By DemocracyRules
This is plan B:
"Because of the self-correcting nature of free-market economies, bank failures, if permitted to run to their conclusion without interference, will eventually resolve themselves. However, the time-scale of these events is highly variable."
Some relevant graphs from the Economist (a British rag):
Graph 1: The line for "all loans" is not so bad. The current up-tick is within the normal range of variability. It's the mortgage delinquencies that are the source of the problem.
Graph 2: OK, Treasury securities are dropping, but that is more of a symptom than a cause.
Graph 3: Big bank failures definitely do happen. This is usually because some hard-headed bankers or politicians refuse to face free market realities. They fight with reality until the free-market imposes a correction.
GDP definitely suffers. For example Japan was really determined to do stupid things. They forestalled a solution for years, and In 1997 they paid big-time.
In the current crisis, the US response is comparatively quick. It's mainly aimed at forestalling further crisis. Most of these other banking crises were ignored, or even made worse for quite a while. Then the free market forced the correction.
Pro Patria
Count on my vote for Plan B. How about eliminating the Corporate income tax along with a commensurate cut in spending? That might be stimulative.
Posted by: btenney | September 29, 2008 at 04:35 PM