Crisis Averted? Or Wasted?

The stock marekt has had quite a run.  For instance, on March 9 of this year the S&P 500 closed at 676.  This past Friday it closed at 1026 for a gain of 350 points or a staggering 51%.  There has been quite a bit of discussion along the way about whether this is a sustainable rally with some fairly vocal folks (such a Roubini) saying that it isn’t and that there is a risk of the economy and the markets making a second big dip.

My worry isn’t so much that, but rather that we in fact managed to waste a perfectly good crisis.  It seems that we had been given the opportunity of enough pressure to make some of the structural changes which we will badly need to deal with a much more global, hyper productive and ecologically unsustainable economy.  Instead we stabilized the patient with a massive infusion of drugs (cash), while ignoring the true causes of the condition.

The health care reform rut seems to support my view.  As soon as the immediate economic pressures appear reduced the political process is once again stuck.  All of this feels to me like a startup where the investors decide to provide more money despite the fact that the product is not a fit for the market and management can’t agree on how to fix it.