We Are Now A Third-World Country!

Krugman speaks:

Third world America?

One thing I learned way back in grad school was that there was a big difference between the assets of first-world, mature-country central banks and those in rickety developing economies. The Fed and its peers had clean balance sheets, with basically nothing but Treasury bills on the asset side. Third world central banks, on the other hand, did a lot of direct lending to the private sector, and had all sorts of dodgy assets on their books.

Now the Fed is in the business of directly buying commercial paper, in some cases unsecured. Wow.

I’m not saying this is a bad idea — until Treasury comes back with a bailout plan that actually makes sense, Bernanke has to try everything he can to hold the system together. But it is shocking how fast things have gone downwill.