This is an excellent article (longer than average) that explains some key economic myths which have been widely held and used to our demise over the past several years. These include:
Military spending stimulates the economy
The banks are acting more conservatively now than before the financial crisis
We’ve got to prop up the big banks
We’ve got to protect the bondholders against suffering big losses.
The government has prosecuted the financial fraud which it has discovered, but it’s hard to make out a case against most of Wall Street’s acts.
The economy always returns to equilibrium and stability by itself.
Obama’s belief that unemployment is good for the economy, and Greenspan’s belief that too little debt is bad for the country are also ridiculous.
But the most dangerous myth – because a lot of economic policy is based upon it, and because so few know that it is false – is the myth about how banks make loans…
Read the whole article here for some sanity and enlightenment.