I think the description by Peter Tchir is a reasonable analogy of the economic situation. Be forewarned, it isn’t pretty. But neither is our economic condition!
It’s possible that the problems in sovereign debt in Europe continue to get worse rather than better, because we are treating the wrong “disease”. Everyone has been talking about the risk of “contagion”. That makes me think of scientists working in pristine high tech labs searching for a cure, of technicians working on computer models, estimating spread patterns, and citizens walking around with face masks to stop the spread of the “disease”.
What we have is gangrene. Doctors with leather aprons covered in blood and saws are the images that come to mind. Whether it was a genteel Confederate soldier or a grizzled Roman legionnaire, there was only one treatment. It was disfiguring and ugly, but effective. We have waited so long that the choice is no longer above or below the elbow. We have let it spread too long, things like EFSF have done nothing but let the disease spread. It is now time to amputate (let defaults occur) and begin the real process of recovery. It won’t be easy, but it is better than continuing to ignore the real problem and avoiding taking the hard, painful, but necessary steps.
What has happened could not occur in a free market economy. Free markets allow prices to adjust and resources to be re-allocated automatically. Free markets don’t enable crony capitalism and a corrupt banking system. Problems develop in free markets, of course. But they amount to sniffles or the common cold. Benignly ignored, they cure themselves.
In a world of central management of the economy, every sniffle is treated as a crisis. Interventions are taken to prevent the discomfort of the common cold. Underlying adjustments that allow the economy to correct itself are deliberately suppressed by interventions. Over time repeated interventions need to be larger to cover new and larger problems created by prior interventions. Ultimately a point is reached when further intervention no longer works.
After almost eight decades of government interventions, we have reached that point. Now, it is time to start amputating or else the patient will die.
Unfortunately, the political class will attempt to do more of the same. It will not work.
It is over without amputations, amputations of numerous government agencies and functions. The political class is unwilling to take the necessary and drastic action.
It seems so obvious and simple to those of us who actually UNDERSTAND how a free market works. The problem is that the regressives DON’T know the fundamentals of how a free market works. They actually believe that what we have today is capitalism when it resembles socialism much more than it does capitalism
Amputation is the answer. Let’s start with the head(s)…and let’s use guillotines.
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