Friday, December 05, 2008

Is a Depression (to be hoped mild) in Order?

I am fully convinced that there isn’t a politician extant that has a clue what to do about the current economic melt down. That’s here, there and everywhere.

Think about it. One day a few months ago someone came up with the number: $700 billion. He, she, they threw out a few ideas about what to do with it. Early “winners” were AIG, Citi (twice I think) and a laundry list of banks. Since, we’ve had a series of plans, none of which got more than a day or two of thought by their proponents.

Then the circus stalled. We are all pissed because the Big Three auto makers want a shifting low eight figures in some shifting loans, lines of credit and other stuff, which may get them through the end of the year, quarter, or not.

The chief clowns flew the first time and drove hybrids the second time, the Ford guy stopping at Quiznos on the turnpike. The GM guy said something about how saving his company was a noble thing to do, or something else. The Chrysler guy did a great job with GE during the boom times and screwed up Home Depot when things were not so good.

Think about this. You are either in a deep world of doo doo right now, or not so much. Whichever category you inhabit, it may or may not be all, some or none of your fault.

So, why not let it all collapse, if collapse is where this thing is going? Use our public resources to pull those at the bottom of the heap out of the bottom of the pile. Let the businesses that don’t make economic sense fail. Put some more public money into economic policies that make some economic sense (run by people that can at least articulate a business plan).

If we bottom out and protect the really hurting people, where will we be? The houses and apartments will still be there, at prices that reflect what people are now earning. Cars will be there, again at prices that reflect the new economy. Etc., etc..

My thought is that while this isn’t isolated to just this country, we still have enough economic effect in the world to make this shifting of the economic base a world thing.

Then there are the geo-political implications. Iran, Russia, Venezuela, Saudi Arabia, dependant on a failed oil and industrial economy, do not have the influence they would have hoped to have wielded. North Korea is still the basket case it has always been. China is delayed, but still in the game.

I admit, I don't have a clue; but, we are mortgaging our and our kids futures on a crap shoot.

We’ve been drummed and drummed and drummed on the genius of the free market economy. Is it the time to let it work, saving our collective contributions to government largess for those who fall out during the time that it needs to work?


dr sardonicus said...

It's not the 30's anymore. People no longer trust the government to do anything about an economic crisis, and a depression of 1930's proportions would only give rise to an "every man for himself" attitude. This time around, people will just bar their doors and windows, and load their guns and rifles.

Poor people always get screwed in a depression. A major depression like the 30's would destroy what's left of the American middle class, and instead of the Keynesians, the dominant economic advisors today include many Friedmanites who would argue that the middle class is not worth rebuilding. Call me paranoid, but sometimes I think that destroying the middle class has been the goal all along.

molly gras said...

Ok, I have to admit, I was a little shaky while reading Dave's comments ... now I'm practically quaking in my boots reading Dr. S's response.

You guys really have me freaking out here!

DaleC said...

First, we have had 13 recessions since WWII and I lived through one more severe than this one back in the 1970's. The sun will rise again and teh economy will return.

There are so many places where I can point out government policy as the primary cause of the curent economic policies. I don't mean de-regulation. I mean things like Fannie and Freddie guaranteeing stupid loans and government subsidies for ethanol and stupid-sss labor regulation among many others.

If we continue on the path of the government saving the economy, we will end up like Japan. Their economic pain began in the early 80's and, rather than letting some large organizations fail, they propped them up. This only prolonged the pain and that is why they have been economically weakend ever since.

I am not an anarchist, regulation is needed, but it must be reasonable. We are rapidly moving toward government ownership of production and the inevitable meddling in the operations of those companies.

Let the companies die and the forces of creative destruction replace them with something newer and better. The alternative is a recession or depression with prolonged duration due to government meddling just as we saw in the 1930's and 40's.