The hand-wringing about the economy wouldn't be nearly so frenetic if more people just looked at the gasoline market. There, demand went down and prices followed. Producers who overextended on the way up (think Venezuela) will get hit hard by gravity. Those who kept their wits about them when demand was high (like Exxon) have proven themselves well-prepared to ride out the storm.
Not forcing banks, auto makers, and cities and states to live by the same rules is a mistake we will be paying for a long time down the road. When demand goes down and prices are allowed to respond in kind, markets shake out inefficient producers, rewards efficient ones, and the world goes on. Training a generation of bankers, auto execs, and politicians to default instead to feeding at the federal trough can't possibly be justified in light of this simple truth.
Friday, January 16, 2009
This is how things get fixed
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"Training a generation of bankers, auto execs, and politicians to default instead to feeding at the federal trough can't possibly be justified in light of this simple truth."
The guiding rule seems to be that certain institutions are "just too big to allow them to fail." Given that it is unlikely that our politicians will ever wise up and allow a huge company to fail, perhaps we would be better off in the long run by implementing new business rules that prevent a company from ever becoming that big. If a company is simply "too big to be allowed to fail" perhaps it should be declared ipso facto in violation of some new antitrust-type law and forcibly broken into smaller entities.
I hate the idea of the government breaking up large companies but I find that result less damaging than the current policy of bailouts.
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