The Most Radical Idea of All - Do Nothing

I'm still thinking about the TARP bailout. All the rational folks seem to agree it was a good idea. And for some reason, I'm still skeptical, and I'll tell you why: the explanations don't make sense to me. I can almost understand it intellectually, but on a very gut level, I can't see how it would have totally shut down the American economy. I get that if a series of big banks failed all at once, corporations couldn't get their short term loans to make payroll and pay their creditors. But would this have happened? And then, so what if it did? Wouldn't the less exposed banks simply buy up the more exposed banks before total meltdown occurred? Or couldn't some non-banker with huge reserves of cash come in and purchase a bank? Couldn't the bank be owned by creditors? I guess what I don't understand is what the big banks provide that is so special? They just borrow money at rate X and loan money at rate X+ some percent and make money. That's all it is or should be on a fundamental level. It's a good business.

But say the total meltdown occurred. A lot of people would have lost jobs and been out of work. The banks would have failed. Maybe America even loses it's position in the world economy. So what? Is it the government's job to ensure people have work? Is it the government's job to preserve American economic power? Or is it the government's job to protect property rights and individual rights and provide public goods?

If the TARP bailout didn't occur, I imagine there would have been a massive redistribution of wealth from those who were leveraged to those who weren't leveraged. It would have been radical. It would have hurt a lot of people. But so what? As it stands, the government opted to preserve the wealth of a class of people who were connected at the expense of future taxpayers. I can't see why that is a preferable solution.

Look...I can say this...I don't have a family that would have starved if I lost my job and I don't know the in's and out's of the banking mess. But my gut instinct is that we were blackmailed. And you don't cave to blackmail because it encourages more of the same behavior. We shouldn't be living so close to the edge. People should have reserve money where they can survive if they lose a job. Banks should have reserve currency to back up defaulting borrowers. We don't have these things and so when the shit hits the fan, you pay and you learn.

What ever happened to failure? People who play close to the edge should fail. That's the only way we learn. Now...the system we have puts an incredibly high percentage of this country - both rich and poor - in hoc to future generations and Chinese communists. We have entire classes of people subsisting on future taxes and on the backs of the deflated cost of Chinese labor.