I like this article by Tim Cavanagh over at Reason’s Hit & Run blog:
This is the problem with the new declinism. With no compelling vision of the apocalypse that doesn’t involve zombies, cyborgs, or outlaw bikers, we tend to miss something obvious: The problem isn’t that things are collapsing. It’s that not enough things are collapsing. General Motors, AIG, and the government of California have committed enough errors to merit immediate extinction, but there they still are. Yet the political establishment continues to argue that the market needs to be prevented from delivering rough justice to sinners. President Obama, who one year ago gave us a worst-case scenario in which an unstimulated economy might hit 8 percent unemployment by this year, now presides over 10 percent unemployment but tries to bamboozle us with counterfactuals like this doozy from the 2010 State of the Union address: “If we had allowed the meltdown of the financial system, unemployment might be double what it is today.”
He’s making a good point. Much of the current mess has been caused by policymakers, such as Greenspan/Bernanke at the Fed, or our own benighted Gordon Brown, trying to “rescue” a failed system by throwing huge amounts of money into the system to prevent disaster, only to build up even greater woes in the future. Going bankrupt is never nice, but by freeing up resources and more to the point, by making people learn from their mistakes, it is a healthy process. To borrow from Karl Popper, if we don’t allow bad investment theories to be falsified by events, then the market will fall short in one of its most powerful functions, of generating valuable new information.