The alternative is to let someone, anyone, pay a price for recklessness. Otherwise, you get more recklessness and eventually, you have a catastrophe rather than just a bad experience. All of the reaction to the crisis from Bush through Obama, presumes we can just squeeeze over here, push something over there, institute this program for homeowners, bail out these banks, turn this knob just so, and so on and so on to keep the system afloat without any pain. Maybe they’ll pull it off. But label me skeptical.

Imagine your son getting arrested for shoplifting. The policeman asks for a bribe so your kid can avoid a criminal record. Easy choice, right? You don’t want your kid to have a criminal record, do you? Then your kid is caught breaking and entering. The policeman asks for a really big bribe so your kid can avoid jail. You don’t want your kid to go to jail, do you? A really big bribe is the lesser of two evils, right? So when your kid is arrested for operating a Ponzi scheme on Wall Street and gets fifty years in prison, it’s too late.

Repeat after me: “Even a shock which was originally one hundred percent "nominal” becomes increasingly “real” as time proceeds.“ Again, that means the case for significantly higher inflation – whether strong or weak in absolute terms – becomes weaker every day.

Business is still lousy, credit has dried up and we can’t shake it loose, and unemployment remains a huge problem for us. We keep trying to inflate but nothing works. So, we’ll just keep doing what we’ve been doing. We can’t think of what else to do right now.

In fact, one of the reasons that Austrian theory has been difficult to “sell” is that (i) it’s quite deep and difficult to study, and (ii) other theories are just easier to grasp.

The whole system is basically an out-of-control locomotive that’s derailed, caught fire, and is hurtling down a steep mountainside toward a cliff with no working brakes. Progressives have completed their welfare state just in time to see a U.S. economy beginning a long, downward spiral start to undermine it, and the way our political system works there is really no way to change that. Bottom line is, if you’re young, you’re in all likelihood going to spend your working life working longer hours at a lousier job, making less money, and being taxed more heavily than your parents, and you’re going to have to retire later and more meagerly. Raising kids, buying a home, doing all the things that have defined middle class American life for the past few generations, are going to get more difficult.

Every since the early eighties, when the Greenspan commission kicked the can down the road with a combination of tax increases and later retirement ages, analysts have been awaiting the day when the system would finally go into deficit. That date has been sliding around between 2016 and 2020 for some years now, but the suspense is finally over: the system is going into deficit this year.

I’ve written elsewhere that we should wait at least a week or two before paying attention to polls on Obamacare, but this one is too remarkable to pass up: Rasmussen finds that 55 percent of voters want Obamacare repealed. That is extraordinary. Has the public ever greeted passage of a major piece of legislation with this much disgust?

The latest actions from Washington as well as Wall Street banks include all manner of mortgage mods, foreclosure abatements, and other extend & pretend measures. These are not only ineffective, they are counter=productive. From a moral hazard perspective, the reward the reckless and punish the responsible. Worse still, they are yet another example of penalizing middle America for the sake of Wall Street banks. Our story so far:

IOW, contentious political partisanship is subject to the laws of economics just like everything else. When its cost is free to politicians, so they profit by engaging in it, we get a surfeit of it. But when it becomes costly, fatally costly to politicians, there is a lot less of it.