I have written about it extensively, but it seems like some other commentators — even ones ensconced inside the establishment — are finally getting the point about 2008.
Responding to Bloomberg’s revelation that the Fed shot off trillions of secret zero-interest loans to Too-Big-to-Fail banks, Yglesia concludes:
The government didn’t actually lose any money on these deals. There was no loss of funds or transfer of real economic resources. But as Bloomberg writes “details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.” Capitalism is supposed to have an evolutionary dynamic. Firms with sound business strategies survive and expand. Firms with unsound business strategies shrink and go bust. Consequently, over time the average quality of business strategies is improving. This evolution toward better firms over time is one of the key pillars of our prosperity. If ill-managed firms nonetheless survive, the system is broken in a fundamental way.
Yglesias and others still put a whole lot of value into “saving the system”, though, which is a shame because that is the problem. It’s not just ill-managed firms, it’s a fundamentally broken system. And as MF Global’s failure (not to mention present gross derivatives exposure levels) proves, you can’t mend the system by saving it. You have to replace it with something better, which is exactly what hasn’t happened.
The logical corollary of this is that the government (i.e. We the People) did lose on this — we lost the right to a capitalist economy based on creative destruction, good firms succeeding, and bad firms failing. We lost the right to see the debt liquidated, and ultimately we lost (or delayed) new organic growth.