> I'd argue we should resist the "failure-will-clear-the-system" argument,
> because it assumes there's some natural, market-centric equilibrium which
> corresponds to the greatest human happiness. The libertarians on ZeroHedge
> are a sharp bunch, but they talk about the Final Valuation the way the Far
> Left goes on about the Final Crisis.
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I'm not a libertarian. As you know, the Bernanke-Summers-Geithner program
was criticized all along the political spectrum, with the liberal and social
democratic left rejecting it for proposing too little rather than too much
regulation and other forms of state intervention. An administration willing
to confront the discredited Republicans and Wall Street could have closed
down the insolvent banks and restructured the industry, not by inflating but
by trimming the sails of GS and JPMC along the lines of Glass-Steagall. An
even bolder administration could have used the bailout and stimulus money to
launch a well-capitalized state bank(s) extending credit directly to
homeowners, workers, and small businesses. The Chinese recovery is
attributible in large part to state ownership and control of the financial
sector and other key industries. Circumstances differ greatly in the two
countries, of course, but the frustrated US left is still right to conclude
that there was much the administration, building on its early support and
deepening it, could have done well short of a revolution.