To paraphrase Augustine of Hippo (en.wikipedia.org/wiki/Augustine_of_Hippo), the wild rake who late in life became saintly: “Oh Great John Maynard Keynes, Give Me Fiscal Restraint, but not yet please.
Obama has an incredibly tough job and the blame lies equally between the last couple of administrations and Congress (which abdicated its roll as the third branch of government in favor of imitating a rubber stamp.)
No single thing shows me just how bad this situation really is as much as the fact that the administration can’t even find anyone willing to staff the Treasury Department’s top jobs.
But consider.
Virtually everyone (notably excepting the heads of the Federal Reserve who were in charge of the loose credit) agrees that loose credit got us where we are.
Without loose credit the criminal lack of oversight by the government agencies who were supposed to be watching the cookie jar wouldn’t have done much damage because the banks wouldn’t have had the money to burn.
So, what is the Obama solution to disaster caused by loose credit?
Right! Looser credit!
I’m not Rush Limbaugh who apparently hasn’t noticed that we are all riding in the same airplane and if the pilot crashes things won’t be particularly comfortable for the passengers in first class either.
Do I have a better suggestion? Actually not because this is a political problem and there is never any good solution to those except radical change.
An economic solution under free enterprise is easy; let bankrupt banks go out of business, let factories which can’t make money close down, etc. In a few years things will be fine again.
Politically that isn’t possible which is proven by decades of voters electing politicians who tell them they can have any services or goods they want without paying for them.
The U.S. has lived for nearly 12 years by borrowing from China. You know about China, don’t you? That’s the big country which has lots of new factories and whose people save lots of money.
Spending (printing money) WILL stimulate the economy. Giving a morphine drip to a drug addict with gangrene in their big toe will make him feel a lot better – he may even get up and walk around.
But eventually the whole leg will have to come off, not just the foot.
I say there is no good solution because politicians NEVER accept great pain today to avoid greater pain later – they are collectively like teenagers whose brains aren’t mature yet – unfortunately the last part of the brain to start working (around age 19-25) is the one which allows a person to predict the consequences of their bad acts.
We (the whole world) may pull out of this economic disaster by stimulating the economy. But, since the cure is just piling on the same medicine that caused the problem, eventually (5 years? 10 years?) the cliff in front of us will just be a lot higher and by then no one will believe in any rescue plans.
Keep printing enough money and the dollar will be devalued – that probably lies in our very near future – it has happened before – it is every government’s eventual solution to having a really big debt.
Printing lots of money is the temporary way out but it never works in the long run.
The problem is that right now this is absolutely necessary!
What do people do when government fails to feed them? Ask Louis XVI or his bride Marie, Tsar Nicholas II, or the German republic BEFORE Hitler, or Japan in 1939, or the Roman Empire for that matter, etc.
Hungry people overthrow their governments. Threatened governments start wars to maintain power at home.
You say that makes no sense? True, but war isn’t logical. Virtually every country which started a war has lost it.
The big danger now isn’t bread lines in the U.S.; we can feed people given enough incentive.
But the big danger of a deep recession/depression is always the same – social unrest.
Don’t take my word – check out the little noticed February 12 report from Dennis Blair, Director of National Intelligence.
www.dni.gov/testimonies/20090212_testimony.pdf
Mr. Blair told the Senate Select Committee on Intelligence:
The 46 page report goes on to describe the most dangerous places in the world and how they will be made more dangerous by the world-wide economic disaster.
Some are obvious – Russia was oil rich two years ago, now it is broke. There are many other examples, one which hits home directly is the threat of massive northward refugee migration from Central and South America.
Everyone in Congress knows all of this, so, when you hear politicians ranting for protectionism or against stimulus, just realize that they are talking through their hats and know it – they know the real risks, they just won’t talk about them.
An honest student of history will note that Roosevelt had far less to do with the end of the great depression than Hitler did.
WWII showed that, indeed, we had far more to fear than just fear itself.
