Is the U.S. Alcoholic, or Merely Schizophrenic?

Check out this article from Charles Hugh Smith.  (Look for the blog entry with the title the same as mine)  It’s good stuff.  Tough action will be needed in our future if we’re going to fix this debt problem our whole country is in.

Our government should be ashamed of themselves for all the two faced talk they’ve been giving lately.  Paulson says that institutions will need to fail, and then they bail out Fannie and Freddie (sort of, $15B doesn’t go far when a company has debt like they do) so that institutional investors (read, foreign governments, PIMCO, etc) can all get rich, or at least maintain what they have.

In a capitalist economy when a business fails it fails, and the investors lose money.  What we have in this country is some kind of hybrid where the owners make money when times are good but when they are bad the downside is pushed onto taxpayers, if the business is deemed important to the greater good.  The bad thing is that these businesses are historically reckless because of this potential bailout.  There is also a sort of short term mentality with these large corporations.  The managers know that they need to get their cash while they can, screw what happens 5 years after they leave their office.  It’s a messed up incentive pool.

The article sums up a lot of the crap that’s gone on that no one hears about on CNN or ABC.

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2 responses to “Is the U.S. Alcoholic, or Merely Schizophrenic?

  1. its called a kleptocracy, the rule of thieves.

    Everytime I get into a discussion with someone about the virtues of the free market and the dangers of becoming a welfare state I like to point out that we are already a welfare state, we provide handouts to the most fortunate. Whenever said individuals complain about people expecting handouts just because they are poor, and the moral hazard of giving away free money, I point out the subsidies of oil and bailing out businesses as deincentivizing forward thinking and wise business practices.

    The free market is dead, taxes are certain, and I’d rather mine go to people in need.

  2. No candidate will offer realistic solutions to our financial problems. They are all politically unappetizing.

    Do you raise taxes? Slash or get rid of entitlement programs? Severely cut defense spending? Hollow out the farm bill? Hyperinflate the debt away? Borrow one’s way out?

    All of these options are political dynamite, which is why it’s easier to throw out gauzy, half-baked ideas than it is to offer anything of substance.

    The Japan model offered in the first link is the likely way out, since it can be seen as ‘less painful’ than simply taking the pain now and being done with it. We have lived the high life on the backs of future generations long enough. It’s time to grow up and deal with the problem as mature adults, and that means getting used to lower standards of living, and probably lots of upheaval in the short term.

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