Bail-Out Vote Fails in House, Now For Plan B

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

Comments

[btenney]

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.