From a layman’s standpoint, something’s never set right with me regarding the late billions of bucks’ worth of economic stimulus being tossed at consumer and industry alike. And here’s that something, articulated:

…Maybe it’s an indication that we were measuring the wrong thing, or measuring wrong. Some of us thought a Super-Sized Chevy pickup was worth as much as a house, and a house as much as a small business. But a barrel of oil turns out not to be worth $150, and Campbell’s Soup isn’t worth $1.50. Everybody thinks, “Dang, they’re on to us.” Panic ensues.

People had been making useless junk and didn’t know it, and now they’ve stopped. Maybe our economy depends on us working hard to make stuff we don’t need, so we can buy stuff we don’t need. Every few years people notice, and then there’s a recession. Really, if most of what we make is expensive and unnecessary, we’re lucky it’s ever anything but a recession.

This is the heart of it. When everything started crashing, the first response was to thaw out the suddenly-frozen credit mechanisms that had enabled years of profligate spending — in other words, restart an unsustainable system of growth. No plans for shifting gears away from economic strategy keyed on packaging cheap debt and selling it to China; instead, just another Band-Aid via stimulus checks and bank bailouts.

In hindsight, it’s not surprising, as the Bush administration had been playing this money shell-game for eight years. The alternative is a tougher road founded upon increased savings — cash reserves for households and capital funds for businesses. But that would require some innovative thinking, so that’s out.

Eventually, it’s going to dawn on everyone that the old SOP of spending tomorrow’s money today with little longer-term consequence doesn’t work anymore. It will again someday — that’s the nature of macroeconomic cycles. But for the short term, it’s a different terrain.

(Via dustbury)