automobile economy

While I’m certainly no expert on banking or Wall Street, I know enough basic economics
to sense what has gone wrong. It has to do with what kind of economy we choose. Unless you’re a hunter gatherer, you basically have three choices: Socialism, Capitalism or some mix of the two.

Socialism doesn’t have the financial incentives for innovation and success, but it creates equality, the equality of financial stagnation. Capitalism has periods of boom and
bust, the boom making many people rich, the bust causing many to go broke.
Capitalism with regulation cushions the up and down motion, hopefully avoiding the nasty booms and busts.

It’s like the early attempts to build an automobile. People bolted the body to
the frame, and everything was secure and controllable, but the ride was so rough that you couldn’t go over five mph. That’s sort of like socialism.

So, people installed springs, softening the ride. However, when the car hit
bumps or holes, the car would alternately bottom out and send the passengers
through the roof, plus making steering almost impossible. That’s sort of like
capitalism.

Then someone invented the shock absorber. The car was still able to go up and
down on the springs, but it was kept from full compression and full
extension. That’s sort of like capitalism with regulation.

I’m sure that even the guys in banks and on Wall Street know this. They just don’t want to admit it.