A crisis that was created by cheap credit must be corrected by less of the same ~ilana
“If this threat is permitted to fully and suddenly emerge, all actions, all words, and all recriminations would come too late. Trusting in the sanity and restraint of Saddam Hussein is not a strategy, and it is not an option.”
That was Bush on January 28, 2003.
Cut to Bush of September 24, 2008: “The government’s top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.”
In 2003, Bush and Cheney cowed a cowardly Congress into authorizing war against Iraq. Congress’s vote was a mere formality.
In 2008, Bush (minus the manic grin) and King Henry (Paulson) are hectoring the same creeps into authorizing $700 billion of taxpayer funds for firms who’ve funded bad mortgages.
The latest calamity, like the first, is, as I write, being rammed through at breakneck speed before the November elections.
Unmentioned by the bumbling Bush is that the US Treasury is broke. Bernanke will likely monetize the debt, which means minting money in the basement. In the process, the dollar will further devalue, and the national debt will be driven above 70 percent of gross domestic product!
All the same, the teletwits insist that borrowing or forging funny money in order to buy, for a pretty price, assets whose value the market has pegged at zero will be a boon to taxpayers. But in the unlikely event that money is made, it’ll flow not to the taxpayer, but into the insatiable maw of the feds.
Bush lobbed his financial WMD first by nationalizing the heavily socialized Fannie Mae and Freddie Mac, another formality. The administration then handed $85 billion to AIG. Mercifully, the moribund Lehman Brothers was allowed to expire, marking the largest bankruptcy in U.S. history, but not before an attempt was made at resuscitating Bear Stearns.
Ludwig von Mises, the greatest economist ever, was never wrong: The road to socializing the means of production is paved with interventionism.
Buried in Bush’s blather was a tacit acknowledgment that government’s deep infiltration of the mortgage and homeownership markets encouraged a laissez faire attitude toward lending and borrowing.
Obama “thinks”—my tongue is firmly in my cheek here—that the crisis is due to too little government meddling. McCain doesn’t think. The natural laws of economics consistently show that State subsidies and subventions are what enervate markets.
“Because [Fannie and Freddie] were chartered by Congress,” confessed Bush, “many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.”
Fannie and Freddie’s “charter” partners Bush exonerated.
Moreover, nowhere did Bush come clean about the continual expansion of credit by the Central and commercial banks. Loose monetary policy has caused interest rates to fall below the natural market rate, and has precipitated an artificial stimulation of economic activity reflected in the colossal malinvestment and misallocation of resources witnessed in the housing market.
Consider another pesky piece of the puzzle: This government—and previous administrations—has eliminated the risks of mortgage lending. The subprime fiasco, in a nutshell, is a consequence of extending credit to the un-creditworthy, chief of who are minorities. “The Diversity Recession” is how VDARE.com commentator Steve Sailer has aptly dubbed the mortgage misadventure.
You had the Federal Housing Administration (FHA) colluding with the U.S. Department of Housing and Urban Development (HUD) to provide taxpayer-subsidized home loans to illegal immigrants, no questions asked.
You had the 1974 Equal Credit Opportunity Act, the 1975 Home Mortgage Disclosure Act, and the US Fair Housing Act are—all arrows in the quiver of the federal government and the Department of Justice, aimed at forcing banks to throw good money after bad by lending it to those with low credit ranking. Mainly minorities.
Under the guise of remedying (alleged endemic) root-and-branch racism, the State has legislatively removed the risks of mortgage lending, thus precipitating the housing bubble.
Bush’s ownership society, built as it was on quicksand, has metamorphosed into the bailout society.
“I’m a strong believer in free enterprise,” declared Dubya the dirigiste, “so my natural instinct is to oppose government intervention.”
Don’t believe him; oppose him.
If he favored markets he’d let them work. And that means, as the only Congressman with any economic acumen has counseled, not propping them up, and allowing the liquidation of bad debt and worthless, illiquid assets at prices set by the market, not manufactured by government.
Above all, a crisis that was created by cheap credit must be corrected by less of the same.
How does a bankrupt person become solvent? He ceases to borrow and spend, pays down what he owes, and lives within his means. But Bush and the bailout bandits (here I include Obama and McCain, who’re down with destroying the economy too) would like you to believe such eternal verities do not apply in macroeconomics.
Bush’s idea of a correction is thus to “free banks to resume the flow of credit to American families and businesses.” In the man’s own crazed words!
Those who buy the Bush bailout are—to use the incomparable Paul Gottfried’s coinage—”at least as dumb as turkeys, the mouths of which have to be shut when it rains, lest they swallow too much water and drown.”
An unlovely snapshot of candidates Obama and McCain.
©2008 By Ilana Mercer