An Amateur's Musings on Economics

I'm no economist, but I dabble and try to learn. Please correct me if I'm wrong on any of these things.

1. The SEC's temporary ban on short selling is frightening.

Short sellers are necessary to keep markets in balance. The markets have exploded upwards today... but they are exploding without short sellers to capitalize on inflated positions. What happens when the ban is removed? I would argue that a significant market drop is necessary.

2. This is the inevitable correction for the explosion in financials mostly brought upon by globalization.

Three decades of strong growth (sometimes fueled by 30x leveraged debt) inevitably would require a correction.

3. A strong series of regulations are necessary here--but the most important thing to regulate is government intervention.

Simply put, the actions of the US government over the past couple of weeks have reaffirmed the idea that companies can be "too big to fail." With government policy as is, there is massive incentive to combine investment houses and insurance companies to reach a point of criticality for the economy. This is an anti-competitive practice, and it is quite clearly a response to the interventions of government.

If I'm reading this correctly, then, the right approach (after this crisis passes) is to offer disincentives for massive companies by making massive bailouts (like what AIG got) illegal. Gigantic companies cannot have the existence of the federal government as an insurance policy. It's anti-capitalistic and it hurts smaller, more efficient companies who succeed by being well-managed.

4. Please, Barack Obama, no tariffs if you win.

Does Hawley-Smoot ring a bell? International trade can keep things moving a bit. Hawley-Smoot II would be a massively unfortunate policy decision.

5. Please, Federal Reserve, no tightening of the money supply.

Deflation is far worse than inflation. If the economic crisis is a repeat of 70s-style malaise, so be it. A Great Depression II would not be fun.

I fear that capitalism will be the inevitable loser in a crisis that was caused by a myriad of things. Government intervention in the markets, over the years, is a big cause.

Confirmation bias? Perhaps. But I'm not giving up on the free market yet.