The world is likely to view any temporary extension of the income tax cuts for the top two percent as a prelude to a long-term or permanent extension, and that would hurt economic recovery as well by undermining confidence that we're prepared to make a commitment today to bring down our future deficits.

In the financial system we have today, with less risk concentrated in banks, the probability of systemic financial crises may be lower than in traditional bank-centered financial systems

There is a basic lesson on financial crises that governments tend to wait too long, underestimate the risks, want to do too little. And it ultimately gets away from them, and they end up spending more money, causing much more damage to the economy.

The recognition that things that are not sustainable will eventually come to an end does not give us much of a guide to whether the transition will be calm or exciting.

The plausible outcomes range from the gradual and benign to the more precipitous and damaging.

Looking past the immediate crisis, a more resilient system must be built on stronger and better designed shock absorbers, both in the major institutions and in the infrastructure of the financial system.

The substantial uncertainty about the path of asset price movements going forward necessarily reduces the case for altering policy in advance of the move.