“This is a difficult time for a free market person. Under ordinary circumstances, failed entities — failing entities should be allowed to fail… I have concluded these are not ordinary circumstances, for a lot of reasons. Our financial system is interwoven domestically, internationally. And we got to the point where if a major institution were to fail, there is great likelihood that there would be a ripple effect throughout the world, and the average person would be really hurt… And what makes this issue difficult to explain is — to the average guy is, why should I be using my money because of excesses on Wall Street? And I understand that frustration. I completely understand why people are nervous about it. I was in the Roosevelt Room and Chairman Bernanke and Secretary Paulson, after a month of every weekend where they’re calling, saying, we got to do this for AIG, or this for Fannie and Freddie, came in and said, the financial markets are completely frozen and if we don’t do something about it, it is conceivable we will see a depression greater than the Great Depression… So I analyzed that and decided I didn’t want to be the President during a depression greater than the Great Depression, or the beginning of a depression greater than the Great Depression.”—President George W. Bush, speaking to the American Enterprise Institute, December 18th, 2008.
The die is cast.
When President Bush says he has abandoned free market principles, he means it. He believes with apparent sincerity that, by doing so, he is saving the free market system: but the truth is, that he—through de facto nationalization of the mortgage, insurance, financial, and now the auto industries—has set back the cause of free markets and limited government by at least thirty years.
Speaking last week to the American Enterprise Institute, he outlined, with some candor, his rationale. He says the nation is averting a depression—perhaps the greatest depression ever—by using the public treasury to prop up financial institutions that he says were on the brink of failure. His essential case is that a failure to act would have resulted in the collapse of the global economic system.
In a nutshell, this system had become far too overleveraged. Former Fed Chairman Alan Greenspan admits to as much last week in his commentary, writing that banks will require greater capital cushions moving forward in order to lend freely. It is this basic, critical failure of a system designed to create easy credit that precipitated the current crisis.
And that, say the central planners, is what necessitates perpetuating that failure. So addicted to credit is the economy that even when too much credit causes a catastrophic failure, the only solution is yet more credit. Yet more debt.
That’s what President Bush means by abandoning free market principles to save the free market system. It’s a lot like abandoning common sense to save one’s sanity.
Both the President and Mr. Greenspan believe that this direct, command-and-control approach to the economy must only be temporary. As if that is any relief.
Mr. Bush says he does not want to leave the incoming President, Barack Obama, with a crisis. And yet he has.
And to make matters worse, this dramatic, unprecedented expansion of government under an Obama administration will be anything but temporary. The incentive for there to be private investment to capitalize mortgage, insurance, and financial markets has been removed.
Instead, government has created a monopoly over these industries, a trend not easily reversed, and certainly not by a political party that supports nationalization on its face.
The bailout, in a single year, has topped $8.7 trillion, reports Politico.
Unlike private investors, government can just print more money, and the private sector simply cannot compete with that. Nor can it afford to finance it via the tax burden, because government is dramatically expanding the nation’s financial obligations far beyond anything the private sector can produce on its own. Government, in the process, paralyzes the economy from being able to meet this artificial demand for services.
In short, the nation is being bankrupted. And the American taxpayer is being shackled to a mountain of debt.
That is not a temporary fixture. That is slavery.
The die is cast, and things may never be the same.
Robert Romano is the Editor of ALG News Bureau.
