In the late 1980s, the Soviet Union was forced into an embarrassing scramble for money. It tried to make deals with numerous banks, but the funding offered was far smaller than what the country required. Food shortages worsened, and Moscow needed the help of governments in the West, for which the USSR effectively had to allow Eastern European countries to assert independence.

Writing in 2007, some warned against the consensus that oil prices would stay high:

What lessons can we learn from the Soviet collapse and apply to the current situation in Russia? First, we must remember that Russia today is an oil-dependent economy. No one can accurately predict the fluctuations of oil prices. The collapse of the Soviet Union should serve as a lesson to those who construct policy based on the assumption that oil prices will remain perpetually high. It would seem that in our country, which has lived through the collapse of the late 1980s and early 1990s, this fact would be evident. But as soon as the prices went up again at the beginning of 2000 and in 2004 became comparable in real terms to those at the beginning of the 1980s, the idea that “high oil revenues are forever” has gained an even wider acceptance.

Russia today isn’t the same top-down, command-and-control economy that it was in the 1980s, but the dynamic hasn’t changed entirely. The country is still hugely dependent on oil, particularly in terms of tax revenues and exports.

And Yego Gaida, the Russian economist, r thinks the collapse of the Soviet Union is still relevant for modern Russia:

One more lesson that is relevant for Russian politics today is that authoritarian regimes, although displaying a façade of strength, are fragile in crisis. In conditions of relative stability, society is prepared to tolerate the lack of real elections. People are prepared to come to terms with this situation as an inevitable and habitual evil. But they will do so only until the country encounters a serious challenge, requiring decisive and tough measures in order to adapt to unfavourable conditions.

J. Bradford de Long writes:  When it became clear in late 2008 that the global economy was headed toward a crash at least as dangerous as the one that had initiated the Great Depression, I was alarmed, but also hopeful. We had, after all, seen this before. And we also had a model for how to mitigate the damage; unfortunately, policymakers left it on the shelf.

Roosevelt’s New Deal policies sometimes conflicted with one another, and quite a few of them were counterproductive. But, by trying everything, and then scaling up the most successful policies, Roosevelt was ultimately able to turn the economy around.

And so, in late 2008, the way forward seemed obvious: recapitalize the banks, guarantee loans, use the government-backed housing lenders Fannie Mae and Freddie Mac to resolve underwater mortgages, drop short-term interest rates to zero and use quantitative easing to prevent deflation or dangerously low inflation, and embrace deficit spending. Then, as events evolved, we would reinforce those policies that seemed to be working and gradually drop those that seemed to be ineffective or counterproductive.

But that was not what we did. Instead, each proposal faced its own opposition. Some worried that recapitalizing the banks would reward the very institutions that had caused the problem. Others fretted that resolving underwater mortgages would reward feckless borrowers. Still others raised concerns about expansionary fiscal and monetary policy. And some favored one set of polices (say, resolving underwater mortgages and recapitalizing the banks), while opposing all the others (for example, deficit spending and raising inflation expectations).

Six years on, the economy has yet to fully recover and the problem persists. The usually wise economist Martin Feldstein makes the case for a set of policies designed to stimulate demand, including increasing investment tax credits and shifting the corporate-tax burden to firms that do not spend very much.

Feldstein’s ideas are promising; and, in line with the lessons of the Great Depression, they are definitely worth trying. The trouble is the rhetoric surrounding his proposals. The article’s headline, “The Fed’s Needless Flirtation With Danger,” is followed by warnings that quantitative easing could “increase the risk of financial instability.” Instead of simply promoting his policies, Feldstein presents them as a “safe and effective alternative” to other approaches. His proposals, he argues, are not an additional arrow in the quiver, but replacements for traditional Keynesian policies.

Pushing your ffavorite recipe at the expense of other is not productive. As policymakers continue to seek a path out of the ongoing malaise, it would be wise to remember Roosevelt’s words before he led the US out of a very similar crisis. “The country needs and…demands bold, persistent experimentation,” he said in 1932. “Take a method and try it. If it fails, admit it frankly, and try another. But above all, try something.”

Jean Pisani Ferry writes: Eurozone monetary officials are expected to make history when they gather for the European Central Bank’s next policy-setting meeting on January 22.

The ECB has many reasons to launch QE.  Low inflation is already a serious obstacle to economic recovery and rebalancing within the eurozone. Outright deflation would be an even more dangerous threat.

Financial markets consider QE so likely that the largest part of its bond-rate and exchange-rate consequences have already been priced in. Should the ECB not launch QE,  markets would confront an abrupt and damaging unwinding of positions: long-term interest rates would rise, stock markets would sink, and the exchange rate would appreciate. That is not what Europe needs as it struggles.

Jens Weidmann, the president of the German Bundesbank argues that the consequences of recent price data may be less serious than believed, while those of full-fledged QE could be more serious than assumed.  At a time when the US data seem to validate the Federal Reserve’s strategy, why is the ECB hesitating?

The Bundesbank fiercely opposed the ECB’s conditional support of debt-distressed eurozone members, but German officials do not dispute the legitimacy of wholesale bond purchases for monetary-policy purposes.

In principle, QE has nothing to do with sovereign solvency. It is a monetary instrument that the central bank must rely on when its policy interest rate has hit the zero lower bound and thus cannot be pushed lower.

But, by lowering long-term interest rates, central-bank purchases of government debt can help contain government debt service. In this way, QE can keep solvent a government that otherwise would be insolvent.

Japan is a case in point. The Bank of Japan already holds government securities worth 40% of GDP, and it is committed to annual purchases worth 16% of GDP.   With annual purchases amounting to twice the deficit, it has become hard to speak of a “market” for government debt. In fact, the BOJ sets the price.

Such a situation can make the central bank hostage to the government’s behavior. The BOJ’s action is predicated on Abe’s commitment to restoring the sustainability of public finances once deflation has been defeated and the economy has returned to growth. Should Abe fail to deliver, the BOJ would be trapped. If it stopped buying government debt, it could trigger a sovereign crisis and reduce the value of its own portfolio.  But continuing its purchases would tighten the government’s grip.

Trust in the government is therefore vital for any central bank that embarks on QE. The EU fiscal framework lacks credibility and does not give the ECB confidence that governments will continue to pursue sustainability after its bond purchases shelter them from market pressure even further.

Moreover, unlike its counterparts, the ECB does not face a single interlocutor. This explains why the ECB, once obsessed with the risk that governments would coalesce to assail its independence, has turned into the staunchest advocate of fiscal-policy coordination.

These concerns do not diminish the need for bold unconventional action against deflation, and it should not prevent the ECB from launching QE. The parallel with Japan highlights the need for governments to behave responsibly, individually and collectively. Europe’s elected national leaders have a large role to play, and they must not eschew their duties. The more confidence they give to the ECB, the more effective QE will be.

Jared Meyer writes:  Even though the Federal Reserve has ended its massive bond purchases, interest rates remain near zero, where they have been held since late 2008. Low interest rates remain even though the economy has improved.

The Fed believes that if it can keep long-term interest rates low, business investment and consumer spending will increase and the economy will grow. However, the Federal Reserve is unable to singlehandedly create economic growth. Its role is instead to execute sound, consistent monetary policy, which provides the backdrop for a strong economy.

Historical evidence shows that interest rate increases during the early-to-middle stages of economic expansions do not endanger economic growth. As Boston College economics professor and Shadow Open Market Committee Member Peter Ireland argues,“These higher rates are nothing to be feared. To the contrary, they are a necessary component of a broader policy strategy designed to keep the economy growing along a stable path while maintaining the environment of slow-but-steady inflation that has served the country so well, going back more than a quarter century to the days of Paul Volcker’s Fed chairmanship.”

The Federal Reserve’s continued accommodative monetary policy is unlikely to increase GDP or employment growth. Instead, suppressing interest rates in times of increased and sustained economic growth increases the risk of inflation. It is time for the Federal Reserve to let interest rates rise with the improved economy.

Joachim Gauck, president of Germany, called on Chancellor Merkel to take on global responsibilites. Gauck Speech  This is not Merkel’s style according to a fascinating portrait by George Packer in the New Yorker magazine.

Joachim Fischer, a German social theorist, describes Germany under Merkel as a return to the Biedermeier period between the end of the Napoleanic Wars and the beginning of the 1848 Revoltuions.  The middle class was focused on growing wealth and decorative style.  Peace reigned.  Today the German people overwhelmingly support Merkel.

Stephen Green who wrote “Reluctant Meister: How Germany’s Past is Shapig Europe’s Future” has another thought.  Going back to the revenge of the Romans on Hermann in the 9th century AD and up until the Treaty of Versailles, the German’s could point to their victimhood. This combined with German thinkers emphasis on ‘duty’ which has sometimes been turned to the wrong cause, has wrecked disaster.

Gauck’s criticism of his country’s unwillingness to lead the EU based on its size and economic weight may be apt. But marvel, Green suggests, at the reformed democratic character.

Now the Greek elections which may well be won by Syzria create big problems for Merkel.  Syzria says he will refuse to carry out the austerity measures required for the country’s remaining bail out funds.  He promises to roll back economic reforms also required at the time of the bailout.

Merkel has resisted relenting on austerity.  She has also refused to let the ECB do large scale quantitative easing.  By doing these two things, she may put such a strain on Europe’s currency and demccracy that they being to break apart.  Is this the price of the new democratic Germany led by Merkel?

For Michael B. Froman is U.S. trade representative charged with expanding global trade.  He and his colleagues have clocked more than 1,500 meetings on Capitol Hill to promote the president’s big potential trade deal, the Trans-Pacific Partnership.  Its prospects for passage don’t look good.

Some said in the beginning that the deal was too small, with only four Asian countries as members.  Now there are twelve.  Mr. Froman is convinced that he can complete negotiations on a complex trade agreement.

At stake is a colossal trade agreement that would stretch from Peru and Chile to Japan and Vietnam, accounting for 40 percent of the world’s economic activity. It would not just lower tariffs: The pact would require rigorous regulations on labor and environmental standards, as well as the first rules for state-owned enterprises like those run by the governments of Vietnam and Malaysia.

The T.P.P. has emerged as the linchpin of Mr. Obama’s strategic shift to Asia, giving the United States a way to counter the economic inroads made in the region by a rising China. The deal is supposed to be followed by the Trans-Atlantic Trade and Investment Partnership with Europe, though those talks have much farther to go.

Mr. Froman has expressed unwavering confidence in the outcome, saying the various parties are searching for “landing zones” on issues ranging from Japanese farm subsidies to Vietnamese labor regulations..

Democrats may be a big problem.  On the Ways and Means Commitee, members have said they wat to work with the administration on the T.P.P., down to the finest details.

One problem with the Obama administration, made clear in executive orders, is that Mr. Obama is not a talented politician and he prefers ‘orders.’   T.P.P. may have of tough time because of this attitude.

Dean Baker, co-director of the Center for Economic and Policy Research and a consultant to American unions monitoring trade talks, said strong currency provisions would do more to promote middle-class manufacturing jobs than any other provisions, including lowering tariff barriers on American goods.

On the broader concerns of reluctant Democratic senators like Elizabeth Warren of Massachusetts, Mr. Froman pointed to the 18 cases of alleged unfair trade practices the administration has brought before the World Trade Organization, half of them against China, as proof that Mr. Obama can be trusted to watch out for the interests of American workers.

The president has mobilized virtually his entire administration to see the trade agenda through: the Interior Department to work on wildlife trafficking; Health and Human Services to work through pharmaceutical issues, especially intellectual property; the Commerce Department to reach out to businesses; Treasury to handle currency; the Labor Department to address worker rights; the Environmental Protection Agency to deal with land, water and air conservation; and the State Department to take on broader diplomacy. Still you have to ask why the President insists on control.  He is no Lyndon Johnson.