I am not an advocate for the banks. If you have read my comments, you would know this. My point is that in the '08 crisis, deposits (and depositor insurance) didn't matter and commerce was going to stop. Modern businesses and individuals rely on short-term credit mechanisms (e.g. commercial paper, letters of credit, etc) and, once that system freezes, it's EXACTLY equivalent to money disappearing from your account. And that was precisely the risk that the various Fed programs were supposed to address (btw, the money mkt guarantee, MMIFF, was only put in place once the sh1t hit the fan). As to your last point, you seem to be awfully cavalier about it. How can you be certain that the "painful credit squeeze and near-depression" doesn't turn into a depression right and proper? What gives you the magical power to draw the line between what "should have been" and the worse outcome that you believe was worth preventing? I am also quite confused about the transfer of the cost onto people who can ill afford it. Did the various crisis measures transfer these costs or are you referring to later policies? Also, who are these people who can least afford the costs?
It's the same actually. Say you have 1000 banks and 500 of them are allowed to fail. Free markets. Say you have 1000 banks and none of them are allowed to fail through inflation. Money drops in value by 50%. Both of them hit as many people as the other and there is no pain free fix. Systems can only be strengthened after a severe hit is taken not during the hit itself.
If USA follows Milton Friedman economic principle, we would still be in depression worldwide. Free market with common sense regulations work well.
You might want to check out money supply growth. Friedman advocated M2 as the best measure, Bernanke through QEs has been able to keep M2 growing at this kind of rate since the crisis started. Yoy is currently at 4.1%, even though it includes both QEs in it. Monetary base is not the same as the money supply
You are going to get to live through it and learn why the founders requred in the Constitution that money be gold and silver coin. Just think back and try to imagine how bad things would have been if you had your money in Continental Dollars. "Paper is poverty" - Thomas Jefferson
I understand the need of borrowing. However, it is double edge sword, if meaningful growth without huge debts is not possible, the time when the music ends will be horrifying.
Its a HUGE beyond anyone's wildest imagination debt Ponzi. Whoever waits to collect will get nothing of value because there WAS NOTHING of value saved. As with ALL Ponzi schemes, only those who collect early in the game will get repaid. Imagine having a budget surplus of $100 Billion per year for the NEXT 140 YEARS! *THAT* is what it would take to pay off just the debt run up since Reagan, and THAT assumes NO interest at all.
Actually, the rich did not become richer as you contend, many of them were either in the stock market, which kinda didn't do too well or leveraged up with debt. Many former tycoons had to try and sell their estates to raise cash, most were unable to do so because no one could afford the maintenance costs. They literally had to lock the gates and walk away. Of course some of the "rich" even commited suicide. I also recall reading that the number of millionaires for income tax purposes fell from a few hundred in 1928 to about 3 in 1930.