The Grand Alternative

From The Oil Drum:

"Rather than spending a trillion dollars on buying toxic derivatives, or on a war, these funds would be better spent in helping private enterprise jump-start the above referenced conservation techniques and alternate energy research and implementation. The use of our hard-earned tax dollars to help accelerate these initiatives would create jobs and new businesses. The bottom-line is that solving the energy problem - which must be dealt with anyway, and soon - is the perfect solution to solving the consumption- and credit-induced economic dislocation we are now beginning to experience. There would be a third, important benefit. Energy conservation, increased natural gas use and alternate energy implementation all help lower CO2 emissions."

One of these days I will track down that link, but this passage gets to the core of the issue. 1 or 2$ trillion here cannot be $1 or $2 trillion there. There has been little discussion of opportunity costs in discussion of the financial bailout, but it pretty obviously forecloses just about every other policy initiative one might fancy.

London Banker eloquently summarizes what is at stake:

"If the core problem leading to the current seizure of the credit markets is the misallocation of credit into unproductive works during the boom years, then no amount of new credit will solve the problem unless the distortions promoting misallocation are redressed through fiscal and regulatory policy changes. Bailouts and recapitalisation of failed policies of the past are only digging a deeper hole, betraying more capital of younger generations into the unproductive works financed by the current generation."

10/27/08