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Submitted by Lefteris Botsas, Professor Emeritus on
Yes, indeed the current crisis marks the end of the post- Keynes market mechanism. The massive bailout that shifts personal responsibility for decision-making on mortgage and finance to the society at large is not what markets require for efficient operations. Moreover, what the market tells the individual or the firm is: “it’s up to you to succeed or fail.” This bailout says “be as stupid as you want, there are no failures in the system. You may not make a profit, but you cannot fail.” Forcing the real interest rate to a negative territory encourages consumption of both domestically produced and imported goods and services. Let the current-account deficit go sky-high. "Let the Chinese do the saving for us" is what the bailout says. The taxpayers will reward you even for stupid decisions. Let's make sure the AIG executives do not have to work for the rest of their lives.