The Real Crisis

The economic crisis is all over the news.

A friend notes that worries about the government's bailout of AIG is exaggerated, that the government will likely make money on the deal. Fine. My worry is that the government is so deeply involved in the economy at all. When politics and not economics controls where the money goes, when stupid decisions don't receive their natural retribution, then the economy ends up weaker in the long run. Of course, the problem is the collateral damage of destroyed trust ruining it for everyone else.

The real crisis goes much deeper and some of its roots extend to our founding, but many more to the last half-century of American prosperity, as described in this excellent article by Andrew Bacevich. This is not just a problem originating with the financial elites of this country, but is a problem of from people like you and me, Joe Citizen, living beyond our means and expecting the good times to go on forever.

The heroes and villians of the article will probably surprise you. The usual good guys and bad guys end up playing much different roles when you look at them from the perspective of leading our nation in self-control.

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Also some commentary I ran across from a physicist with a liberal point of view here. He surprisingly opposes government intervention, but I suppose for the unsurprising reason that he thinks the bailout will benefit the rich (only).

I personally don't blame the quants (physicists on Wall Street) for all the evils of the universe (ha ha) so much as their MBA masters, whose exclusively quantitative approach to the world (notably inspired by the success of physics) courts disaster.

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Andrew J. Bacevich, "Appetite for Destruction," The American Conservative (September 08, 2008) 18-24.