Friday, September 19, 2008

The Government Bailout: Will We Be Toasting Marshmallows Over Dollar Bills?

While the markets opened this morning in a cheerful mood, that can't hide the fact that long term government deficits lead to inflation and long term uncontrolled deficits lead to uncontrolled inflation. If, and it's a pretty big if, the value of AIG's assets can be maximized, perhaps we can avoid the situation, pictured above, where Germans found it cheaper in the 1920's to use paper money instead of wood to heat their kitchen stoves.

The kind of money that is being discussed in the wake of the AIG bailout is almost too large to comprehend. It can't be recouped by a mere tax hike. The economy will have to grow stubstantially, or I am pretty sure we all will be toasting marshmallows over bonfires of dollar bills.

The early morning recovery in today's markets shook Barack Obama so much that he put his big economic plan on hold. That's a good thing, because if you read the news articles, you know that Barack Obama's remarks make it seem that he has already appointed himself President. Acting as if you are the President doesn't make you one. Obama's lack of humility is profound, and his demeanor troubling.


Blogger B said...

Big business should not be allowed to become too large to fail. A business with that much influence is too big for a free market. It has access to wholesale market manipulation. And it has the privilege of depending on a government safety net if it fails.

The recent economic crisis demonstrates that such businesses will now be rescued at taxpayer’s expense when they suddenly collapse. The CEO of AIG has even demonstrated on national TV that big business leaders expect tax funded rescues. And that diminishes a primary incentive for them to be efficient and prudent. It may even encourage their board members to strategically create a crisis requiring a government bailout rather than suffer losses over time on their own. These business leaders have developed an attitude of entitlement that should inspire corporate welfare reform.

If businesses that are too big to fail are allowed to exist, then they should pay for their own government entitlement programs. This has been the arrangement for the lower classes. That is why social security tax rates in the United States become less for those who become wealthier. Wage earners should not be expected to pay for business welfare too. The influence these businesses have over markets should help them pay for their government programs. And to discourage corporate welfare fraud, those in charge of businesses that either purposely or by neglect cause the government to pay for their rescue should be punished for a kind of embezzlement.

Bryant Arms

Sep 20, 2008, 3:01:00 PM  
Blogger Publia said...

Where is Teddy Roosevelt when we need him? I am particularly taken by your last comment about making it a criminal offense to put your company in a position to require government bailout. While I am sure there is a special place in hell for the irresponsible persons who conduct their businesses irresponsibly, I would like to see some punishment earlier on . . . Financial ruin used to be considered punishment enough. Now that these clever crooks have figured out how to avoid that, new remedies need to be devised.

Sep 22, 2008, 8:44:00 AM  

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