Toby asked what I thought of a credit-crunch article in the Telegraph. The key bit for me was:

There is a pure free market position which holds that no financial institution should be bailed out – ever. If this approach was followed, people would factor much more risk into their behaviour and the world would be a better place – eventually. I have some sympathy for the intellectual purity of this position – but that is all. On balance, I think it would be rather a good idea, you know, if we did not repeat the Great Depression all over again.

I'm one of those that take the 'pure free market' position. I follow the Austrian School of thought on the Great Depression:

In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable.

The artificial interference in the economy was a disaster prior to the Depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. According to Rothbard, government intervention delayed the market's adjustment and made the road to complete recovery more difficult.