Existence of a Crisis Does Not Imply Existence of an Easy Solution

Just a quick thought on the economic situation.  A few days ago, Pat Lang (who usually blogs about military issues) had a post asking people’s opinions on whether the current economic situation was just a typical business cycle downturn, or whether it was a financial Gotterdammerung. His point was that in reading a lot of right-wing sites, the attitude all along has been playing down the seriousness of the current economic situation and recommending doing nothing or slashing taxes at most, while left-wing sites seem to take the tack that this is Great Depression 2.0 unless government does something to save the day.

Me, I disagree a bit with both analyses somewhat.  I actually agree with the Democratic side up to a point.  I think that this if nothing is done, that this is probably going to be a multi-year protracted recession/depression.  Probably the worst one since the Great Depression itself.  The difference is that while Democrats look at this as proving that the government has to do something, I see this as a best-case scenario if the government is smart enough not to try “fixing” the problem.  You see, admitting that the current economic situation is dire doesn’t imply that there are some magic-wand fixes that will make everything all better.

As Michael Shedlock pointed out in an open letter on his blog to President Obama:

With all due respect Mr. President, it is impossible to spend one’s way out of a problem, when the problem is reckless spending.

With all due respect Mr. President, you and Congress want to force banks to lend when banks (by not lending) are acting responsibly for the first time in a decade. Mr, President can you please tell us who banks are supposed to lend to? Do we need any more Home Depots? Pizza Huts? Strip malls? Nail salons? Auto dealerships? What Mr. President? What? And why should banks be lending when unemployment is rising and lending risks right along with it?

It is human nature to try to hope for easy outs to the consequences of one’s foolish actions. And quite frankly, both sides of the aisle have been leading us to this current situation for at least 10-15 years. I’m sure most drunks would love it if there were some pill you could just take that would instantly get rid of hangovers with no bad side-effects. I’m sure that college students cramming for finals wish there was some magical way that could make it possible to learn in one night what they should’ve been studying hard and paying attention to for a full semester (I’m sure they also wished there were some way they could go without sleep for long durations without it messing them up int he head). And everyone wants to find a magical way that saves them from the consequences of living beyond their means for over a decade (both individually, as well as voting for representatives that have the government living well beyond its means). I think the sooner people realize that just throwing trillions of dollars into all the pet spending priorities they already had isn’t going to solve the problem caused by two decades worth of profligacy.

Sure, if the government does nothing, we’re all screwed for a while. Unfortunately, that’s going to be the case no matter what happens.

The following two tabs change content below.
Jonathan Goff

Jonathan Goff

President/CEO at Altius Space Machines
Jonathan Goff is a space technologist, inventor, and serial space entrepreneur who created the Selenian Boondocks blog. Jon was a co-founder of Masten Space Systems, and is the founder and CEO of Altius Space Machines, a space robotics startup in Broomfield, CO. His family includes his wife, Tiffany, and five boys: Jarom (deceased), Jonathan, James, Peter, and Andrew. Jon has a BS in Manufacturing Engineering (1999) and an MS in Mechanical Engineering (2007) from Brigham Young University, and served an LDS proselytizing mission in Olongapo, Philippines from 2000-2002.
This entry was posted in Economics. Bookmark the permalink.

2 Responses to Existence of a Crisis Does Not Imply Existence of an Easy Solution

  1. I agree with you that the solutions lie somewhere between the extremes of the opposing views.

    I don’t believe that this Congress and this Administration are so much interested in fixing the economy as they are in taking advantage of the situation to greatly expand their power and their share of the nation’s money supply. I would not be surprised if they would be fine with a permanently weakened economy — albeit one that is more robust than it is at this moment — if they can severely weaken the influence and power of those who oppose their policies, while at the same time increasing their loyal base dramatically with the transfer of wealth that is part of the process of weakening the opposition.

    A shadow of the free-market system on life support is all they really need. A majority of people can become used to the notion of 8 or more percent unemployment as “normal” (especially with expanded unemployment benefits), and also with anemic economic growth as long as they themselves are not innovators, entrepreneurs, or even small business owners. If they can get either a decent paycheck throughout the productive portion of their lives — or the expanded unemployment benefits for the even less ambitious — then the system as envisioned by the current administration and congress will limp along until it collapses for future generations.

  2. Rhyolite says:

    I agree that we are headed towards the worst down turn in my lifetime, though I am not sure it will reach Depression 2.0 levels. And we shouldn’t be surprised that politicians will use this to advance their agendas.

    However, I think the quote is misleading in that it trivializes lending as going only to build Pizza Huts and strip malls. Credit is the lubricant that keeps the wheels of a market economy from seizing up. Businesses use short term credit to buffer irregular cash flow when carrying out essential functions like making payroll and purchasing inventory. Many business also have debt vehicles that require periodic refinancing and will become insolvent if it is not available. Without access to credit markets many business – functioning, profitable business – will suffer.

    Unfortunately, the administrations efforts with the credit markets are not going well even in the view of sympathetic commenters like Paul Krugman.

Leave a Reply

Your email address will not be published. Required fields are marked *