Don't Take Over the Free Markets to Save Them

by: Michael Shedlock October 14, 2008    
Michael Shedlock

Michael Shedlock

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In what may be the most Orwellian comment in history, President Bush just stated: "Bank buyout needed to preserve free market".

The US Government is to spend up to $250 billion buying direct stakes in banks and other financial institutions under a controversial emergency plan which President Bush insisted today was "not intended to take over the free market but to preserve it".

It's A Brave New World

Professor Jeffrey Cooper made an interesting comment on Minyanville Tuesday.

Treasury Secretary Hank Paulson Jr. told nine leading bankers they would have to accept government investment for the good of the U.S. financial system.

It's a brave new world.

I'm also waiting for word as to when the implanting of chips in newborns is done 'for the good of the country'.

What hath they wrought?

One Does Not Take Over Free Markets To Save Them

President Bush just proven without a doubt he does not understand free markets. Of course he has long since proven he does not understand anything else either.

One does not take over free markets to save them. It was and still is government intervention in the first place that is destroying the free markets. The root cause of the mess we are in is fractional reserve lending, an unsound currency, and interest rate micro-mismanagement by the Fed.

In a free market, there would not be a Fed, nor would there be fractional reserve lending, nor would there be unsound currencies. And instead of attacking the root cause of the mess, Bush, Paulson, Bernanke, and others are responding with measures that lead one further down the path of fascism, supposedly to "preserve the system".

Also sad is the fact that highly respected economic professors like Krugman and Roubini openly cheer such nonsense. There is very little if anything in these bailout measures that is worth cheering over. Indeed, there may not be anything left worth preserving if we continue down this foolish path we are on for too much longer.

The actions taken by Central Bankers to "preserve the system" are tantamount to cutting off one's head so that it won't get any more blemishes.

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This article has 13 comments:

  •  
    Oct 14 05:23 PM
    The free market is obviously not free to fail. It did not do its job in the first place and its being sustained by your tax dollars not for your benefit but the benefit of the banking industry big wigs. If we allowed everything to disappear except FDIC we would quickly get readjusted to a new banking system the old one gone gone gone...everything can now be done over the computer. Cash could disappear, your withdrawals credited to you Debit
    Card and we would save a ton of money in bank real estate and branch salaries...MarvinMBA
    Reply | Link to Comment
  •  
    Oct 14 05:43 PM
    He meant the neofree market.
    Reply | Link to Comment
  •  
    Oct 14 05:55 PM
    Well, it looks like we are going to have 4 years of misery so Ron Paul won't be ignored in 2012. I will write his name in this election.
    Reply | Link to Comment
  •  
    Oct 14 06:14 PM
    Flash:
    Fed takeover economy in bloodless coup.
    Americans to serve the state for the foreseeable future.
    Banks install truck barriers as a precaution.
    Reply | Link to Comment
  •  
    Oct 14 06:18 PM
    New song to be played at Presidential appearances:

    Sieg Heil to the Chief
    Reply | Link to Comment
  •  
    Oct 14 08:44 PM
    The Mogambo Guru must be in his bunker. Poor guy.
    Reply | Link to Comment
  •  
    Oct 14 09:31 PM
    Which is worse, a car crash solution [no bailout] or cancer [bailout, spreading out the pain]? Is one inherently better than the other? Michael and Jim Rogers favours a car crash solution, then start all over again. Not too sure myself, just have to accept reality. The reality is those in charge choose bailout we have to make the best of it, or avoid the pitfalls.
    Reply | Link to Comment
  •  
    Oct 14 09:34 PM
    Free markets? Only government regulation can keep a free market in existence. That is because the natural tendency of markets is to either monopoly or Oligopoly. Oligopoly is what we have in the USA since our markets have not been free for quite some time.
    Reply | Link to Comment
  •  
    Oct 14 10:43 PM
    My country used to be.
    Now the land of bailouts be.
    Of thee I morn.

    Land where the patriots died,
    Marx and El Duce stride.
    Hasn't all this crap been tried?
    Not by US, I guess.
    Reply | Link to Comment
  •  
    Oct 15 09:50 AM
    Now watch a whole new layer of Govt. bureaucracy grow like weeds around the banking industry, talk about parasites driving up costs and sapping profits.

    And watch the Pols like Frank & Dodd line up at the trough for their piece.
    With just a passing interest in Fakeie and Foolie they bled them white and bought votes from minorities with worthless mortgages till they were bankrupt.!!

    If it ain't broke don't fix it--Change to if it works, break it.
    Will the Commissars campaign ??.
    Reply | Link to Comment
  •  
    Oct 15 11:15 AM
    "When I was a boy I used to believe that anyone could become President; I'm beginning to believe it." Clarence Darrow.

    "I never trust a man unless I've got his pecker in my pocket." Lyndon Baines Johnson. (1908-1973)

    "The difference between Washington and Yogurt is that Yogurt has an active, living culture." Unknown.
    Reply | Link to Comment
  •  
    Oct 15 11:44 AM
    Do property rights still exist in the United States?

    This isn't meant as a snide comment or a rhetorical question. I would be genuinely interested to know what legal basis Paulson has for disenfranchising the common stockholders of financial institutions forced into mergers last month or compelled to accept public investment this week. If there is no basis other than 'for-the-good-of-all' arm-twisting, aren't the directors of those institutions who succumbed to it open to a cascade of stockholder legal action?
    Reply | Link to Comment
  •  
    Oct 15 06:23 PM
    Here's an experiment to illustrate what happened: Go the your local playground. Find a teeter-totter that is reasonably well-balanced between the two sides. Set it level, then carefully stack about a 100 telephone books on the center pivot point. What happens if there's a little gust of wind?

    That's the banking system. It was balanced and functioning reasonably well until the bankers started stacking higher and higher leveraged derivitives on it. Then a butterfly flew by....

    We've only seen the first few phone books hit the ground so far. There's still at least $14 Trillion worth of toxic derivitives (the net imbalance between up bets and down bets) that has to get written off at some point. That's more than the GDP of the World.

    Mike, don't pine too much for the free market. It never was free. We're just buying it back from the banks that have owned it for the last 100 years. Of course, they've already sucked it dry, which is why we can buy it back at such low prices.

    Reply | Link to Comment
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