I’ve been hearing this a lot the last couple of weeks. “The world’s credit market is in crisis. Ginormous banks can’t lend to each other. We have to pump huge amounts of cash into them to save our economy. WE DON’T HAVE A CHOICE.”
You know, I’m pretty sure we do have a choice. In his speech, President Bush spoke of banks that “found themselves saddled” with huge loads of toxic debt. It’s not like they woke up one morning and found those debts behind the toaster. They actively sought them out, leveraging their purchases in defiance of common sense to get as much risky debt as they could. Economist talking-heads argue that while the banks made poor decisions, we have to save them now or else.
Or else what? Some other world financial system could spread prosperity and promote sustainable growth based on industry and innovation rather than speculation. A market correction and tightening of regulations could lead to more prudent lending and the return of a barrier between investment banks, personal banks, and insurance companies. If things get really bad, the return of local money and barter could carry us through for a while. I don’t know that these would be good things. Perhaps pumping liquidity into the market is the best course, but I’m tired of hearing that it’s the only one.