I think all of you are underestimating how bad it would have been if the financial sector would have gone under. Literally, every one of the independent Wall Street institutions, (there were seven including Lehman Brothers, Bear Sterns, AIG, and Merril Lynch) had to change the type of financial institution they were into a traditional bank (like Bank of America, Wells Fargo, etc.) so that they could get easier money from the government and would not collapse to the ground. There are no more independent Wall Street institutions in existence because none of them would have survived if they hadn't changed. Some of those had been independent for almost 100 years. If all seven of those had been allowed to collapse, the market would have gone into a freefall.
You can talk all you want and point at your economic textbook about how the market self-corrects and should be left alone, but a textbook and reality are two completely different things. There is a difference between allowing unsound businesses to fail and allowing an entire sector of the market to fail, especially the financial sector. Do you honestly think the financial sector could pick up the pieces and move on if all those institutions had failed? You would have seen a run on the banks like none other, possibly even worse than the Great Depression.
People sometimes assume that markets run on rationality. It does not. The market is in many ways an inherently irrational thing. It can be like a person who mixes uppers and downers and decides it is a good idea to drink alcohol too. Not to mention the market has fundamentally changed since the entire idea of laissez faire capitalism was invented. If anything, the market is even more irrational now than it used to be since information can be transported instantly and since an economic catastrophe in one country can trigger catastrophe overnight elsewhere. Laissez faire capitalism was invented in a time when it took at least six weeks just to send information from America to Britain.
The U.S. economy was essentially like a person addicted to methamphetamine for the past few years. Everyone knew he had a problem, but nobody said anything. Eventually the problem started getting so bad that people knew it was going to crumble. And then when it did crumble it exploded in a fit of violent rage. You don't just let a person like that go back on the streets. You put them in rehab. And rehab doesn't just mean you let them "work it out on there own." Rehab is not cheap, but without rehab it can often be even worse if somebody doesn't intervene.
The flip side of that is when the economy is doing well, you have to raise taxes and cut government spending so that you can run a surplus. Too many of you are blaming the housing crisis alone for this. One of the reasons why there is such a dark cloud looming over everything is because the government has been running up deficits like a kid with a stolen credit card for years.
Controlling the economy is like controlling a drug addiction. You avoid the highs and lows. You raise taxes when you are doing well so that you can save up money for the bad times. You cut taxes and/or increase spending when times are bad to get your way out of it. It makes no sense why everyone is poo pooing spending now while they have been happy as clams to sit by on the sidelines for so long.
We had two bags of grass, seventy-five pellets of mescaline, five sheets of high-powered blotter acid, a salt shaker half full of cocaine, a whole galaxy of multi-colored uppers, downers, screamers, laughers…Also a quart of tequila, a quart of rum, a case of beer, a pint of raw ether and two dozen amyls. The only thing that really worried me was the ether. There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge. –Raoul Duke
It is hard to shed anything but crocodile tears over White House speechwriter Patrick Buchanan's tragic analysis of the Nixon debacle. "It's like Sisyphus," he said. "We rolled the rock all the way up the mountain...and it rolled right back down on us...." Neither Sisyphus nor the commander of the Light Brigade nor Pat Buchanan had the time or any real inclination to question what they were doing...a martyr, to the bitter end, to a "flawed" cause and a narrow, atavistic concept of conservative politics that has done more damage to itself and the country in less than six years than its liberal enemies could have done in two or three decades. -Hunter S. Thompson
