It's a fascinating question.

Allowing the markets to work on their own without government intervention of any kind would certainly result in an eventual correction and then a very powerful economic boom. The markets always work.

However - we are looking at a social fabric today that is very thin and fragile. The old moral and ethical base that formed the foundation of society in the 1930s is gone. (Crime even went down during the Great Depression)

The housing bubble is the core of the problem. We would be looking at widespread hunger and homelessness as the housing bubble corrected itself. It certainly would correct - and it will now.

But under pure capitalism we would see the virtual collapse of the housing market and large-scale evictions and foreclosures that would be even worse than what we are seeing now (although it would likely end much more quickly).

The financial markets would be allowed to crash and companies would go bankrupt, also on a large scale. But this would wipe out those who are depending on stocks for their income. Last year we saw a very severe crash, but raw capitalism would allow the markets to simply implode. The money from Washington did calm the markets and had a powerful psychological effect. Without that, it is likely we would have seen the indices continue to fall. Unemployment would be much, much higher.

How would we deal with the violence and panic that would result? Markets usually over-correct first, if left to themselves. It would likely take at least two years for the process to be completed. Of course, at the end we would have removed all of the excesses from the economy, and while we would have a higher debt level (due to falling tax payments) we would not have anything like what we are looking at.

So there is threat of social collapse and a great deal of suffering. On the other hand, the current rate of spending and the strongly anti-business government we now have will also result in suffering - but it will be stretched out over time.

What’s to remember here is we are in effect stealing potential growth ala taxes/income from 2010- 11 and beyond to finance what we have going now, which doesn’t appear to be much in the way of forging an economy that can get us back to square one, which is finding 3.3 million jobs.

The market will I firmly believe fall in line with this paradigm, that is it cannot sustain itself on vapors and shrinking capital expenditures and squeezing even more productivity from those left at work. Growth year to year is the sine qua non for sustained (and yes cyclical) growth in stock prices and a true bull market.

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"The captain has turned off the `No Dubbing' sign. You are free to speak any language you choose."

You can only go so far backwards before growth is the only direction the economy can go.

A full blow economic collapse just wont happen, that would take intent.

As far as the stimulus. It was NEVER meant to stimulate the economy. That stimulus was noting more then a payoff by Obama to his loyal liberals. Now I'm not saying SOME jobs wont be created but the stimulus will hardly "save" us as we have been sold.

All that stimulus money is in the bureaucrats [liberal politicians] pockets now and they will dictate it, not use it to really stimulate the economy.

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Sic Semper Tyrannis






http://www.myspace.com/swoop187muzic

Paying down balances is good for the individual, but bad for the economy, because it contracts the money supply and doesn't produce any economic activity. It's better than the financial system imploding overnight, but it is a slow collapse of the financial system.
What we need to do in this country is to produce wealth, and if we produce enough wealth it will allow us to unwind all the debt.
To do that the country needs to operate at close to full productive capacity.
This is what happened during WWII, unemployment went away, everyone was producing something, even though what they were producing had little or no economic value, they were producing.
In the aftermath, that production could be redirected towards consumer goods, and the economy could continue to operate at near capacity.

The stimulus so far has been emergency measures to prevent the collapse of the financial system, but we are still several trillion dollars short of operating at full productive capacity, and more stimulus is needed.

It should take the form of large public work projects, especially the transformation of the transportation infrastructure to use less petroleum, because the importation of petroleum is what is bankrupting the country.

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“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

If raw materials, such as oil, are what are bankrupting the country, why isn't every importer of oil and other raw materials going bankrupt? Japan and Europe have never produced enough raw materials on their own (at least during the Industrial Era).

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Giving money and power to government is like giving whiskey and car keys to teenage boys. ---P. J. O'Rourke

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The statement sounds a little absurd. Any chance you have a link? Or can you at least cite who/what group made that claim...?




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"Give a man a match, and he'll be warm for a minute. But set him on fire, and he'll be warm for the rest of his life."


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There's no doubt consumers are cutting back on debt, however, I agree that the claim it's at an "all time low" is absurd, credit cards only being around for what six decades or less?

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Giving money and power to government is like giving whiskey and car keys to teenage boys. ---P. J. O'Rourke

Gee, I wonder if that famous liberal, G.W. Bush had the same thing in mind for his stimulus package and bailouts.Ah, so you're now saying that the stimulus $ actually is in the possession of politicians now, all of them liberal.

You're classic. Don't ever change.

Get yourself some education; everyone knows the demorats congress forced the otherwise strictly fiscal conservative Bush the younger into all the bailouts and stimulus at the end of his otherwise strictly surplus term

I mean seriously , this is a purely partisan issue, just one side of the spectrum is to blame and every good damn swoop knows, that it was the demorats and the liberal media, which forced Americans to act fiscally irresponsable, to take as much debt as possible..., as only by expanding the debt burden, these filthy Muslim demorats knew they could gain the whitehouse and install their marxist theories.

Well to get serious again, this recession has so many politicans involved in it, that it's just ridiculus to try to blame soley one of the parties for it.

Hell it's not even a pure American thing, even although some Euro trashs love to do so.

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"Homo Homini Lupus"
Thomas Hobbes

Cool! Which state though?

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I have the body of a god! To bad its Buddha!

Personally, I got out of my last car and bought a car for cash with what would've been a decent down payment on a new car. I paid off my last old bill and am making ends meet. I don't have money to put away but I'm doing fine.

Not like it matters because I can't get a loan and the job market is in the toilet, so making more money is out of the picture.

Oil imports are very profitable, because the US has not built a new oil refinery in over 20 something years. Oil consumption has increased but our ability to refine it has not kept up, therefore demand outweighs supply.

Conn.

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The government cannot give without first taking.

You believe that's because the evil corporations forced Congress to force the EPA to make emission standards so high for new refineries they now only rebuild the ones they have now, and by law and reg can only increase production on the old ones by less than 10% or be subject to the new regs?

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Giving money and power to government is like giving whiskey and car keys to teenage boys. ---P. J. O'Rourke

*sighs and paces the decks*

arg.

from what i be understandin', the roots 'o what ails us dates back decades. generations 'o americans have had lives 'o milk and honey, runnin' up the bills and seedin' the land with the horrors that face us today.

i, fer one, am not willin' to be the sole bearer 'o the weight of these actions in me one and only life that i get to have.

all this, "we should just let everything collapse because we'll emerge stronger!!!"

mate, if you want to face total personal economic ruin fer the sake 'o future generations, be my guest.

thats not me cup 'o tea.

i'd rather the pain be spread out evenly o'er the next century...and while we're at it, we can blame them who be havin' thar sunset years in bliss, them who have profited so handsomely from our errant ways, and sock it to'm.

tax'm (liberals, rejoice!).
take away thar entitlements (conservatives, rejoice!).

spread the fiscal agony out equally.

but whatever the government does, this whole "lets just have a nice depression so we can start o'er" approach doesn't suit me.

*puts his foot down*

- MeadHallPirate

ps - not to single you out, mighty chassisman. a few folks have suggested that this be the wise and proper approach.