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Just as echoes of the “New Deal” are still costing us dearly today… - A Suburbs Boy Living a Country Life [My Flickr Photos]
October 2nd, 2008
10:50 pm


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Just as echoes of the “New Deal” are still costing us dearly today…
Unintended Consequences by John Ross, 1996

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This bailout will cost us dearly later:


Please, call your congressman and ask them to reject this rash remedy.  Yes, without this “bailout,” the market will fall. Past excesses will continue to be exposed, and the institutions that “bet the farm” on poor choices will fail.  Some people will lose their life savings.  The problem is that if we do this, we guarantee the well-being of the “fat cats,” and will save some ordinary people from harm in the short-term.  Make no mistake though, the long-term, inevitable unintended consequences of this bailout will impoverish even more people than doing absolutely nothing would. 

There is an extraordinary economic engine in this nation, and the larger world economy.  Even if we stumble, we will reach a new equilibrium.  Growth will come again without this reckless economic intervention.  People are bemoaning the death of the “commercial paper” market—but what they seem to forget is that “nature abhors a vacuum.”  Where there is demand for goods and services requiring the extension of credit in the absence of a working market, people will see that there is money to be made.  A new market will rise to replace the failed one.

If we bail out Wall Street, here’s what we are putting ourselves in for:

  • Further inflating our currency in a time of natural recession.  We don’t need a repeat of “stagflation!”   An inflated currency means a weaker dollar and higher real prices for goods and services, foreign and domestic.
  • Paying Wall Street off now at overvalued prices with a promise of future repayment.  Don’t force all taxpayers to become further invested in the very firms that caused the problem.  If we as taxpayers want to make investments, let us do the research and choose which firms and funds deserve our hard-earned money.  Even though the bill at hand calls for guarantees of repayment, I can hear the cries of poverty when that bill from the taxpayers comes due on the street.
  • Sending a message to market makers that all they have to do is make themselves “too big to fail.”  The moral hazard is real; just say no to a “free pass” for reckless investors.

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(2 comments | Leave a comment)

[User Picture]
Date:October 3rd, 2008 10:59 am (UTC)
I told them all. My senators will not be getting my vote again. I can only hope the house saves us.
[User Picture]
Date:October 3rd, 2008 02:50 pm (UTC)
Yes, the bailout is a bad idea, that's obvious to anyone who will be paying into it for the next 20 years and losing their retirement savings to date along the way.

What we need, which you're unlikely to agree with, is regulations to prevent so much 30:1 leverage nonsense as went on for the past 5-10 years or more that allowed this to happen.

Of course that means giving the SEC and the IRS more teeth to enforce corporate law and tax collection from these guys. No more hiding their cash in offshore island accounts etc. For every company that is involved in getting help from the government, a permanent annual audit by the IRS (and not some 3rd party folks that can be bought off like what happened in Enron) is needed.

I also would consider revoking the right of corporations to investing in political candidate campaigns. Sure they can campaign against a specific piece of legislation, but no more handouts to congressmen, senators and presidential wannabes. Period. They aren't people, time to stop giving them the rights of a person without the responsibility for their actions.
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