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Ideas Matter: Bailout Would Be Socialist Win

More of the Austrian School’s take on the current crisis in this article by Llewellyn Rockwell, Jr., Bush the Socialist Destroyer. Rockwell writes:

And here is his [Bush’s] description of the grave calamity we face:

As uncertainty has grown, many banks have restricted lending, credit markets have frozen, and families and businesses have found it harder to borrow money.

Imagine that! We might have to live within our means for a bit. That would actually be a wonderful thing. Maybe a recession would last a year or 18 months, and then we would be back on solid footing again. He very nearly admits that too much credit is what created this mess. So he proposes more credit so that we can continue to live on too much credit. And then what happens next time? Ever more credit? This path ends in Weim[a]r-level inflation and total destruction.

While the free-market advocates’ prediction of hyperinflation seems like doomsayer talk, so does the socialists’ prediction of the greatest depression the world has ever known.

I don’t think anyone knows what would happen if the government stops bailing banks out, and I suspect it’s somewhere in between devastating deflation and the tropics of torpor with suffocating inflation.

But the question is what direction do we want the country to go toward — more government intervention and less economic freedom or laissez-faire solutions that may be painful but would lead to more prosperity after the dust settles?

This is a philosophical debate, a clash of ideologies between the capitalist advocates vs. the statists calling for more government control over the engines of our economy.

What is the moral action? I am for free markets, and I don’t think there is room for compromise. Yet we have been compromising for decades, which has brought us to this point. I don’t want massive deflation, but I don’t want hyperinflation and economic stagnation either. It seems to me that the academics are calling for what they think is the lesser of the two evils (inflation), but this is delaying the inevitable (deflation). Maybe there is a way to avoid both. Maybe this is a false alternative.

It just doesn’t seem logical to say that if government intervention brought us here (and I think that it did) that more government intervention will be able to get us out of the mess. Do the socialist academics simply win because we are afraid of what might happen if we¬† free up the markets? Isn’t this what the free market advocates have wanted for decades now? If we don’t move toward freer markets now, when will we?

1 comment to Ideas Matter: Bailout Would Be Socialist Win

  • Rich

    No bailout. Let the companies fail for their poor decision making and let the chips fall where they may. The stock market used to be a place where companies could acquire capital to manufacture goods. For the last 10 to 20 years it’s morphed into a place for companies to try to make money just from the notion of shuffling money around.