What’s Wrong with the World

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What’s Wrong with the World is dedicated to the defense of what remains of Christendom, the civilization made by the men of the Cross of Christ. Athwart two hostile Powers we stand: the Jihad and Liberalism...read more

Michael Bauman on Government Bailouts

Although published during the 2008 presidential campaign, Michael Bauman's essay on government bailouts is probably more relevant now than it was then. Mike, as some of you know, is a frequent commentator to WWWtW. Here are some excerpts:

The government does not bail out anyone. Taxpayers do. The government just decides to which corporations they want to redistribute our money.

Because I know better than does anyone else in the world what I want and need from the marketplace in exchange for my money; because I am the person most well-informed about my own needs, resources and values; and because I, therefore, can do the best job of investing my money effectively for my own highest good; I want to decide where my money goes. I want every individual to decide where his or her money goes. If it goes where each one thinks it does them the best service, the aggregate result will be better than if some government bureaucrat decided on everyone else's behalf where it ought to go....

Even though the government insists otherwise, it cannot rescue capital by means of bailouts because government has nothing to work with except what the taxpayers give it. When government grants bailouts, it is not "rescuing capital." It is simply reallocating and redistributing taxpayer capital. "Rescuing" and "redistributing" are not the same. Redistributing is all the government can do, and redistributing does not work.

Put differently, in recent weeks government has wasted many, many billions of taxpayer dollars, poured that capital down the drain, and with no appreciable progress to show for it. The system is still not liquid. Credit is still frozen. Nothing is rescued -- not credit, not capital. Had the taxpayers themselves spent those hundreds of billions of dollars in their own privately best way, the economy would now be far better off than it is.

Government caused the problem we face, and in trying to solve the problem it caused, it made that problem far, far worse. You cannot -- you absolutely cannot -- find a solution by looking to Washington. The DC politicos are so backwards on the point that some of them actually say this problem was caused by deregulation, as if we needed more government involvement, not less. Government intervention is at the root of this crisis, not at the root of its cure.

How did government cause this problem? (1) By putting economically foolish incentives and regulations in front of lending institutions, thus inducing them to grant mortgages to folks whose financial resources could not reasonably be expected to sustain them, (2) by encouraging those financially under-qualified folks to take on mortgages beyond their financial reach -- with disastrous personal and public consequences, and (3) by trying to fix the crisis it created with even more idiotic policy interventions, like massive bailouts in the wake of the crisis those countless mortgage failures caused. The arrogant ignorance of bureaucrats, the monetary fine-tuning of state financiers, and the personal aspirations of politicians seeking votes cannot put this crisis behind us. They put this crisis before us.

Rather than changing the mortgage rules for minority borrowers -- as if racial or ethnic background were an economic qualification -- government do-gooders should have stayed out of the mortgage business from the beginning, and declined to follow up their initial failure with another. Had they done so, we would be better off all around.

You can read the whole thing here.

Comments (7)

The government's laws of credit

(1) Discrimination must not decrease.
(2) Discrimination must decrease to zero.
(3) Discrimination can only be zero
when there is no credit.

Sorry,

(1) Discrimination must decrease.
(2) Discrimination must decrease to zero.
(3) Discrimination can only be zero
when there is no credit.

Didn't Zippy defend the bailouts as the "conservative choice" because if we didn't do something, then all hell would break loose?

It's very difficult for me to believe that the few dozen individuals in DC making the decisions to move trillions of dollars around are both wise enough to know what to do with those vast sums and have the character to resist the inevitable temptations to choose the not so good for the sake of personal gain. I'm not even sure if such a qualified person is alive today, much less alive in DC and in power.

But neither do I believe they are humble or honest enough to admit when they are simply overwhelmed, so I'm pessimistic for the short and mid-term economic future.

Terrific piece by Michael Bauman, which I somehow missed at the time. Thanks for the link.

It's very difficult for me to believe that the few dozen individuals in DC making the decisions to move trillions of dollars around are both wise enough to know what to do with those vast sums and have the character to resist the inevitable temptations to choose the not so good for the sake of personal gain.

It certainly doesn't help that the inspector general put in charge of TARP has been stripped of most of his independence by the Obama Administration. You almost get the feeling that the Obamanics have something against the inspectors general lately...

And our moral imperative is not only a duty to warn our fellow taxpayers, but the billions of persons globally who will be negatively impacted should our currency further decline in its purchasing power. For the essentials for sustaining life will be priced even further from their grasp... we will be not only rendering ourselves paupers, but forcing leagues of the world's indigent souls into chronic famine, arrested development and severe social dislocation. Not what I'd call an act of charity, eh?

"You may recall when the Nez Pearce Indians were relocated by treaty, that the paperwork was signed not by the leaders of the tribe but by their 'lawyer'. Effectively, their land was sold right from under their feet, by a traitorous member of the family. Something like that is happening now, the American people are being committed to buy companies and take on mountains of debt without being asked. There is a government 'lawyer' or elected representative to sign the paperwork on their behalf. But the result is, you now have new mortgages to pay, forever, without your consent. I am sure that Sitting Bull is happy to see us suffer.

America is in the process of a socialistic experiment to bail out billionaires with the middle classes hard earned money. We have simply done again what is expedient, yet, it will only defer the day of reckoning. American politicians, and Wall street elite are morally, ethically and financially bankrupt. It is no longer a model for the world. When the people with money (foreigners) start to call in their debt, you can't blame them for being a bit smug. We have been warned that our reckless habits would one day not go unpunished, well that day is coming soon.

For the fact is that money has no conscience, only people do. "

cited from The Columbus Era 1492–2009 by Scott Kelly http://www.lewrockwell.com/orig10/kelly-s1.1.1.html

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