Like anyone who wants to know where our economy is going, I’ve been scouring the economics news more than usual of late. It’s confusing stuff. Market pros typically say the Fed under its newish chairman Ben Bernanke isn’t doing enough to lower interest rates. People who don’t make their living in the markets tend to point out that it’s not Bernanke’s job to bail out investors who made stupid investments. A third layer of complexity is what, if anything, the administrative and legislative branches should be doing to help in the form of stimulus measures (spending more money, lowering taxes, or both).

The single best article I’ve read recently to make sense of it all is Sunday’s cover story in the New York Times Magazine: “The Education of Ben Bernanke,” by the great Roger Lowenstein. Perhaps with the exception of my colleague Allan Sloan, there isn’t anyone in America who writes as clearly about the complexity of economics as Lowenstein. Over Christmas I read (I’m ashamed to say, for the first time) his “When Genius Failed,” an absolute must read to understand what the mortgage crisis of 2007 does and doesn’t have in common with the collapse of Long-Term Capital Management in 1998.

Taking advantage of his three, count them, three interviews with Bernanke, Lowenstein does an outstanding job of explaining the history of the Federal Reserve, how Bernanke is different from his predeccesor, Alan Greenspan, and how the current crisis unfolded. I’ve been baffled that Bernanke failed to see the problem of the mortgage meltdown sooner, and in the article I found a clue. In his teachings at Princeton, Bernanke became if not a fan, then at least a consumer of econometrics, the study of the economy as it is reflected in the economics data published by the government and others. Greenspan, in comparison, is far more anecdotal and driven by hunches. Had Bernanke paid more attention to anecdotes about how out of the control the mortgage situation was he might have caught on more quickly.

Finally, a small-C criticism of Lowenstein’s article, and not just that it twice misspells Treasury Secretary Henry Paulson’s surname. Fine as it is by way of explanation, Lowenstein, at least to my read, never offers up a suggestion as to what Bernanke, the president and Congress ought to be doing. Immediately after finishing the article, I caught up with a Saturday editorial in the Wall Street Journal I found far more helpful in this regard. It’s called “The Panic Stage,” and here’s the kicker:

So what to do? Pass a tax cut that is immediate, marginal and permanent. In the “stimulus” grab bag that President Bush is contemplating, the only growth driver is bonus depreciation. Congress will be worse. As for the Fed, continue with the regulatory triage, but ease as little as it can get away with and slowly restore the monetary credibility that was so painfully earned in the 1980s.

This recipe may or may not prevent a recession, though we’d note that so far the underlying economic indicators suggest slower growth rather than a contraction. What these policies would do is prevent today’s panic from becoming something much worse.

This short and punchy editorial, together with Lowenstein’s leisurely and masterly narrative, will bring you up to speed on the economy. For now.

The weekend papers were full of reports about the Treasury Department and Federal Reserve Bank meeting behind closed doors with mortgage lenders, servicers and investors to work out a plan for a voluntary freeze in interest rates for some subprime borrowers.

I was fascinated by the stories — the New York Times and Wall Street Journal coverage had significant overlap — and I pored over them to try to divine their murky details. As I read, though, a niggling thought took over my brain: If anyone is getting their rate frozen on their adjustable-rate mortgages, I want mine frozen too.

I’m no doubt opening myself up to charges of heartlessness. I don’t have a an ultralow teaser-rate ARM. My loan isn’t subprime. In fact, I knew exactly what I was doing when I bought an adjustable-rate product. I understood the risks and benefits. I’ll be able to afford the consequences of a rate increase.

Still, why should I be the sap who pays just because the above is true? The Journal’s primer suggests that only borrowers for whom a freeze would make the difference between staying in their home and defaulting would be eligible for a freeze. Those who either can afford their mortgages without a freeze or can’t afford their mortgage under any circumstances wouldn’t qualify. Good luck deciding who doesn’t need the help. I’ve just told you I don’t need it because I’m being honest and I’m not sharing any numbers. Would I like to continue paying the same interest rate for the next five years? Hell yes.

The harm I suffer by this measure is philosophical. The impact on others is clearer. A group called the American Securitization Forum, which represents hedge funds who bought repackaged subprime loans, appears to be resisting the most the “voluntary” freeze proposal because its members stand to lose a lot. (Its investor members are listed here.) A rate freeze would cut into their returns. Who’d be helped? Lenders and servicers who can keep collecting on the mortgages they sold. Shares of Citi (C), Wells Fargo (WFC) and Countrywide (CFC) all shot up Friday.

(Look for more details and debate on this topic Monday, when Treasury Secretary Henry Paulson — who realized there was a mortgage crisis months after his former partners at Goldman Sachs (GS) figured it out — addresses the well-timed Second Annual National Housing Forum hosted by the Office of Thrift Supervision. Paulson is scheduled to speak for 15 minutes, but the day promises plenty of other fireworks. The agenda includes Countrywide CEO Angelo Mozilo, Toll Brothers (TOL) CEO Robert Toll (whom I had fun with in July), Fannie Mae (FNM) CEO Daniel Mudd, and American Banker’s Barbara Rehm, one of the best banking journalists in the country.)

The decision to freeze an interest rate or otherwise modify a mortgage is appropriately handled by the borrowers and the lenders, and, in our current reality, the investors who bought the loans from the lenders. They’re the lenders now. They’ll act in their economic interests, whether that be freezing a rate or forcing a default. Anything else makes a total sham of the system of lending money so a borrower can purchase an asset which, in turn, is pledged as collateral against the loan.

Heartless? Perhaps. I’d feel a whole lot more generous if my own mortgage payments weren’t headed higher.

Signs of a bubble are everywhere in the buyout game. It felt like this in techdom in 1999, and yet it took many months for the air to begin to come out. What are the signs? The Chinese government is investing in the most prominent buyout firm of all, Blackstone. That feels a little like Japanese companies buying Pebble Beach or Rockefeller Center. Fed chairman Ben Bernanke warned last week that so-called bridge loans for the equity portions of buyouts could signal trouble. (It used to be that bridge loans were for senior debt, or the loans at the front of the bankruptcy line, not equity, which stands in the rear.) Bloomberg quoted Bank of America (BAC) CEO Kenneth Lewis saying the following about private equity:

We are close to a time when we’ll look back and say we did some stupid things. We need a little more sanity in a period in which everyone feels invincible and thinks this is different.

So how will it end? I discussed this in an interview last week with Marketplace Radio host Kai Ryssdal. (Listen to the interview here.) Eventually, the market will turn. Economic conditions won’t be as favorable. Rates will rise. Banks will start imposing stricter terms, something they aren’t doing today. BofA’s Lewis is right. Everyone always thinks this time is different. It isn’t. All that’s left to decide is who gets to play the greatest fool.