It seems to me that the Obama administration can go with any of three different truths as it tries to explain its banking programs to the world:

1. The banks have us by the plums: Keeping the economy near full employment requires pushing asset prices back up to values at which businesses selling stocks and bonds can obtain financing that makes it profitable for them to expand. But pushing asset prices back up enriches the bankers whose overleverage got us into this mess, and prevents them from suffering their just punishment. There is no way out of this dilemma, but the Obama administration is trying as hard as it can given the limited authority congress has granted it to maximize the gain to employment and minimize the support provided to financial princes.

2. The government has a chance to make a fortune: Just as in 1999 and 2005 financial markets were ruled by irrational exuberance, now they are ruled by irrational pessimism. Because of this irrational pessimism, businesses selling stocks and bonds cannot obtain financing that makes it profitable for them to expand–and so unemployment is high. But the government is not irrationally pessimistic, and is "patient capital": the government can buy up financial assets and so raise their price, boost employment, and then hold the assets until maturity and very likely make a fortune. It can do good for the economy and the country and do well by its own finances at the same time. It is true that financiers who ride-alongside, front-run, and manage the government's portfolio are very likely to make fortunes too, but much smaller fortunes than the government.

3. We have to play out the hand before we ask for a New Deal: Perhaps the situation can be cured with relatively minor support for the banks. Perhaps the situation will require full-fledged bank nationalization. Bank nationalization could not pass the Senate now. Come this fall, it may be needed–but it will only be clear that it is needed if the Obama administration has done its best to rescue the banking situation with the powers it has at its current disposal. You cannot ask for a New Deal until you have played out your hand.

If the Obama administration were selling any of these three lines of narrative–or were selling all of them–it seems likely to me that it would be having more success is building support for its strategy. But I do not think that it is selling any of these narrative lines to make sense of its policies. Indeed, I do not know what the narrative story it wants to tell about the current situation is.

Economists are roundly cheerful about China’s worst quarterly economic performance in nearly 20 years.

The 6.1% year-to-year GDP growth in the first quarter — way down from the double-digit growth levels of recent years — does belie some encouraging signs for the economy.

Manufacturing output, up 8.3% year-to-year in March, is growing at a healthy clip again. A range of indicators, from rebounding car sales to faster fixed asset investment growth, all look positive.

In sum, a belief that the last three months represents the trough of China’s slowdown has taken hold, with credit due to last autumn’s $586 billion fiscal stimulus and a massive surge in lending from state-owned banks, mainly to state-owned enterprises.

Now the debate among economists is becoming more alphabetical.

Is this recovery V-shaped, with China set to return quickly to the high-level growth of recent years? Or is it more W-shaped, as a government spending-led recovery this year peters out and China’s longer term structural issues resurface?

The risk in Beijing’s spending-and-lending stimulus measures is of an eventual, large misallocation of resources.

That the state-owned sector is driving the current recovery is clear. There are two purchasing managers’ indices in China: The one that reflects activity among state-owned enterprises is now in positive territory, while the private sector-weighted index — calculated by CLSA Asia Pacific Markets — is still contracting.

Optimists argue Beijing’s stimulus spending via state companies will have a multiplier effect on the rest of the economy.

But the danger of crowding out potentially more efficient private-sector activity is high. In the absence of helpful external factors — namely a resumption of Western demand for Chinese exports — the government pump will continue to be the only thing preventing China’s V-shaped recovery from turning W-shaped.

China’s fiscal strength will give it leeway to keep money flowing into state enterprises and projects if need be — Stimulus II, so to speak. But reliance on government spending isn’t a long-term alternative.