I don't know much about economics, just the basics of supply and demand, a little bit about how monetary policy plays into it, and random bits that I've picked up from the Economist or other reading.
Politically, I land squarely in the middle of the libertarian section of the chart when I take those online quizzes, so it's no surprise that I would experience concern over the current measures being taken in regards to the "economic crisis".
I've been trying to work it out in my head with the limited knowledge I have, and am resorting to those same tired analogies to a sick patient that the politicians have been utilizing.
OK, so if the economy is a patient, it seems to me that there are two "conditions" that it experienced that led to it's rapid and continuing decline. One was the drop in housing prices, which is a healthy and normal reaction to over-priced assets in the market (when prices increase, demand drops, ultimately resulting in a decrease in price). Let's make this analogous to someone who has eaten too much and ended up with a really bad tummy ache. The normal process would now be for the patient to experience some discomfort as the food makes its way though the system, allows the usual elimnation processes to occur, and then resumes normal eating habits going forward (or at least until the memory of the unpleasantness recedes enough that they go back and do it again). However in this particular case, the patient also unknowingly ingested a dangerous micro-organism and some toxins that had been added to the food (subsitute for the sub-prime mortgages, credit default swaps, etc.) So now the patient is REALLY sick, losing it from both ends, severely dehydrated and possibly looking at death if something isn't done to stabilize it.
And THAT is where I get confused as to what exactly the enonomy doctors are trying to do to stabilize the patient. They're throwing all sorts of meds into the patient haphazardly, not taking the time to analyze exactly how these meds will interact, or even knowing for sure how some of these meds work. And hey by the way, a bunch of pharmaceutical reps are here and thought that maybe we'd like to buy some of these trial meds that they've been wanting to try out on a real, live patient. Just $1 trillion dollars! Of course, we have a more sober team of doctors also working on this case who believe that they must first address the "root" of the crisis. And here again I get confused, because they maintain that it's the drop in housing prices that is to blame for all the ensuing chaos, and if we can just stabilize housing prices then we can work on treating the rest of the problems. But if the drop in housing prices was a normal, rational market occurance, just like digestion is a normal occurence for over-eating, wouldn't tinkering with the pricing (either directly or through incentives) be akin to force-feeding the patient food at this juncture? And how could that be a good idea, when the original food is still working its way out? Or am I looking at this wrong, and should I be viewing the interventions into the market as an IV instead of more of the same?
I don't know. And what's really bothersome is that I don't think the doctors know, either. Yet they keep pretending like they do, and charging us top dollar as they go experimentally along. And since we don't have "economy" insurance, that's going to be a whopper of a bill when it comes in. I think I'll stop checking the mail.