|
|
|
|
|
|
by gitfan86
1538 days ago
|
|
|
I recently read a book that was basically a diary of a businessman from the great depression with some commentary. It seems like there were two big problems that we have done a good job avoiding since then. #1. Way too many people were rich on paper and with margin. #2. Once the economy started to collapse everyone panicked and tried to avoid spending money, which causes a negative feedback cycle. 2008 was similar to issue 1, but we avoided step 2 by bailing out the banks and auto companies that should have collapsed. |
|
|
'Should' is doing a lot of work in that sentence.
Should a business that's selling $10 bills for $9 collapse? Yes, that's pretty obvious.
Should a business that's consistently selling $10 bills for $10.05, but requires access to short-term liquidity that completely evaporated overnight to function, and is now not functioning, because some other unrelated part of the economy is sick, and all flow of credit has stopped?
Should that latter business fail? Who's going to be better off for it failing? Even if killing that business will create an economic catastrophe, as well as a mountain of geopolitical concerns that are the consequences of de-industrialization? [1]
On a metric of anything but ideological purity, the fed stopping the economic collapse where it did was a bargain at twice the price.
[1] Just ask Russia in 2022 how well de-industrializing all of its inherited Soviet economy has worked out for it. It's now in the unenviable situation where its domestic production can't even sustain a Soviet-era standard of living, without relying on now-sanctioned foreign trade.
All because it hyper-optimized on growing the 'productive' parts of its economy (Oil, oil, gas, oil, and gas), and let the unproductive parts (all that old, crappy, internationally uncompetitive Soviet industry) rot away.