We moved from guns & butter to guns & bubbles a long time ago. If you faced the collapse of the world economy on your watch, wouldn't you kick the can down the road, hoping to buy time to sort things out in a more orderly way once you're down the street and around the corner?
As a Socialist, I don't see any alternative to re-inflating this bubble and trying to create additional bubbles as an offshoot (alternative energy is one we haven't gone full-bore on yet).
Sure, moving the insane liabilities off of company balance sheets onto leveraged government balance sheets is morally corrupt, anti-free market, (I don't know that I'd call it Socialism as government is not controlling the means of production or distribution -if you can call our financial system a product-, rather insolvent corporations are dictating our government's actions.. call it little-f fascism if you like.
PLEASE someone tell me what the alternative is to kicking the can down the road & creating another bubble?
Treasury reports Q4 2008 - $200 trillion in outstanding derivatives (4x WORLD GDP), 96%+ of it held by 5 US Banks, all basically insolvent TARP recipients. (98% of the derivatives are credit default swaps) http://www.occ.treas.gov/ftp/release/2009-34a.pdf
$200 trillion in CDS's alone, not to mention all other forms of leverage that are unwinding.
If you actually look at the US Government's books from a generational accounting perspective and include future off-balance sheet obligations of Social Security & Medicare, we're already on the hook for $60+ Trillion in debt: http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=88851 OK, so WorldNetDaily may not be most reliable source of data.
How about the Federal Reserve Bank of St. Louis white paper by Laurence Kotlikoff titled "Is the US Bankrupt?":
Weigh it for yourself if you're Geithner or Obama - what are the options? Certain implosion of the world economy on your own watch if we swallow our bitter pill now, likely implosion of the world economy down the road on someone else's watch?
When it comes to putting food on the table, whether you're a Democrat, Republican, Socialist, Capitalist, Libertarian, Free Market worshipper, you can't eat your ideals & you will find a way to justify bending them as far as need be.
Forget your ideals, forget what action the US Government SHOULD take or what YOU would do, or how sure you are that XYZ plan is doomed to fail eventually - what action will the US Government take? So far every step they have taken has been towards re-inflating bubbles through massive leverage and some damn creative accounting.
If you think the US is going to do anything different than what I've laid out, I am earnestly interested in your view and whatever data you may have to support it.