After youve gotten drunk, taken the wheel, screeched through back alleys, driven over a hobo, packed him into your trunk, headed for the countryside to bury the body, and steered at high speed into a parked state police car — then its a bit too late to demand a painless solution to your problems. Somewhere between your first drink and your last you should have stopped short; you should definitely not have attempted to drive; if you did drive, you shouldnt have steered pell mell down narrow roadways; after you hit the homeless man, you shouldve called for help, not stuffed him away for later burial; and if you wanted to stay out of jail, running into that troopers car was a bad idea, indeed.
These thoughts come to mind when certain ideologues demand that politicians DO SOMETHING about an economic depression. They dont want politicians to stand by and let the correction take its course. They refuse to be corrected, demanding instead, that the nations great solons fix everything, with zero or almost zero (or, at least, zero for them) pain.
Fat chance. The history of major financial debacles, and attempts to worm around the consequences of bad financial practices, is not good. Ive reminded subscribers to my Common Sense e-letter of the post-WWI bust and quick recovery several times. Herbert Hoover, the progressive Secretary of Commerce to President Harding, entreated the president to take extraordinary measures to save the economy. Harding rolled up his sleeves and cut government spending, instead. The nation quickly recovered from the devastating post-war collapse, without Hoovers help.
The next time a crash happened, Hoover was president, and — as a number of historians and economists have noted — Hoover did his darnedest to fix things. And put America in a fix that FDR managed to make even worse, by his own grab-bag of solutions.
Since the 2008 implosion, our federal government has bailed out banks and automobile businesses (and, more importantly, unions). The Federal Reserve has inflated the money supply and rigged interest rates to as near zero as it can manage. A huge new regulatory regime was put in place to prevent future problems. And, even as the nations entitlement system of Social Security, Medicare and Medicaid increased the speed at which they raced towards their spectacular insolvency, an additional entitlement was foisted on a more-than-skeptical population.
And yet, somehow, were still in the doldrums. Its Hoover Progressivism/Roosevelt New Dealism all over.
Why? After you stuff the dead hobo in the trunk, theres no easy solution. In this case — and to speak without metaphor — after the Fed had financed a bubble, after Congress had ensured increased participation in the bubble (by subsidizing housing and taking all responsibility out of the mortgage markets), and after a financial after-market created by government and leveraged by experts collapsed into a black hole, some pain must be endured.
A new and natural — not centrally planned — balance must be found. Trying to force a painless recovery assumes that politicians know what they are doing about the vast cosmos of the economy. Which obviously they dont. They cant even manage to balance their own budgets — a relatively simple task compared to figuring out how to make jobs while stabilizing investments and the dollars value. Instead, politicians pretend to fix the economy (and endlessly pat themselves on the back) while doing the one thing that will do it the most harm: overload it with public debt.
America is long past the Dead Hobo stage.
The problem, at this point, is that, after a criminal has gone so far as to hide a dead body and plow into a police car, the next step may be a dangerous and even violent panic.
Americans need to talk their politicians down.
Now step away from the economy.