Is the ongoing economic crisis as difficult to solve as it is portrayed?

Europe and America are in an economic crisis that is getting worse by the week. Even as politicians try to soothe the populace, there is little doubt that we are closer to the beginning of the crisis than we are to the end.

Imagine you landed in a place with five hundred million people living outside, or in caves. People with no knowledge of electricity, unable to read. People with no possessions beyond the days food they had foraged. How many years would it take to organize those people into a functional economy? If you had a vague familiarity with their society and beliefs it might take a few years, but after that growth and stability would increase rapidly.

Now imagine you land in a place with five hundred million people who mostly have professional skills, who live in houses, in areas with complex infrastructure (roads, power lines etc) and a struggling economy already in place. But there is an extreme instability in derivative aspects of the existing economy. What do you do? Do you try to preserve the derivative aspect of the economy?

[Note. "Derivative here means parts of the economy one or more steps removed from real assets. A commodity (food, real estate, oil, metal etc) is a real asset, it has unquestioned usefulness to an individual. A currency (dollar, euro etc) is one step removed from a real asset. Something built on the concept of currency combined with risk or opportunity is two steps removed, such as stock in a company etc. Normally, use of the word "derivative" starts after this third level. On this page it starts at the second level. Gross mismanagement of the dollar, euro etc have made these currencies unstable derivatives (of the commodities that underlie all economies). That's not a fringe opinion, it is the truth. Pretending that it is not true is dangerous at this point.]

Considering the potential problems that are straight ahead of us, why is there not even a discussion about reducing unstable economies to their basic level, at the expense of speculative parts of the economy?

The answer is simple and it has numerous historical precedents that do not bode well.

Bluntly, in times of great economic turmoil, political leaders are not focused on protecting an economy as a whole, they are interested in protecting the speculative, or derivative, aspect of the economy that buoys them as leaders individually.

The word "revolution" is very scary if you are the one in power, the one against whom the revolution plays. For that reason, people who are in power almost always treat the word "revolution" as a political word, something with supporters and opponents. But revolution can also be a natural process that does not have two sides.

When early Americans had their revolution, they had no interest in the British. Their attitude was "We have a country. Others (i.e., the British) need to tend to their own country." If a British person at the time could look ahead a few years and see past American independence, he would say "We gain nothing by getting involved. Let the Americans be". There would be the same "revolution", but with only one side. The problem was that the British were vested in the derivative economy, the profits and potentials derived from managing the colonies.

There is certainly nothing wrong with indirect, or derivative aspects of an economy, so long as basic ethical rules are followed. And there is the problem with the current situation.

What is the danger?

Very simply, as economies continue destabilizing politicians will continue pursuing every possible solution, except for any solution that might eat at their power base or that might erode the wealth of their most important lobbies. It is like a quicksand that wants your boot but you are not willing to give up your boot so you lose everything.

Our leaders do not have the historical perspective to understand that the economy has to be pruned in a much more basic way, no clever money transfers, no bailouts. A reduction of economies to their minimum and then a rebuilding with the lessons learned.

Compare to Iceland here. (It's a pay article, but just the introductory text is enough to make a strong point).