On Wednesday, the Bank of England, the Bank of Japan, the European Central Bank and the Federal Reserve announced a plan to boost liquidity in financial markets. Under the plan, private banks will have access to cheap dollars for as long as the global debt crisis rages and they aren’t borrowing from one another. Stock indices responded favorably to the news, but the plan will, at best, only provide short-term relief.

The lack of confidence in financial markets hasn’t dissipated since the Fed printed nearly $2 trillion, so why does anyone expect the latest, actually more modest central bank intervention to have any long-term effect?

Maybe they don’t and they’re just buying time (what an appropriate expression) for politicians to come up with the answer. Given their unwillingness to seriously cut spending and not just restrain the future growth of government, it’s no surprise that investors are increasingly weary of lending these people money. Even Germany, that bastion of frugality, is struggling to sell its bunds at an affordable rate.

It’s not just the Greeks and the Italians who are bankrupt — although their debts are so colossal, one wonders how any financier could have justified loaning them money in recent years. It’s the mixed economy, that contraption of public-private entanglement known as the welfare state, that has run its course. The spectacle of Portuguese mass transit workers striking because their Christmas bonuses were cut in half is ample evidence of the moral bankruptcy of the progressive fantasy that markets could be made to work “better.”

Even in the face of sovereign default, a calamity that is virtually unprecedented in modern times, there are economists, politicians and union leaders who won’t recognize that the game is up, let alone that the average public-sector worker would be told honestly by their representatives what’s at stake. It’s not just their pensions but their livelihoods that depend on the assumption that governments cannot go broke and that central bankers and politicians can stop the contagion if only they push this button or pull that lever, as if the economy were a machine that can be “kickstarted” into growth mode.

We will not have growth in the West unless and until the massive misallocations of credit and investment that have been built up in the last ten years are filtered out of the system. This can only happen if the market is left to its own devices so worthless debt can be written off and firms can fail.

It’s a somber prospect that our leaders are trying desperately to avoid, but all their efforts to contain the damage of the credit crunch have only made things worse. Cheap money got us into this mess and it’s not going to get us out. Now is the time to repent.

This story first appeared in The Daily Caller, December 3, 2011.