| Your comment loses value through the unmitigated bias showing through. You had me until 'Psychotic Right' as though viewing the problems through a left/right filter is the explanation. The fact is we'll never know what would have happened if large companies were allowed to fail, because they weren't. It might have been worse, it might have been better. For sure it would have been worse in the short term, but these issues should be measured over the medium to long term. One of the messages that has been sent out with the current handling is that there is a Fed put on any high risk adventure, and that's not good. Personally I think that there is something to be said for the 'bandaid' approach. Not sticking something over the top to cover the problems, but a short sharp shock of pulling it off and let the problems be. The problem with the bailouts is that they cover over the fact that some companies were allowed to fail. Lehman, for one. And the world didn't stop turning. Sure, this caused liquidity problems and risk premiums to escalate dramatically, to the detriment of employment and the real economy. But it's foolish to pretend that this isn't going to happen anyway. The problem with Krugman and others is that they believe a lack of demand is the problem. They view the problem through this prism, and as such they come up with solutions that match their world view. Others (including me) say that perhaps the problem is excessive debt. And until that excessive debt is eliminated from the system, productive companies are unable to make use of the resources tied up in the unproductive ones currently taking shelter with public money. You say the institutions should be kept alive, I say that they should be destroyed and the buildings and staff and infrastructure released to new institutions who can find a way to be competitive. I believe you shouldn't look at the problem in terms of a company or bank failing. That's just the symptom. Once the debt had built up excessively, it was only a matter of time and method for the companies to fail. The problem was watering down of regulation that had stood the test of time for 70 years, and regulators becoming toothless. So far, this hasn't been fixed. This is a not a left/right blue/red debate. It is a debate as to the level that central governments should take in directing and manipulating markets. Neither 'side' is debating this. Nobody will try and defend central planning and a command economy, because it is comprehensively proven as a failed model, yet we seem to be reversing backwards into this situation on the say-so of a bunch of people who couldn't see the problems headed their way. They don't seem to realise that controlling the fundamentals of money (supply and price) causes wrong investment choices through inappropriate price signalling. And then they try and correct those choices by further fiddling with central control instead of letting the chips fall where they will fall. Because they're going to do this eventually - no amount of bailing out will fix a fundamentally out-of-date business model. |