Created 1/18/09
As my writings indicate, I believe the various Bailouts, Stimulus Measures, and Interventions (which I will hereafter refer to as “interventions”) that have been, and will be, implemented in hopes of improving the economic condition carry tremendous risk for both the short- and long-term.
The United States, as a country, has fully embraced the theory and practice of interventions. I don’t believe this embrace will change in the short-term due to a variety of reasons ranging from political pressures to a near-complete misunderstanding of the economic maladies.
It is possible that these various interventions will seemingly marginally improve the economic condition for a short period. Proponents of these measures claim that “things would be worse now” had we not embarked upon these interventions, which in some ways may be correct.
A question may arise as to whether I oppose the interventions currently being proposed. This is a difficult question, for the following reason: Prior intervention activities have created a situation for which there is only one seemingly reasonable course of action: more intervention - which is another way of saying that there will be pain with or without further intervention. The main issue is whether the pain is short-term in nature, or long-term in nature, and the resultant short- and long-term effect. Given current conditions, I agree that these interventions are in many cases needed to avert outright collapse of certain institutions and/or financial markets, which could cause immeasurable damage to the economic/financial system as a whole. This is a rather incontrovertible fact, and serves as a testimony to the complexity and serious nature of our current economic predicament. Basically, to now “pull the plug” on these various interventions would cause a tremendous amount of damage and losses.
However, there are other aspects that have to be considered as well. Perhaps chief among these include the “going-forward” long-term viability and character of the economic system. If the intervention measures serve to only “prop up” the economy for the short-term, are they worthwhile given the risks and other adverse conditions, including significant additional indebtedness, that they impose? The goal of any action, or inaction, to improve the economy should be to maximize economic success, in a sustainable manner, over the short- and long-term.
I am of the opinion that major transcendental changes need to be made as to how we manage the finances of The United States and its economy, and the quicker the changes are made, the more prosperous we will be in the future. These changes are “a long time in coming”, and unfortunately, the “intervention” mindset and associated actions are in many cases heading away from the changes that are needed.
In summary, I believe the interventions will fail to produce the desired effect of providing the economy with short- and (especially) long-term benefit. My analysis and modeling of the situation indicate that the interventions can not, and will not, work given the situation that we are in. Hopefully I am completely mistaken, as the actions that have, and will be, taken will have truly immense repercussions.
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