Doing nothing is a very bad idea ...

The current economic crisis is very real, but it is very confusing for many of us. It's important to remember that changes in the stock market are only part of the story. But the wild fluctuations taking place day by day are not a good sign. I did this post on the Hindenberg Omen a while back and it is very interesting. But what I'm reading about is the current credit crunch and how it is affecting big and small companies, municipalities, and all sectors of the economy. Here is Thomas Friedman:

"This time, we are doing it to ourselves. This time, it’s our own failure to regulate our own financial system and to legislate the proper remedy that is doing us in.

I’ve always believed that America’s government was a unique political system — one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.

This is dangerous. We have House members, many of whom I suspect can’t balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don’t understand, swamped them with phone calls. I appreciate the popular anger against Wall Street, but you can’t deal with this crisis this way.

This is a credit crisis. It’s all about confidence. What you can’t see is how bank A will no longer lend to good company B or mortgage company C. Because no one is sure the other guy’s assets and collateral are worth anything, which is why the government needs to come in and put a floor under them. Otherwise, the system will be choked of credit, like a body being choked of oxygen and turning blue.

Well, you say, “I don’t own any stocks — let those greedy monsters on Wall Street suffer.” You may not own any stocks, but your pension fund owned some Lehman Brothers commercial paper and your regional bank held subprime mortgage bonds, which is why you were able refinance your house two years ago. And your local airport was insured by A.I.G., and your local municipality sold municipal bonds on Wall Street to finance your street’s new sewer system, and your local car company depended on the credit markets to finance your auto loan — and now that the credit market has dried up, Wachovia bank went bust and your neighbor lost her secretarial job there.

We’re all connected. As others have pointed but, you can’t save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We’re all connected. “Decoupling” is pure fantasy."

It's a scary time, and of course politics will get injected into the process, emotions will run hot and hotter, and some people will make total asses of themselves:

Good times.
Here's Dan Riehl's take on it all:

"While no one should want a major meltdown of the American and world economies, there is a common sense rationale for simply allowing it to burn. I see people going on about a trillion dollars in value lost. But in any real sense, that value wasn't really there.

(...)

Some of the alarmists out there might want to take a moment to consider all the ramifications here. It may sound harsh, but the Great Depression produced many things - one of them was called the Greatest Generation.

The great economic boom of the last few decades propped up by dubious credit has produced a generation or two that thinks enough is never enough and if one can't earn it, than you either borrow it, or the government in the form of hard working taxpayers should make sure you get yours in the end.

I'm no financial expert. I realize that without some plan there will be serious pain. But I also know pain is unavoidable in life. And any government that would have its citizenry believe that isn't the case simply isn't telling them the truth."

Personally, I've always preferred the idea of trying to make myself as decent as possible, rather than waiting for catastrophe to do it for me. But if people's lives have to be destroyed in order to produce a new
"Greatest Generation", I hope that people like Dan Riehl, who think that this sort of character-building through national catastrophe is a good thing, are disproportionately represented among them. After all, as he and his family settle in for the night in their minivan, Dan Riehl would be able to console himself with the thought that it's all for the sake of the greater good. Most of us, not having had this callous and idiotic idea in the first place, would not have that comfort available to us.

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