A nagging question haunts U.S. government efforts to revive a dormant financial system: Can a crisis that started because of excess credit be solved with more debt?
Since Debt is King, of course, the political establishment has no choice but to deny, deny, deny…:
[T]he refrain out of Washington places a lot of credence on the ability of debt to revive the country’s economy. U.S. Treasury Secretary Timothy Geithner was only the latest to proclaim what has now become an official mantra. Without credit, which he and others call the “lifeblood” of the economy, you can kiss recovery hopes goodbye.
Federal Reserve Chairman Ben Bernanke, justifying the massive help the central bank has offered to financial institutions, made his own case: “This disparate treatment, unappealing as it is, appears unavoidable. Our economic system is critically dependent on the free flow of credit.”
Credit having to ignore all other economic conditions for the system to function? Sounds to me like the problem is the system itself. Strange thing is that at the same time they say this, credit isn’t budging anyway.