More Bailouts, More Regulations, More Government: Obama’s Chump Change
Obama’s economic team seems to confirm at first glance that all his talk of “change” really means more of the same – “more bailouts, more government intervention, more addressing symptoms rather than causes – along with greater deficits, and massive increases in government spending,” which our illustrious leaders in Washington superstitiously believe can restore us to economic health. As with all superstitions, no logical argument or historical evidence can shake it away. Besides, it gives them reason to spend, which they love to do anyway.
There is nothing our “masters” in Washington: Obama, Barney Frank, Chris Dodd, or Barnanke at the Fed can do to improve the situation, but they can prolong it, and that is what they are doing.
Although they don’t understand how we got into this situation, we must, in order to find our way out of it.
No novel theories, just a layman’s understanding of our present economy, what should be done next, and some important ideas that have been forgotten by Americans for far too long, a true free-market perspective – specifically the ideas of Ludwig von Mises and F. A. Hayek – explain our crisis which many economist and financial analysts do not fully understand, and which the usual theories fail to adequately explain. These ideas are not new.
They’ve simply been neglected.
As usual, government officials first misdiagnosed the problem, giving themselves a pass and blaming others for the problem. They looked at the Great Depression, but got the lesson wrong. Next, they told America that the government needed to follow the same wrong-headed policies that prolonged the Great Depression in order to save us from the current crisis, creating, as Gerald Celente calls it, “The Greatest Depression.”
Beginning with massive bailouts, they are prolonging what the market would have cured in a shorter time. Despite the people’s overwhelming rejection of the Bush administration’s “rescue plan,” Congress passed it in September 2008. Why? According to the Center for Responsive Politics, the securities and investment industry contributed million to congressional and presidential candidates in the 2008 election. Those voting for the “rescue” plan on 29 September received 53 percent more money in campaign contributions from banks and securities firms than those who voted against it. Surprise. Surprise.
Despite rejecting it at first, because it had to pass, legislators ignored the people and worked to find a way to ram it through anyway. The Senate added billions of dollars worth of enticements to help get it passed. So, even though handing over 0 billion to reckless companies on Wall Street seemed like a bad idea, adding an extra million tax break for makers of children’s wooden arrows helped smooth things along.
Treasury Secretary Paulson had told the nation that the bailout money would buy up bad assets from banks (like nonperforming mortgages and “toxic” mortgage-backed securities) in order to revive inter-bank lending. Everyone (administration officials, congressional leaders, the media, state sponsored economists) agreed that it was the right thing to do.
After it passed, they changed their minds. First, they postponed buying up the bad assets in favor of exchanging government money for bank shares, even if banks didn’t want to sell. Then Paulson just abandoned the idea of purchasing the bad-assets. So the “rescue” plan’s solution that was vital to save the nation, no make that the world! was forgotten with Paulson later admitting that he knew from the beginning it was the wrong solution.
Next consumer credit needed saving, so that “millions of Americans,” as Paulson said, could “finance everyday purchases.” So, it’s a healthy economy when people are “financ[ing] everyday purchases”? Well, according to Paulson and the government it is. Therefore, the obvious answer is to prop up an unsustainable system based on borrowing and consumption instead of encouraging people to live within their means as the market is trying to do. Government officials, the sound economist that they are, usually can’t see the obvious, but German chancellorAngela Merkel did correctly warn in November 2008 that Washington’s policy to create and borrow more money would simply sow “the seeds of a similar crisis in five years’ time.”
America, having the wonderful “choice” between Obama and McCain, who both agreed on the congressional bailout package, voted for “change.” Well, it felt good at least. That’s what matters, even if real choice isn’t permitted. So, by the end of 2008, Washington had loaded onto the American people a .7 trillion debt.
And they’re just starting.
Inspired by Meltdown by Thomas E. Woods Jr.