Tuesday, September 30, 2008

Does Someone Who's Bleeding to Death Need a Transfusion or a Tourniquet?

I see a bailout as a blood transfusion for a patient that is bleeding to death. sure, it'll let the patient live longer, but why not stop the bleeding rather than just adding more blood?

The global economy is fucked not because we wouldn't pout 700 billion into the raging inferno to keep in burning, but because our politicians didn't have the balls in 1913, 1944, 1971, and don't have the balls now to stop the financial sector from adopting irresponsible and reckless practices as their common, everyday way of life. I don't see any bailout as a solution. I see it as more inflation... because the money is coming, essentially, from nowhere. No equal exchange of labor, just 700 billion from the central bank to continue to fuel the fire. as long as the fire continues burning, it's business as usual...

We have been operating on a completely unsustainable system since the dismantling of the Bretton Woods Agreement in 1971. Fiat currencies tend to do things like this (implode) when they are largely unregulated. But to actually fix it, what's needed is not more fiat money, but a serious amount of restraint, regulation, and hopefully an end to the commonplace irresponsible and reckless behavior of the financial sector.

Hopefully there will be a smaller bailout, because in that way the mainstream media is right--at this point we need it to survive in the short-term. But unless it's coupled with serious ass-kicking economic reform, it's just going to prolong the situation and make it even worse when the inevitable crash does come. A bailout without meaningful changes/reforms will set the stage for another bailout in a few years--this time by the IMF/World Bank.

But I don't think things are quite as bad as the Dow Jones reports would make them to be. People are still buying things (on credit even). Many companies are still profitable and still hiring. The financial sectors will feel a lot of hurt and they will pass it down through the rest of the economy and some innocent companies will likely go under... But companies that actually provide a useful service or produce a useful product will probably be OK. And the American people are quite resilient... We'll be OK too...