Our discussion is necessarily abstract and simplistic. We don't have the time, the inclination, or (in my case at least) the expertise to delve too deeply into this fiasco, its causes, and probable effects. But what we must do, to the best of our ability, is figure out how best to protect ourselves and our loved ones. This is why I asked for opinions in the other thread.
Our senators and representatives, with a few exceptions, are themselves anything but expert in financial matters. They have to spend most of their time and energy on political concerns. What you describe, Bear, is much closer to what I expect than what I described. But notice, for example, that even the more responsible aspects of the current bailouts--the equity positions in banks being taken by Paulson, for example--seem to carry no implications on how the capital infusions are put to work, or not.
That is, we've given them our money but haven't told them how to use it. This is what should be expected from the current administration. But the result is throwing money down a well. If the banks elect to hoard the cash to protect themselves, because they are so desperate--and they are--no public good derives from the effort. Instead, the malefactors are rewarded yet again. These stopgap measures--these band-aids--may be irrelevant at best. Part of my own financial awakening these past 18 months has been to realize that our collective situation really can spiral out of control. It's not just scare tactics. It really can happen.
I don't think we're addressing it, and our political structure may simply prevent it. Barack is smart enough to figure this out. Whether or not he will have the political courage, and the political capital, to take effective action is a separate question. It would mean taking on the entire commercial establishment, and much of the political. Political suicide? McCain, as you know, isn't even on the playing field.
Meanwhile, how do we protect ourselves, if severe inflation--as is expected--replaces the current deflation? Much of the country has just suffered a body blow to its finances. How to prevent the insidious, invisible taxation of inflation from robbing us of what we have left? I can't see a likely outcome which doesn't involve the (greatly accelerated) destruction of the dollar. This death by a thousand blows would seem to be the politically expedient 'solution'.
PS: It's past our bedtime... we can continue this tomorrow