Dead Men Walking

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Pull the plugs.
Let the dead men be buried. Trying to keep insolvent bad deals alive
uses all the scarce resources that newborn good deals need. This
produces staggering costs of lost opportunity. Like Japan, we might
not recover for a very long time if we think we can keep dead men
walking. Let necessary liquidation happen. Recession is the mandatory
painful reality of clearing markets in order to regain a recovering
economy. Booms and busts will happen as long as the money system
we have in place is such an unsound one.

But,
within the reality of the money system we do have, happy days can
not be here again by propping up the corpses of all the bad stuff
that was birthed by reckless Federal policy. Greenspan and Bernanke
deliberately drove interest rates from 6% to 1% and deliberately
reduced the purchasing power of each unit of money by flooding the
money supply by a 9% increase. It was boom time. Credit was thrown
at everybody. Debt was the name of Nirvana, while savings were taxed.
Everyone was high on a wealth effect that came from the effervescent
bubbles. Our homes became our ATM machines. We were never as rich
as the boom times led any of us to believe.

Don't adopt
the corpses through bailout deals. They will not revive. Ever. Bury
them properly through liquidation. Return them to dust. Hunker down.
Stop spending beyond means. Save.

October
2, 2008

Floy
Lilley [send her mail]
is an adjunct faculty member at the Mises Institute. She was formerly
with the University of Texas at Austin’s Chair of Free Enterprise,
and an attorney-at-law in Texas and Florida.

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