Exactly what makes a business ‘too big to fail’? The Treasury has tapped more than two trillion dollars in new public debt over the past few months to save failing businesses, businesses that will still have to take drastic measures to stay open, such as cutting thousands of jobs and fire-selling assets.

One has to wonder: is this an investment in our industrial and financial stock, or a fleecing? Executive pay has never been higher, while individual wealth has hardly been lower for decades. We are definitely wasting our national wealth.

This is not a short-term blip on the economic screen. Every pundit and most administration and government officials acknowledge this now. It’s just the start of a long readjustment to more sustainable levels of debt and the remonetization of global commerce and asset prices.

In such an environment, reinflating debt leverage is not going to result in any long- (or even medium-) term retrenchment or recovery - this wealth will be destroyed or simply expatriated into sealed Swiss vaults for the filthy rich that are still heading these companies.

I say let them go bust. Let the economy shrink by half. Let the dollar crash. We will have to inflate our way out of this once it does anyway. Let the time that’s left before we become Zimbabwe be used to shovel money into schools, technical training, health care, and intellectual property documentation, preservation and protection. I’m not opposed to ballooning the public debt for the sake of trains, schools and a new green grid. But the current use of the Federal credit card is the equivalent of foregoing a trip to the doctor in favor of buying a new cathode-ray tube analog TV at twice the MSRP. What a waste this country’s enormous potential is becoming. We need to reeducate ourselves as a society with new, useful skills in the “other third” of the economy that is not dependent on ever higher levels of consumer spending and debt.

I actually started out as a fan of the idea of buying distressed mortgage-backed assets from banks (the original purpose of the bailout, and something which really was never actually done) because it would stabilize the market and eventually we could re-sell them a few decades from now when they were worth something again. But the administration is now using that cash like confetti at a wedding, tossing it about with no real plan or rationale or long-term idea of how to get it back. It’s mostly just landing in firm’s bank accounts and allowing them to throw out fat bonuses and continue to burn money and delay the inevitable crash (whilst turning it into a super-crash for the Treasury).

I’m not necessarily in favor of mortgage rescues for the ‘little guy’ or handouts for the newly destitute. I’m not against it, either. But I think the best stimulus we can give this economy is a solid investment in the productivity of the next generation: education, green infrastructure, and geopolitical retrenchment. It’s sad when I find myself agreeing with my odious home congresswoman, but these unending bailouts are a bad deal for America, and for the world economy.

This entry was posted on Tuesday, November 25th, 2008 at 4:23 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.