Circling the economic drain

Lots of news and comment today, none of it good. Let's see:

1. WaPo reports that the feds have turned on the cash spigot, but still don't have anybody overseeing how that money is spent. And Ritholtz says that the bailout has gone from a triage operation to a corporate free-for-all in which the hyenas are rushing in for their portion of the carcass before it's all gone.

2. Nouriel Roubini warns that this thing is far from bottoming out. Excerpt:

The U.S. will experience its most severe recession since World War II, much worse and longer and deeper than even the 1974-1975 and 1980-1982 recessions. The recession will continue until at least the end of 2009 for a cumulative gross domestic product drop of over 4%; the unemployment rate will likely reach 9%. The U.S. consumer is shopped-out, saving less and debt-burdened: This will be the worst consumer recession in decades.

--Obama will inherit an economic and financial mess worse than anything the U.S. has faced in decades: the most severe recession in 50 years; the worst financial and banking crisis since the Great Depression; a ballooning fiscal deficit that may be as high as a trillion dollars in 2009 and 2010; a huge current account deficit; a financial system that is in a severe crisis and where deleveraging is still occurring at a very rapid pace, thus causing a worsening of the credit crunch; a household sector where millions of households are insolvent, into negative equity territory and on the verge of losing their homes; a serious risk of deflation as the slack in goods, labor and commodity markets becomes deeper; the risk that we will end in a deflationary liquidity trap as the Fed is fast approaching the zero-bound constraint for the Fed funds rate; the risk of a severe debt deflation as the real value of nominal liabilities will rise, given price deflation, while the value of financial assets is still plunging.

3. Leonhardt says the crash in consumer spending is both rational and dangerous. And it's unclear that the government can do anything to stop it.

4. Tunku Varadarajan has a black-humor "Economic crisis A to Z" piece in Forbes. Might as well laugh.

5. Sharon Astyk asks: "How do we tell the children?"

6. A friend writes to say he doesn't understand how people can get so caught up in strategizing for the 2010 and 2012 elections when we have six months to discover whether or not we're going to have the Great Depression II. Cognitive dissonance, anyone?

7. Another friend:

It is amazing to see how delusional this whole thing is. Paulson is going to inject money into the consumer credit markets so consumers can spend money they don't have, on things they don't need. The health of our economy is measured by how much we consume, how much we borrow, how much we overextend. We are living in houses that are too big, with loans we cannot afford, and driving cars that are too big. Fantasyland can last only so long.