seems to me that it would be reasonable to infer that (a) the institution isn’t going to be very good at managing risk, and (b) the institution is biased toward taking unwise risks that it’s not really even trying to manage risk well. Then you see an entire industry founded on risk-taking and risk-management and it’s all men in all the key positions, you have an indication that something’s gone badly wrong.

In other words, as Keynes said “The game of professional investment is intolerably boring and over-exacting to anyone who is entirely exempt from the gambling instinct; whilst he who has it must pay to this propensity the appropriate toll.” Except this time around we’re all paying the toll.

I’m just going to quote Orrin Kerr on this:

John Yoo:

“Now that I’m not in the government, part of my role, because I have a certain amount of expertise, is to try to keep the government honest.”

– From an interview with the Orange County Register.

On the other hand, back when he was in government….

That’s funny. But it’s also outrageous. It’s not as if Yoo’s job in government was as a press flask. The Office of Legal Counsel really is there to try to keep the government honest.

By coincidence, two great articles on Iceland’s economic collapse came out this week. The one by Michael Lewis is funnier and available for free online so it’s been more widely linked, but the one by Ian Parker is more evocative and does more to explain what actually happened. But running through both articles is, I think, a kind of telling shadenfreude at the island’s downfall. It’s nice for us, as Americans, to spend time thinking about Iceland—a country that seemingly screwed the pooch on the great credit boom more than we did.

Nevertheless, when you step back and think about it, though Iceland’s in for some rocky times in the near future, so are we all. And in a lot of ways, Iceland’s pretty well-situated for the future.

At the end of the day, they have a well-educated, healthy population a decent infrastructure and an absence of obvious pressing social problems. It’s a small, quiet, peaceful, orderly country that will suffer through the downturn and take advantage of business opportunities when the global economy revives. The United States is neither small nor quiet nor orderly. You could imagine the hard-fought crime control gains of the 1990s being totally reversed by a years-long recession, and you could imagine that pushing one or more cities into a downward spiral from which there’s little prospect of return.

Speaking of which, there are substantially more people living in Detroit than there are people living in Iceland, and it’s not at all clear—even on the most plausible possible optimistic assumptions about the economy—how their situations are ever going to be turned around. That’s a tale of collapse really worth dwelling on.