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FDR's hyperkinetic New Deal created uncertainties that paralyzed private-sector decision making. Which sounds familiar.
Bear Stearns? Broker a merger. Lehman Brothers? Death sentence. The $700 billion is for cleaning up toxic assets? Maybe not. Writes Russell Roberts of George Mason University:
"By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next. The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s."
Barack Obama says that the next stimulus should deliver a "jolt." His adviser Austan Goolsbee says that it must be big enough to "startle the thing into submission." Their theory is that the crisis is largely psychological, requiring shock treatment. But shocks from government have been plentiful.
The Republican message for the foreseeable future is three words: "It won't work." Nothing is more predictable than the failure of the Keynesian interventionism of the Democrats' economic program.
I debated whether to link Will, considering that I've recently argued that he and David Brooks ought to be loaded onto a C-130 and dropped on the Taliban. But now that Will is back to quoting George Mason economists, I suppose Brooks can make the trip solo.
"There is no reason" blithely asserts that there is no quid pro quo. I can assure you that there are indeed some underground rivers of currency moving the capital about.
ReplyDeleteThe long term question is if/when we realize that the Fed, as a whole, needs an overseer for its imperial leanings.
Ron Paul, if only we listened
ReplyDeleteBut the truth is, if U.S. economic policy looked a lot more like Ron Paul's ideal than what we've had these past decades, the nation wouldn't be tottering on the financial abyss. Dr. Paul has long argued that an economy built on easy credit, insatiable consumption and deficit spending is a time bomb. He backs a national economic model based on savings, investment and production.
An economy that depends so heavily on government intervention to keep it afloat is one that creates of necessity an ever more powerful state. The nationalization of the banking sector only increases the power of the central government and decreases liberty. Dr. Paul warned for years against what we're seeing happen today. But nobody – including me – listened to the old crank.
How much better off would America be today if we had? We'll never know. Poor us...
And how much worse off we will be once those idiot Democrats are through with us.