Lawmakers Grapple with Reactive Policy Changes to Control the Cascading, Global Credit Crisis

This is somewhat of a response to a comment on the Economist blog.  Free markets aren't necessarily that free.  Government intervention is needed when few benefit at the price of many.  Usually this doesn't necessarily kick in until the few mess it up so badly with poorly structured "investment vehicles" and then take off with the money via bonuses or otherwise, leaving the bloodbath for the "commoners" to pick up tab.

• The reason why governments are okay with the price of oil falling, but not to it rising is directly tied into productivity.  The lower the price of oil, the cheaper it is to produce and send goods out through the global commodity chain.  When oil prices rise to unsustainable levels and developing governments are no longer able to subsidize part of the costs, there will be a massive re-aligning of demand.

• Also, rising stock prices of a bank is a good sign of economic health for many and increasing credit and economic activity within reason.  The Frankenstein, Ponzi-like credit environment that existed into 2007 was out of control.  When shares fall precipitously due to major structural flaws in investment structures, as it has and will continue to do (with many major banks failing),it threatens to bring the economic health of a nation or the world down.

• Though it's agreed that Washington's recent response to market turmoil of singling out "speculators" who want to push bank stocks down and oil prices up is spurious and basically looking for a quick, slap happy scapegoat. Overall, government intervention is needed  to provide well thought out and robust solutions to a system that's out of control.  They shouldn't have let money be so loose and easy for so long, should have taken a closer look at derivative markets and exotic investment instruments that went mainstream... Because they didn't do that, they now have to deal with the looming problems on the other side of the equation.  At this point it's extremely important to make sure there's nothing that will cause a chain reaction into systematic collapse.

Lawmakers and policy makers tend to be reactive.  How they are dealing with the current inter-related crises shows how much that is the case.