This is the setup statement for why everything that follows in your post is wrong. If everything were simple and easy to understand we would have a straightforward, generally agreed upon solution. Instead, we have a complex multivariate macroeconomic system which we cannot control or isolate, meaning that reactions like these, as a whole, have about as much scientific backing as voodoo.
I'm really getting tired of these pop-economic articles on Hacker News. They never really inspire great debate, nothing gets settled, and everyone hits their own straw man.
It might be that there is a simple and straightforward model, but there are incentives for politicians, academics and other actors in the system to reject this model. For example, politicians will prefer models that defer pain to the future over models that take the pain now. If the simple and straightforward model says that we should take the pain now, then politicians will prefer a different model.
Actually, economics is not that complicated, and not that hard to figure out, or to influence. The reason there's so much effort to pretend like it is complicated is because it is profitable for those in government to do so, to cover up the effects of their actions.
The idea that the crises in 2008 was unexpected, or that the bailouts were necessary is absurd, and had been refuted decades before. But it is part of the act government goes thru to keep people controlled. I knew there would be a housing bubble in late 2000, before it really got started. I knew this because I was told this by economists and hit made perfect sense. And all these bubbles, being creations of government, result in the same kind of government response. The effect of that response, having seen it so many times before, is quite predictable. We've not seen the effect of the bailouts of 2008, and the bailout that just happened for credit unions... but I expect we'll see it by 2012. And when it happens, they will all be on TV saying "this could never have been predicted!" Just like they were in 2008.
I suggest you read "Economics in One Lesson" by Henry Hazlitt, or if you're unwilling even though it is a short book, simply familiarize yourself with Bastiat's Parable of the Broken Window
The theory of economics is easy to understand -- in this you are right. Whether or not the theory has anything to do with actual processes has not been established with any surety outside the field itself.
This is the setup statement for why everything that follows in your post is wrong. If everything were simple and easy to understand we would have a straightforward, generally agreed upon solution. Instead, we have a complex multivariate macroeconomic system which we cannot control or isolate, meaning that reactions like these, as a whole, have about as much scientific backing as voodoo.
I'm really getting tired of these pop-economic articles on Hacker News. They never really inspire great debate, nothing gets settled, and everyone hits their own straw man.