Thinking out loud.

I live in the West and have seen many forest fires. In the case of natural forest fire, what happens is that as the forest grows old, the trees grow so large that the forest floor sees little sunlight and the thick, lush vegetation turns to sparse and dry materials. Additionally, old trees that die of diseases or similar fall to the ground and dry out. The result is vast kindling, great fuel for a fast and hot fire. An event, such as a bolt of lightning occurs, and the forest is ablaze. It is an unfortunate situation as the devestation left behind is horrifying. However within just a few years, where there was once just a couple of very large, old trees there are hundres of small saplings and new vegetation.

A bolt of lightning has struck Wall Street this year, the media likes to refer to that bolt of lightning as the credit crisis. This weekend we saw two more big trees begin to burn, Lehman Brothers and Merrill Lynch. Last week Fannie Mae and Freddie Mac were burning like crazy, but our noble Secretary of the Treasury (the acting firefighter) swooped in and (in theory) put out the blaze. Now he is again trying to determine how to bring in the choppers and contain the new burn.

The whole situation reminds me of the Colorado fires of the late 90′s as compared to the big Yellowstone fire of 1988. The long and short of this is that it has proven quite healthy and natural for the forest to burn out every so often so that new blood can bloom from the forest floor. Despite the controversy about letting the fires burn in Yellowstone in 1988, it proved to be very healthy for the park and policies were enacted in 2004 that make it so all natural fires in the park are left to burn.

The economy is on fire, but just like the forest this is a necessary requirerment for our national economic ecosystem to function properly and regeneratively. When the overgrowth becomes to high and powerful, another powerful force must ravage the big trees in order to make way for the new trees to build new and better forests.

My point is that yes it sucks the stock market was down 5% today. But if we want a long term solution, we need to call off the firefighters and let the credit crisis fire burn itself out. This is how free markets are supposed to work by their very nature and definition. So… Hank Paulson, George Bush, Barack Obama, and John McCain… give up the mismanaged attempts at containment and let the fire burn out. We will be much better off in the long run without the big trees that caused it. The collateral damage is very sad but you are exactly the ones who have told us about the necessity of sacrifice oh so many times over the last few years.

And besides the last two American industries that were really on fire and the government helped put out were the auto industry and the airline industry. Do you really want to see our entire banking and financial services sectors looking like those do five years from now?