A couple of days ago, I wrote about the idea that we may need a $700 billion bailout (the Dems are still saying it will pass) if we are to weather this current financial crisis without going into a depression.
Today, I ponder this thought: Maybe we actually need a depression.
As a country, we have moved to an economy that is based on debt. The motor of our economy runs on ordinary Americans over-extending themselves with the help of easy credit. Additionally, we have been led to believe that the old economic cycles of rise and fall no longer apply. We, for some reason, think that endless growth is sustainable.
It’s not. It’s healthy to have periods of downturn.
Unfortunately, by artificially stimulating growth when political expediency made it popular, we have merely set ourselves up for greater instability — and greater downturns when they finally arrive. Our downturns will get successively worse unless we wake up now and address the underlying problems.
And, argues Paul Farrell at MarketWatch, a depression would actually do this for us. If we were actually made to face the consequences of our actions, we might change our ways. Everything that has been proposed to “help” the economy — economic stimulus checks and stock market bailouts alike — have all been done in the name of credit liquidity.
Perhaps we don’t need more loans with which to buy more stuff that we don’t really need. Maybe what we need is an old-fashioned depression that can help us once again see the value in having modest wants and saving up for the future.
What do you think? Should the government save us from a depression?