I wholly agree with some of what you said, but think other of it dubious…

First off, yes, I’m willing to accept the consequences. I fully expect bad times; part of my Cassandra-like bemusement is watching the present flailing that I really believe is only delaying an inevitable melt-down.

Second, I have absolutely no confidence that the trolls in the important positions in the federal government will get it right. The incoming Administration and the Democrats in power on Capitol Hill are smart in all the wrong ways, have dangerous ideas on economics, and are beholden to far too many special interests who desire policies antithetical to sound economic policy — the Freddie/Fannie connections to Dodd, Frank, Obama, et al. should be ample evidence for that. There is no reason at. all. to hope they will intentionally get it right.

Third, with that in mind, I trust the managers of private companies FAR MORE than those trolls. Yes, many of them needed a bail-out to avoid financial Armageddon. I’m not tickled pink that they got the bail-out, but I accept that the guvmint had to do something to clean up the massive mess they instigated in the free market. But I firmly believe they should do the least amount possible… giving un-earmarked, no-strings-attached money sounds about right. I just hope (and here’s where Adam Smith’s ‘invisible hand’ comes in) that those corporate managers don’t just decide to treat the guvmint as Uncle Sugar and expect to get more money when they burn recklessly through the last allowance check.

Fourth, I very much dispute the need for “good, old-fashioned Keynsian stimulus.” (Not least because that phrase implies two things that are not so — Keynsian policies are neither “good,” nor “stimulus.”) Public works projects should continue as needed, of course, but additional public works projects have the same effect as any other government spending program — they take money out of the free market system (the very system you’re trying to help) via taxes, and put the money in the hands of guvmint troll bureaucrats who, quite usually, are incapable of doing things efficiently, and have loads more red tape. Extra guvmint programs don’t stimulate the economy, they just contribute to guvmint growth and ever more guvmint growth.

Fifth, I completely, totally, wholly, excitedly agree that tax cuts are the way to go… but they are not any part of a Keynsian “stimulus” package. But yes, cut the tax rates for those who actually produce revenue and employ people — real people in real jobs doing real things, not artificial guvmint jobs created just to reduce the unemployment rate. Also, cut tax rates on those who actually work and earn a living and are trying to make their way (this, of course, completely excludes those who don’t pay any taxes anyhow — contrary to Obama’s campaign rhetoric, ya can’t cut what ain’t there)

Sixth, We can deficit spend our way out of this if and only if the size of the federal guvmint isn’t massively expanded… But, returning to one of my earlier points, I have no confidence, whatsoever, that such will be the case, so I have no confidence that things will get better any time soon and I’d rather go through the pain of the re-emergence of free markets than endure the long suffering of a socialist state. One is natural and comes from that spark of human desire; the other is imposed and smothers the flame of ingenuity.

The difference between AIG of today and a GSE? Well, at root, one is still private and the other is owned and operated by the government. Seems simple to me. The bailout did not organizationally change that. Your sense of entitlement does not change that. If you don’t like that the folks in Congress gave your money to some unaccountable private companies, throw the bums out; don’t kill free markets. Don’t throw out the baby with the bath water/kill the goose that lays the golden egg.

As I said before, nothing in the legislation and subsequent transaction subsumed those companies into the government and reconstituted them as GSEs. Nothing required openness or transparency. They were given cash, not strings. I think it was the wrong thing to do — just as I think the governmental activity (or lack thereof) which contributed to the collapse was the wrong thing to do. Part of the reason it was the wrong thing to do, as I also said before, is PRECISELY THAT IT EMBOLDENS THEM TO KEEP GOING BACK TO UNCLE SUGAR because they have learned (as spoiled children) that Uncle Sugar will just give them more money.

But let’s think about your preferred scenario: So AIG/Citigroup/whomever goes all transparent and is found to be mis-using funds. What’s the repercussion? They have to give the money back… and then they fail…. annnnnnnd we’re back to square one. But we could have been at square one months ago and already at square two–the beginning of recovery.

Instead, because of the bail-out, we’re still flailing about trying to avoid square one and going down some dangerous roads. If the free market is to be restored, the first step is letting private companies be private.

I’ve been reading Blackhedd/Francis’ columns and I understand and accept that something had to be done to free up the credit market lest we incur financial Armageddon. But how did we get to that point? Why did that happen? The free market was seriously compromised (as you acknowledged) by governmental and corporate trolls who played the system. So it wasn’t the free market that failed, it was people — especially in government and in government-owned companies. The response is not to give those trolls more power and influence over private companies, but to take away the methods by which those trolls screwed the system up and caused the melt-down.

They’re private businesses that received free money from the government.

As the man in black said,

“Get used to disappointment.”