I wrote the following as a comment on the Krugman blog back on Sept. 22. At that time no one else seemed to be talking about investing in infrastructure, jobs, etc. As for the rest, it looks as timely now as it did then:
Why not, very simply: let the system fail? Instead of pouring more billions (or trillions) into it, just let it fail. If we pour all that money into it and it fails anyhow, then we have truly hit bottom — all hope of salvaging some part of this disaster will be gone.
And it WILL fail. If not sooner, then later. If you doubt that, then ask yourself: what would be the measure of its success? If stocks go up, it would be because investors are confident the feds will step in to bail them out again if necessary. That's called "moral hazard." At best it will just re-inflate the same old bubble, putting us on the same path to nowhere. If stocks remain level, then what’s the point of investing? And if they crash again, then we’re back where we started. Accept it, the market is finished.
If we hold onto the bailout money and wait till AFTER the system fails, prices on everything will have fallen drastically, and our billions or trillions will therefore go MUCH farther.
And there would be a huge bonus, because a market failure would in itself be a great social leveler. Since the super-rich insisted on the freedom to play the “free market” according to their own rules, they can hardly complain when their little game (aka gamble) fails, and they lose their shirt — just like any other sucker in any casino anywhere in the world.
Next, use the billions (or trillions) to do all the things we should have been doing in the first place: restore our decaying infrastructure; develop alternative sources of energy; create decent paying jobs; house the homeless and dispossessed; and, above all, create the sort of social safety net that would make the loss of all those middle class pensions and retirement accounts beside the point.
It’s the construction of a safety net for the nation as a whole that we should be thinking of at this point, not some dramatic rescue plan cobbled together in a last minute effort to protect the fortunes of those who got us into this mess.In other words: if this be socialism, make the most of it!