Clem Chambers, CEO of stocks/ investment web site ADVFN, argues in an article in Forbes.com that the best thing that could happen to the markets right now would be a quick stock market crash.

Chambers writes: "In many ways, the best thing that could happen now would be a quick crash. A lot of professionals are praying for a so called 'puke' because that would set a bottom for a recovery and signal that the worst is over. A short, sharp shock would be good for everyone. Recovery is better than sickening."

Chambers also notes that the market may very well be in the process of crashing right now, but until there's a period of relative calm or a massive drop, it's too soon to tell. Chambers added that if a crash does happen, it will occur in the next few weeks, and if it doesn't he sees a bear market for an extended period of time (It should also be noted that Chambers' other scenarios for the period ahead, 2008-2010, are a protracted period of volatility or a small/short bear market).
Market Analysis: Leaving aside Chambers' timetable prediction for a crash, Chambers makes reference to the market benefits of a capitulation day, a period when nearly all investors sell, panic sell, or otherwise give up, commonly called a 'crash.' The most well-known and serious market crashes occurred in 1929 and 1987. The 1929 crash marked the start of the Great Depression. The 1987 crash, a period of uncertainty/correction, followed a resumption of the 1980s bull market.

Some economists, market scholars, and analysts argue that the only way speculative excesses are corrected is through a capitulation day, or a stock market crash. But that's like saying the only to find out your car's brakes are bad is to have them fail at a stop sign, as opposed to getting your brakes checked regularly or having them checked when a warning light goes on. Given the economic case studies assembled over the decades about crashes and sound markets, about the only generation one can form is that a market crash is one way a speculative excess is corrected. In other words, there isn't enough evidence to suggest that crashes are the only or best way to correct speculative excesses.

Further, Chambers fails to consider the corrective effects of having, for example, 1) the problem slowly worked out of the system -- in the current case the incremental, installment-oriented write-off of bad subprime mortgages and related assets; and/or 2) the healing effect of an interventionist (and reform-based) public policy -- one that includes monetary, fiscal, regulatory, and private equity/sovereign investor tools.

If macroeconomics has taught the free, democratic world anything in the last 150 years it is that public policy can not prevent lenders, or investors, or business executives from periodically making bad decisions or choosing incorrectly. It can, however, lay the foundation for healthy markets and a strong economy with broad-based, sustainable economic growth.