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Likewise and I hope I didn’t come off as condescending as that was certainly not my intent.

Again your heart is in the right place. You concern yourself with the workers and “the social dimension”. Let’s stick with the auto industry. Let’s say “The Big 3″ were allowed to fail and go bankrupt. What would happen? Yes, many would lose their jobs (at least for a while). But the companies would go through a restructuring process. New investors would come in and buy up anything of value. The auto industry in the US wouldn’t disappear forever. After the restructuring (courtesy of the free market) we would be left with a much more efficient US auto industry. One that could actually function at a profit providing cars people want to buy.

We humans have a habit of focusing on the seen at the expense of the unseen. We see the short term consequences for one group without considering the long run consequences for all groups. When the government bails out an industry, we see the jobs that are saved and the products that are produced. We do not see the jobs/products destroyed elsewhere and the jobs/products that were never allowed to come to be because of the subsidy. And since the bailouts are financed through inflation, we all pay through higher prices. By bailing out the auto industry, the government ensures that both human capital (labor) and physical capital are being used inefficiently. They cannot create capital, they can only redirect it.

We must realize that the collectivist approach has not been sustainable. It is collectivism and intervention that has brought us to where we are today. We need to put our faith in the free market and liberty once again.

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There’s no escaping the pain of recession, or of inflation either. True enough. And as for pain, it would not hurt me greatly to see the chickens come home to roost in the banks and lending institutions that have gotten us into this mess. My concern, though, is still about the social dimension. Say our dude works at a job connected with the automobile industry. GM, Ford and others go into a deep recession, or they go bust. Hard to feel sorry for the CEOs, the managers, the big owners and so on. They will survive handily. But tens, maybe hundreds of thousands laid off, the repercussions and reveberations throughout the country, Canada too of course, the world? This is another story seems to me. Huge costs, however you look at it. Canada BTW has already been hit heavily as you probably know.

Dr Paul says that he and his colleagues never even had adequate time to review this last ’stimulus’ package. If he doesn’t know about it, I sure can’t comment intelligently. All done in a big panic rush it seems–like the others. I’ve lost track. I wonder, How carefully has this so-called bailout been crafted. Is it simply a case of Uh-oh we’ve got this terrible problem, a threatening catstrophe, lets throw ‘money’ at it? Or has some consideration been given to allocating the pain equitably? It’s the threat of depression with all the horrors of the last one that scares me, the possibly very large scale wounding of societies that can and is happening. You know, there is an old Chinese saying, I think from the Book of Tao, ‘Govern as you would fry small fish’. Our glorious leaders, and their critics too, need to be vary careful about tweaking things. It’s like a game of pick-up-sticks, remember that childhood game? One wrong move and the whole thing comes down. Which leaves me just as wary about the free-marketers as it does the banknote printers. Fact is, I hardly trust anyone. Sad.

To make myself clear: much as I dislike like saying so, I don’t think we, the world, can avoid a ‘collectivist’ approach. This is another issue I suppose, and fraught with all sorts of ideological landmines too. But there you go. In a way I’d like to think that we could go back to the old verities–sound money, whatever it might look like today, a free market with lots of scope for individual freedom, the Constitution, an end to bloated bureaucracies and so on. But as I said somewhere else, I doubt it’s in the cards.

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Thank you for the compliment but allow me to clear up a little confusion between my analogy and the consequences (rendered homeless, pauperized) of which you speak. My “Dude is trying to sell his house” analogy was only meant to illustrate that there is no need for “massive amounts of credit” if prices are allowed to adjust to their market level.

You rightly concern yourself with who will suffer as a result of prices being set by the market. However, your fears are slightly misplaced. I believe the error comes from the common confusion that if you take a mortgage on a home, you therefore own the home. This is not the case. You only own the home after you have paid the mortgage. As has become clear to most everyone now, many mortgages were written and sold to people who never had any chance in hell of actually paying them off. The person owns the MORTGAGE, the BANK (or whatever lending institution) owns the house.

Yes, people would suffer losses. There is no escaping the pain that comes from recessions. But you know who would suffer more? The banks and lending institutions. Prices for houses would and should come down fast and far. Yes, people would be upset to see the equity of their “investment” vanish but absent a government bailout, there would be a huge incentive for the banks to rewrite the absurd mortgages into which people have been locked. If the banks didn’t do so, people would simply default, or turn in the keys (maybe after smashing the place up a bit as has been reported). Prices for houses have already come down quite a bit but the gov/fed is trying to prevent that from happening through inflation. So, instead of the BANKS and other lending institutions reaping what they sowed, the PEOPLE will suffer the ravages of inflation. It is a perfect example of privatising the gains and socializing the losses.

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