I’m not an economist. I have a dad who teaches economics, but who I don’t always agree with, a sister who studies economics, but who I usually disagree with, two half brothers who are in the private sector and have some practical familiarity with how economics works, but who I don’t talk to that often, and I’ve read stuff here or there that might count as economics, but nothing too technical. I am really trying to understand what is going on at the moment, but it seems as if very few people have much of a clue, to be honest.

This article actually seemed to hit the nail on the head, for me. The problem is we don’t really know what kind of economy we’re in anymore. It’s not really free market capitalism as we envisioned it ideally at some point in the past. But it’s not socialism or communism or the other end of that false dichotomy either. And it’s not fascism or something either.

The thing is that so-called “free market capitalism” has hardly really existed, at least not on a large scale; it was an ideal that didn’t actually play out in the real world – well, maybe Marx was kinda right about that at least; it -was- too turbulent, but that didn’t result in a revolution or a communist state, but just regulation and restructuring. We started printing money that was government-backed in the 30s; that isn’t the free-market capitalism that 19th century economists were talking about anymore, it’s already something else, although what exactly isn’t clear. And ever since then we’ve been reconfiguring the economy in a variety of ways.

So this market freeze up – not a market collapse, by the way, but a lack of liquidity – came about because of a series of decisions made over the last number of years that have resulted in a more homogenous market. According to a lecture I attended a couple weeks ago, the answer ought to have been fairly simple – transparency is a bad idea (it’s basically allowing banks to know how they’re being judged before they’re assessed, so they can sort of cheat the test, so to speak); we should always target leverage for regulation, equally in all markets; and we should have contra-cyclical provisions, since there will always be some natural cycles. This sounds a little different than the bill that got passed, so I dunno what the lecturer I heard would have said about the bail-out, and I would have loved to have heard debates over it.

Instead I just heard Obama / Biden make some bullet point lists and McCain say he was a hero for goin’ to Washington and Palin ??? …yeah anyway. Bill Clinton did talk a little bit when he did the talk show circuit but never with someone who understood what he was saying enough to have a real back and forth.. There were a few politicians on other news shows (like brian lehrer) who got into a little detail, including Hillary Clinton, who were a little more coherent, but usually to promote the passage of the bill, so about the consequences of doing nothing rather than about doing something different. I didn’t hear any economists argue for doing nothing, only people online who had a sense of righteousness but not necessarily a sense of rational understanding.

The idea that putting $700billion into the economy through wall street now is just a favor to wall street and we’re basically helping out rich folks and screwing decent regular people who have to pay for it seems to misunderstand the interconnectedness of everything. If the banking industry falls apart, then universities with endowments will have less money (since endowments are usually invested), so your school won’t be able to offer as much financial aid to you next year, or build that new science lab; and hospitals with endowments will have the same problem – fire some nurses or drop the MS research or the free clinic – something’s gotta give. These things will reverberate as people who would have been employed, educated or assisted aren’t any longer… While non-profits that rely on endowment funds usually invest very safely, looking to the long term, they will still feel the pain if things go south, and if the entire banking industry were to implode, it would implode on us…

Now, if that’s what you want – if you’re hoping for capitalism to fall apart to see what happens next, that’s one thing. But if you’re just hoping for some bankers to learn their lessons and for you to be fine, that’s another. I don’t know that capitalism would fall apart -it would probably just morph into some kind of plutocracy or new kind of capitalism, as it’s been doing for the last century, since, like I said, and that article linked above laid out, it hasn’t really been straightforward laissez-faire capitalism for a long time, if such a thing ever really existed. Even Wikipedia agrees that capitalism is “confined to theory” and only “mixed economies” really exist.

As for those who believe the market will just start itself up again because it’s the market and that’s what it does, perhaps it would eventually. But if everyone is in debt and left to be in debt, with no new money pumped in by an outside source (and the government, by the power of the people, is the creator of money – which is why taxes are important), what will get things moving again? Basically, I imagine things would get moving again when they get low enough that it will be a good enough deal for someone to feel as if they can afford to make an investment (if they still had the money). That means that the market will get moving again when things get bad enough for someone to make money off it… So is it fair to let real people suffer through all the pain of the difficult times if we could possibly do something to prevent or lessen it? That could be a long time, and very real to those whose lives it affects. Or I guess eventually China could buy us out or something…

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