Friday, November 28, 2008

Bailout Mania

More banks are being bailed out, with the government becoming a bank holding company.

Where is that in the Constitution? Nowhere.

It's as criminal as it is ineffective.

Writing at Cato,

A Pew Research poll conducted more than a week ago found that 57 percent of Americans are terrified by Bailout Mania 2008. That was several days, and many billions of dollars, before Bloomberg reported that U.S. taxpayers are now on the hook for $7.7 trillion in bailout bucks — half of the nation’s entire GDP for the past year. At this point, not even Carl Sagan could get a handle on the numbers we’re talking about.

Ya think?

But I maintain that the economy grinding to a halt is on balance good. There will be pain, and real people will have difficult times. But that pain is unavoidable. Better for it to happen now, before the government spends trillions trying to fix it, than afterward when all those trillions will need also to be repaid.

What's that you say? It's already happening? Even so, even so.

We have become a nation with an economy driven by debt. That is unsustainable, as we are seeing. Our chickens, as they say, are coming home to roost, and there's nothing we can do to avoid it.

But we can make it worse. We can have the government buy shares in banks, buy up bad loans, dictate maximum interest rates, and take any other stopgap measure aimed at avoiding the short-term pain. All any of that will do at best is stave off the pain to a later date; it will not avoid it. At worst? I think we may be seeing it.

The way to avoid this kind of situation is to encourage saving, not spending, both for the government and for individuals and businesses.

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