Friday, 26 September 2008

Correction

The Bush Bailout, as (assuming it passes, which sadly looks likely) it will surely be known, is the most expensive sticking plaster in the world's history.

It's a plan that will do nothing to stop the derivatives scam that as I discussed yesterday has blown up into unimaginable proportions. It will propel the US Federal Government's debt towards a barely less unimaginable figure of $10 trillion. And at the other end of the scale, it is a plan that will do nothing for the million plus people who have fallen victim to the ground-level manifestation of the scam and lost their homes.

Don't just take it from me. This is the view of Richard Fisher, President of the Dallas Federal Reserve Bank:

"The [bailout plan] places one more straw on the back of the frightfully encumbered camel that is the federal government ledger...We are deeply submerged in a vast fiscal chasm." - Richard Fisher

Not even the US Government has an unlimited pot of money. Either the money is to be taken from tax revenue (which in total is only around 4 times the proposed bailout figure - and spending is already outpacing total tax take - or they're going to print money, with all the risks to the country's economic well-being that comes with doing so.

The supporters of the bailout typically cry '...but without it we'd all be doomed!', talking as (to take just one example) Kevin Boatang did about the "collapse of the economy". No, it is just delaying the inevitable...

The economy is not going to collapse, bailout or no bailout. The most appropriate response I have seen to these overblown claims of imminent disaster:
"Look around you. Do you see cities and highways and skyscrapers and farms and factories and rails and ships?

Do you imagine that all will VANISH unless the Congress lavishes a fortune unprecedented in human history upon a corporate aristocracy whose avaricious mismanagement has created the eve of their collapse?"
- taraka das (Daily Kos)

Yes, as Boatang implies it may make credit significantly more difficult to obtain, at least in the short term. In the long-run, it ought to herald the return of such old-fashioned concepts as creditworthiness, and responsible lending - and an end to the casino of debt. Taraka's proposed solution as outlined later in the linked post is not a wise course of action, but nor is the Paulson/Bernanke bailout plan.

As Patrick Vessey - one of the few libertarians to be writing posts on such issues before 'Meltdown Monday' and subsequent events brought them to the forefront - points out, the central role played by credit in so many of our lives is a recent development; it should not be so that we have become so dependent on its easy availability.

This is not a disaster - it is a long overdue correction.

2 comments:

richard allan said...

"Look around you. Do you see cities and highways and skyscrapers and farms and factories and rails and ships?

Do you imagine that all will VANISH unless the Congress lavishes a fortune unprecedented in human history upon a corporate aristocracy whose avaricious mismanagement has created the eve of their collapse?"

Come on now, I hate to be glib, but that's what they said in 1929.

TBRRob said...

Very true.