The current economic crisis

As discussed rather simply in Econ 301 – Clunker Economics macroeconomics rests on a false premise. Despite its fundamental flaw, it is a wonderful political tool in two ways. First, it provides the intellectual cover for politicians to do what they want to do — spend more money. Second, it provides political cover in the sense that it can be claimed that “we have taken massive ‘corrective’ actions to cure the problem(s).” The fact that a free-market economy is resilient and self-healing enables the scheme to appear to be valid. In that sense, it is almost a perfect scam. Like witch doctors who claim to heal their patients when the mere passage of time is responsible for the cure or the rooster who thinks his crowing brings the sun up, the government takes credit for something that occurred quite naturally. (They never think that the problem might have been caused by their prior actions.) Unfortunately sometimes the well-intentioned witch doctor kills an otherwise healthy patient. We may be at just such a moment in history regarding the current economic crisis.
So long as people hold onto the expectation that recovery could be brought about by fiscal measures, no national consensus can be built to proceed with the painful disposition of nonperforming assets. It is necessary to learn by firsthand experience that fiscal measures are only makeshift. In this context, the enormous fiscal deficit that will be built up in the US in the coming months may be the political cost for consensus building, which would be a replay of what Japan went through in the 1990s.