However not putting liquidity back into the system would certainly lead to another Depression. If you study the depression several financial decisions were made by the government that only made the problem worse. While we may only be staving off the inevitable I believe it is the hope that the economy may recover long before we have to inject more and more to keep it going and thus really hurt it more.
I see a couple of things that worry me that the government is considering and/or advocating.
- Raising taxes in a recession. Major no-no. Do some research on the what happened prior to the depression and the steps the government took that really paved the way for it rather than avert it.
- Investing in energy that has little or no benefit to the current economy. Whether you agree or disagree about our reliance on supposed fossil fuels I think most can agree that our system is not ready for a huge energy upheaval nor do we have the technology to completely support ourselves with any of the new systems...save for nuclear which has it's own inherent and difficult problems. Creating green jobs may actually backfire and make things worse. Imposing huge fines and ridiculous standards on manufacturing cannot and will not lead to a better economy. If you have worked in this sector at all you realize that the current standards are ludicrous as they currently stand. The EPA in my mind is a complete waste of money in their current capacity. They should be finding solutions to the issues rather than hindering industry and sectors of the economy that actually could bring jobs. Green may be in but green is expensive due to the fact that it is new and the infrastructure for it is simply not there. Changing to green energy amidst a booming economy would be extremely difficult much less trying to do it inside of a very deep recession.
- Placing earmarks and essentially 're-modelling' funds into a stimulus plan. Some of the current stimulus plan is outright ridiculous. $6,200,000,000 of it is going towards weatherization of buildings? Some $2,500,000,000 of it is going towards rebuilding and restructing federal buildings to make them more green? So in the middle of the deepest recession since the Great Depression the federal government is...remodeling? Nice.
- Government gaining more of a stake in the day to day affairs of commercial business. This is never a good thing in a democratic capitalist system. The government cannot balance the budget yet they are going to tell banks how to conduct their affairs? The very reason that Bank of America is in dire straits now is because the government played hardball on their purchase of Merril Lynch. Essentially BOA wanted to back out knowing that Merril Lynch was going to lose almost 14 billion prior to the purchase. BOA was not sure they could handle this type of loss or make up for it. As it stands now I believe BOA lost 1 billion last quarter. However the government having injected money into BOA told them essentially that if they did not purchase ML that they would not look to favorably on helping BOA in the near future should they need it. So the government figured what was good for the economy or the image of the economy was good for BOA. However we can clearly see it was not. The government needs to get out of the affairs of companies as soon as possible and allow them to get back to the business of making money. I realize they had to inject money but they shouldn't be calling the shots. Thats the pot calling the kettle black since the government and money have never been a good combination.
- Blaming the problem on consumers, the executive branch, and whoever else they may. The problem is not just consumers but the fact that banks allowed the consumers to 'slip by' and purchase property way out of their budget. The problem was not the President nor his cabinet since this office does not act in a vacuum in our system and is limited by several checks and balances put there for good reason. The problem of oversight really belonged to Congressional oversight groups and they alone had the clout and the power to enforce the policies which they clearly did not. So if the Congress and the banks want to find someone to blame all they need to do is look in the mirror because they got us here.
- Advocation of protectionism and isolationism. These types of policies will result in a trade war with many many nations. The current economy is global and America cannot act as if we can meet all of our own demands because we simply cannot. Without the influx of imports we currently have America would be in a huge mess. Many factories that I worked at built factories in other nations in order to supply that nation. American factories simply could not handle the demand. One could make the argument they could meet the demand now but when the economy ramps back up, and it will, it will be capped by our own refusal to admit that we simply cannot produce fast enough or gain access to enough raw materials to meet the demand. Isolationism is probably the biggest deterent to economic growth you could ever have and yet we have those who are suggesting it. History shows that it simply does not work.
All of these to me are scary. We can continue our social expirements and free energy, no pollution pie in the sky ideals at a later date. Right now we need to go with what works.