Industrial Insight

liquidity or solvency?? | June 20, 2011

http://www.realclearpolitics.com/articles/2011/06/20/government_looks_to_past_free_enterprise_to_future_110266.html

June 20, 2011
Government Looks to Past, Free Enterprise to Future
By Michael Barone

Decision-makers have responded as if they were facing liquidity crises (we don’t have enough cash to pay off debts immediately) instead of solvency crises (we will never be able to pay off these debts). Too often pain has not been prevented, but just postponed — and prolonged.

In retrospect, much of the pain could not be avoided. As economist Tyler Cowen has put it, we were not as rich as we thought we were. Housing bubble prices did not turn out to be real wealth, unless you sold out at the peak and moved to a cave.

Trying to put everyone back in the position they once thought they were in simply won’t work. But it does sound attractive politically. People can remember what life was like in the past.

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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