Today's Financial Times carried an article titled "Fed Should Stop Rate Cuts, Says Fund Chief," in which Ray Dalio, founder of Bridgewater Associates, commented: "The dollar being the world's reserve currency, coupled with major surplus countries having their currencies pegged to the dollar, has led to a dollar-denominated debt bubble -- a lot of irresponsible lending in dollars. The mortgage crisis is just one reflection of this."

He makes the argument that we've created too much liquidity, and this liquidity is at the heart of our problem. That is a variation of exactly what I believe: Irresponsible liquidity originally emanating from the Fed, coupled with reckless acts of deregulation, have created the problem we now face -- which of course has been a good 20 years in the making. As for what's to be done, Mr. Dalio suggests a solution that would "involve currency policies." On that score, I would have to disagree with him. Although everyone wants a solution, I don't believe there is one.

I know I've said this before, but I think it's worth repeating: Capitalism involves booms and busts. There is a phenomenon, known as the business cycle, that loosely revolves around those booms and busts. The policies of Greenspan and the Fed, wherein the busts were suppressed and "risk" was more or less struck from the lexicon of the English language, reinforced the policies that have landed us to where we are now. Thus, there is no solution.

As I have noted in the past, the country has gone "all in" -- via the credit-bubble-inspired housing bubble, which is now unwinding. I do not believe there is a bubble that can bail it out, nor do I believe that a bailout should be attempted. The real solution will be to let the creative destruction of capitalism finally run its course, after having been held back for a couple of decades. It won't be pleasant, but the sooner we get it over with, the sooner we can move forward. At least, we will finally be creating a recovery built on solid foundation, instead of the quicksand underlying our "recovery" built on the housing mania.

We have experienced a wild, drunken binge and we are going to have a hangover. But the best policy for the country would be to accept the hangover, head to the gym, start working out, and get stronger and healthier for the next go-round.