Seed Newsvine
The Fed worked overnight this weekend to exactly what it’s not supposed to do: get its hands dirty to bail out the private sector.The New York Times reported yesterday that in hopes of avoiding a “systemic meltdown in financial markets” the Fed had swooped in to offer a $30 billion credit line to “engineer the takeover” of firm Bear Stearns and at the same time announced an open-ended (so no limits on the amount) lending program for Wall Street’s biggest investment firms.
Unbelievable. Every one of our economic woes, from the now-bursting housing and credit markets, to our $9 trillion national debt, comes from the fact that the government could never leave the economy well enough alone in the first place, and now the Fed proudly announces that it’s coming to the rescue once again.
Whatever happened to “laissez-faire”? A free market? Capitalism? When will the government learn just to get its nose back out of the economy?
Economic prosperity does not come from periodically shoving handfuls of money into the wallets of the mid- to -lower classes (as the up-and-coming tax rebates will do). That’s merely wealth redistribution.
Economic prosperity does not come from Ben Bernanke standing at the helm of the Fed, pushing various buttons and auctioning off continually lower interest rates. That’s exactly what caused the sub-prime credit and mortgage crisis that’s now pulling the economy down the drain.
And economic prosperity certainly does not come from the Fed rushing in to rescue Wall Street firms who’ve made their own bad business decisions! “In a highly unusual maneuver, Fed officials said they would secure the loan by effectively taking over the huge Bear Stearns portfolio and exercising control over all major decisions in order to minimize the central bank’s own risk,” the Times reports. That’s just the first step toward nationalization…
Forbes columnist Yaron Brookes recently wrote an amazing piece, aptly titled “To Stimulate The Economy, Liberate It” wherein he explains, so much better than I do, exactly how the much the government is stifling America’s economy through its increasingly interventionist policies.
As an aspiring economist, I can only stand back, baffled at the fact that the educated men who run our central bank don’t seem to understand the simple logic of free market economics. The answer is not in complicated tax rebates, fancy Fed loan auctions, or intricate schemes to “engineer” the takeovers of failing Wall Street firms. The answer is what it’s always been… let business just get back to business.
The Fed has done enough damage already. Now, it just needs to let it be. Let this recession correct itself, and let the chips fall where they may. And when the economy picks up again (which it will, as all cyclical phenomena do), learn from the fiscal and monetary mistakes of the past - the deficit spending, the sub-prime interest rates, the progressive taxation and the abandonment of the gold standard - and for once, leave the economy alone.
