Quote:
Originally Posted by dklassen
The solution is for the government to get out of the way and let the folks who really make the economy go do their thing. Once this turns around we'll hum along for another 15 or 20 years and then it will happen again, just like clock work.
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I certainly respect your opinion. I disagree that the government should stay completely out of it, but I really haven't concluded exactly what the Congress should do or how much they should spend to do it.
I would only point out that all economists that I've read recently--those of all flavors, most conservative to most liberal--have uniformly said that the economic crisis that we're facing is unprecedented in economic history and will take huge government intervention to correct. I may have missed some, but I'm not aware of any notable economist who purports that the free market can correct the current financial crisis.
One of the problems that absolutely needs some intervention to correct is the current "frozen" status of the credit markets. Even if the Congress were to pour money into the economy, it will do little good unless the banks begin to lend, providing the multiplying leverage to increase the impact of the government stimulus contributions. The initial $350 billion was not enough to increase the bank's capital ratios to levels sufficient to meet regulatory standards. And with the weak economy, the creditworthiness of almost all borrowers has been compromised to the point that the banks cannot safely lend to them and expect to be repaid in full. It doesn't take the 25 years of experience I have in banking for almost anyone to understand that banks cannot safely lend to auto companies, auto suppliers, most retailers, other banks or insurance companies, etc. All of those companies have been severely weakened by the financial crisis and would almost certainly not pass the credit screens that banks use to approve loans. Until companies such as those begin to increase production, buy supplies and materials and hire more people, the economy cannot begin to re-build itself. Without loans from the banks, they simply don't have the money to do those things. The frozen status of the banks is absolutely something that has to be corrected, regardless of what other actions--or no actions--that Congress comes up with to reverse the economy.