There’s a lot going on right now. Too much, in fact, what with Europe teetering on the edge, Romney flying around the world with both feet in his mouth, half of India dark, and something fun going on in London. All of that is too much to comment on individually. But it all ties together, with a rather simple story.
Imagine that there’s an economic bubble. Imagine that people take out loans to pay for things in this bubble. Now the bubble pops, and the people can’t pay back their loans. As a result, banks suffer.
There are two things you can do about this (if you ignore the non-action approach): you can give people money. They take that money to pay off their debts. The people have more money in their pockets with the debts gone or reduced, and the banks have money due to loans getting paid back. Things go back to normal.
Or, you can give the banks money. This temporarily tides the banks over. However, since the people don’t have any more money than before, and the banks didn’t actually do any loan forgiveness or anything, people still can’t pay their loans. The banks return to doing poorly, and in the end, nothing improves much. All you’ve done is temporarily give bankers fat paychecks.
Is this an over-simplification? No, it isn’t. This is how things are. Especially if you add governments to the banks, and substitute tax revenue for loans. All tied up together.
So please explain to me why action #1, the one that would actually work, is denounced as “moral hazard”, while we blindly and persistently pursue action #2 over and over and over, to the same result? It’s so perverse that people are screaming against disability payments and food stamps. Food stamps. Six million people in this country have no income other than the roughly $6,000 you get annually in food stamps.
Seriously.