If the businessmen drink my blood
Like the kids in art school said they would
Then I guess I'll just begin again
You say, "can we still be friends?"

If I was scared... I would
And if I was bored... you know I would
And if I was yours... but I'm not

All the kids have always known
That the emperor wears no clothes
But they bow to down to him anyway
It's better than being alone

I'm Ready to Start. 
(or we wish Bernanke was running the place)

No helicopter drop, but the Fed has signaled it's on alert and ready to do more. Krugman blogs:

What the FOMC announced was a slight change in policy: rather than allowing its balance sheet to shrink as the mortgage-backed securities it owns mature, it will maintain the balance sheet’s size by reinvesting the proceeds in long-term government bonds. Roughly speaking, it has gone from a completely crazy policy of monetary tightening in the face of massive unemployment and incipient deflation, to a policy of standing pat in the face of same. Whoopee.

...In effect, reinvesting the funds from expiring securities became a focal point, an essentially arbitrary location in the space of policy responses that nonetheless had come to have "salience", because it was what everyone was watching.

...

So why am I even slightly encouraged? Because the critics did, at least, succeed in moving the focal point. Not long ago gradual Fed tightening was the default strategy; but as I said, at this point the Fed realized that continuing on that path would have unleashed both a firestorm of criticism and a severe negative reaction in the markets.

What we need to do now is keep up the pressure, so that at the next FOMC meeting the members are once again confronted by the reality that not changing course would be seen as dereliction of duty. And so on, from meeting to meeting, until the Fed actually does what it should.

And via DeLong, Obama/Pelosi/Reid pass $26 billion aid to the states legislation. Not much but at least they're doing something.

What happened was that liberals were expecting unemployment to top off at 8 percent and then drift down again. Instead it hit 10 percent and might remain at 9 percent for a while. Liberals are depressed about this and what it might mean for November.

Krugman criticized Romer-Bernstein's chart and Atrios made fun of it.

At the time I thought they were being unfair. Yes they got it wrong, but economic forecasting is extremely hard and nobody foresaw the Greek debt crisis. The Fed and Congress are reacting to the change in circumstances but not enough.

Krugman pointed out that Romer had recommended a larger stimulus package but that Summers didn't include it in the presentation to Obama. I also liked how she would assert there is no "new normal" of lowered expectations so it is good to read speculation that she might be nominated to run the Federal Reserve Bank of San Francisco.