While I subscribe to Adam Smith's philosophy, you appear to fall into the Keynesian category. And never the twain shall meet. (Note to moderators: this isn't politics or religion, it's economics.)


If we stipulate that this is true, I still don't see how we would expect the government to be competent to smooth out the swings. How's it been workin' out fer ya so far?


In other words, we have spoiled the child for years, so now its too late for tough love.


Perhaps if they were allowed to fail when they have proven to be stupid, it would reduce the number of Stupid Huge Banks That Must Not Fail Because A Lot Of Innocent People Would Be Hurt.


I'm not certain that all lending has stopped. Although I'm sure some lending by stupid people to broke people has stopped.


For me, its not at all about punishing anyone, even the CEO's with golden parachutes. My point is, when a company is stupid, or even unlucky, it fails, thus reducing the ammount of unlucky stupid companies in the market. When we bail these idiots out for the sake of the common good, we are actually harming the common good.

Some good points certainly. The unlucky/stupid sentence in the last paragraph is great.

When you ask, "How's it been workin' out fer ya so far?" I would say better than if we didn't have a central bank. There has not been a depression in this country in nearly 70 years. Before that, they happened roughly every 20 years. In this sense, I'm more of a monetarist than a Keynesian. I don't trust a government to do this at all.

However, an independent central bank -- with the power to save failing banks -- seems to be the best solution we have going right now. The 'bailout' has different actors with, supposedly, a similar goal to Fed action. It is a US Treasury (i.e. government) led effort to restore confidence by providing good cash for rotten assets to many banks all at one time. Given the motivation of the actors, the bi-partisan nature and the current credit market collapse, I'm in favor of it right now. (Here, I might understand the Keynesian comment). Without a bailout, the risks of a global economic collapse are very high.

(I didn't mean to imply all lending had stopped, but that lending via commercial paper and inter-bank lending had effectively stopped. As of yesterday, it doesn't seem to have resumed. Many companies with good balance sheets are scrambling.)