Brad DeLong posted some industrial production figures straight from the Fed itself. And ... yeah, it's bad. "The rate of capacity utilization for the total industry declined in June to 68.0 percent," the report said, "a level 12.9 percent points below its average for 1972-2008." This figure, coupled with the second quarter output falling at "an annual rate of 11.6 percent," and things look rather grim—even when we consider that an 11.6 percent drop is markedly better than the 19.1 percent drop from first quarter output.

Government deficits "saved the world," concludes Paul Krugman. How? By offsetting a startling spike in private saving in the current economic contraction, he says, referencing numbers crunched by Jan Hatzius, Goldman Sachs (GS) chief economist. Without high levels of public spending, this Great Recession would be another Great Depression, says Krugman.

It's well known that Barry Ritholtz has a fraught history with ratings agencies. He's repeatedly blasted them for their role in the economic crisis of late—and rightly so, it seems. After all, wasn't it House Democrat Henry Waxman who used the words "colossal failure" to describe the history of groups like S&P? Well Ritholtz must have some serious Karmic points stacked in his favor, because Moody's, Fitch, and S&P—which allegedly gave him publishing-house headaches due to its affiliation with McGraw-Hill—is about to get body checked (legally speaking) by CalPERS, the California state institution that manages pensions and benefits for about 1.6 million public workers. (That makes it the largest of all U.S. public pension funds, for those of you keeping score at home.)

Ritholtz outlined the story today. It seems that CalPERS lost approximately $1 billion by investing in SIVs (structured investment vehicles) that the three ratings agencies in question gave high ratings. CalPERS alleges that these ratings were grossly off-base and associated with the SIVs in a manner bordering on negligence. What's most exciting, Ritholtz said, is that "Calpers doesn't give a rat's ass about the money. [...] These left coasters want their pound of flesh." In other words, Ritholtz thinks it's unlikely that CalPERS can be bought out in a settlement.

Felix Salmon approves of the Wall Street Journal's editorial page proposal for a special tax on too-big-to-fail banks. He takes the suggestion and runs with it, saying that ideally the size of the tax should scale up with the size of the bank's balance sheet. That would incentivize institutions to stay smaller and help protect taxpayers from firms taking oversize risks, safe in the knowledge that a bailout is around the corner should they run into trouble.