If you try to keep a free market from being free by inducing behavior with government intervention, you get sustained depressions. The law of unintended consequences becomes the driving force. Systemic thrashing ensues.

The credit markets are freezing for a reason. You don’t unfreeze them by pouring boiling water on them. You let them warm up over time, allow companies to restructure. An unsustainable growth rate cannot be sustained by government intervention. It just causes the normally turbulent, elastic system to vibrate out of control and break down.

Bailout naysayers, explain to me again why we shouldn’t be doing what we can to forestall a systemic collapse by injecting huge amounts of capital into the market.

Ok, so in the past 2 months we’ve spent 7 months of the entire GDP of the country on bailouts; with more to come (I’m not sure the new 600 billion today is covered in the 7.74 trillion racked up in yesterday’s Bloomberg report, so maybe 9 months now)…

So, in one quarter we’re going to spend not just the income of the U.S. Government; but the total income of the U.S. to stave off financial ruin. And next month will we have to spend another 3 trillion?

At some point you’re printing money like Zimbabwe, shooting for 5-7 digit inflation and taking the country into the toilet. You cannot spend more than the country’s GDP on Government spending every year and have an economy. It just isn’t possible.

As soon as you head that direction; every foreign country/national invested in T-Bills will rethink their investment; and the 6.3 Trillion of privately owned Government debt comes due as a new cost.

So the Government will find it will have to print 8 trillion dollars for the bailout so far, and 6 trillion to cover payouts on private debt, and who knows how much for bailouts just from now until New Years… maybe another 3 trillion?

When the Government spending exceeds the gross income of the nation as a whole you’re heading for trouble. When you spend triple the income of the nation as a whole (as we’ve done for the last few months) you’re insane.

That would be like me thinking I need to do something, so I spend my entire annual net income before taxes every month for 3 months… any bets on me avoiding financial ruin if I try this?

Finally, even if the economics worked (and they don’t) business is a competition. What we’re doing is favoring those with a losing strategy, losing money, and a losing business plan and helping them compete against everyone who was winning.

We’re supporting the losers and idiots and killing the winners in the process; rewarding failure and punishing success at every turn. We’ll preserve Ford and kill Nissan… and that can’t be a good plan.

When you cheat a race and let the slow fat kid win, you’re not encouraging anyone to run faster; you’re making everyone realize that running is for suckers…

And the Government is doing the same thing for work, success, business plans, responsibility, and leadership.

These are a fool’s game now; what you need is to go wild with the stupidest riskiest plans possible to may be either hit it big enough to pay off the Government and put you in the lead; or lose big enough to rate a bailout.

How the hell is this a good plan? Bailout supporters; given that we’ll spend 18 months of the GDP of the nation; or 5+ years of the country’s entire tax income to hold off the collapse for 4 months… what happens then? Do we spend another 12 trillion? And how, in any possible world can we ever pay back any of this? Who would loan us money ever again if we do this?

Would you loan Zimbabwe 2 trillion Zimbabwe dollars? Even if it only cost you $10 U.S.? Of course not; when they pay you back 10 trillion Zimbabwe dollars won’t be worth a penny.

But the U.S. dollar is going to go the same way at the rate we’re going. How can this work?

Bailout naysayers, explain to me again why we shouldn’t be doing what we can to forestall a systemic collapse by injecting huge amounts of capital into the market.

Read Thomas Sowell’s column at NRO today.

1. Things aren’t nearly as bad as the media says.
2. When Herbert Hoover had the government intervene it made things worse.
3. When FDR had the government intervene even more – it made things even more worse.

My own two cents:

We’re giving money to companies to keep their failed businesses going. These are basically giant sub-prime loans to companies who don’t qualify.

There are companies out there with cash. Wonder why they’re not stepping in to acquire these companies? Because they’re failures.

Just like the education system, throwing more money at the system won’t make it successful.

Printing money leads to inflation.
Supporting businesses that do not profit does not help the economy.

I didn’t realize that there were so many “conservatives” who mirror the reason & logic capacity of liberals. If the auto industry fails and the banks contract, it will be hard on all of us. But the pain of general Inflation will mean that we all feel more pain than we would of a contraction of failing parts of the economy.

The Government WAS involved in the 1929 collapse of the Great Depression. They messed with the money supply.

I am not going to read all the comments, but I will say that I do not remember Cavuto or anyone like him warning that anything like this was going to happen. Back when the DOW hit a record high they were not saying it was all crap. Oh nooo, they were congratulating themselves on a great market.

Terrye on November 25, 2008 at 6:48 AM

Terrye this is a nice, but long, article about some of the people who saw it coming.

He might not care what happens to the rest of us, but if people like Cavuto have their way a lot of American taxpayers are going to suffer.

American taxpayers are already suffering, and will continue to suffer under the ongoing contraction. Tossing money onto the blaze of staggering national debt without any reform of the fubared system is beyond stupid.

Maybe something does need to be done, but it sure as heck isn’t this.

It’d be one thing if they believed everything would resolve itself after some sort of correction, but my hunch is that they expect the worst-case scenario — a depression with unemployment in the double digits — and greet it as somehow salutary, as a necessary lesson to Americans about spending habits and to financial institutions about recklessness.

I don’t greet it as salutary, but rather inevitable. The first bailout, predictably, isn’t doing anything but throwing this country further and further into debt, without fixing the underlying issues. Throwing money at Citi for acting irresponsibly does nothing to correct its behavior. Instead, it rewards Citi and sends the pretty clear message that Big Daddy will always clean up your crap.

A severe economic contraction is unavoidable at this point. All we’re doing with these bailouts is flushing money down the toilets and exacerbating the problems. And I don’t see the proponents of the plan displaying much economic acumen. Instead, they’re relegated to running around screaming that “the government must do something”. Forgive me if I see that as a bug, not a feature.

Bailout naysayers, explain to me again why we shouldn’t be doing what we can to forestall a systemic collapse by injecting huge amounts of capital into the market.

Because the “capital” isn’t real which is how we got here in the first place. The C.R.O.’s that are bankrupting many of these companies basically produced illusionary assets for these companies, the ever escalating housing prices were artificially boosted by imaginary worth. Now a federal government with no no real money of it’s own will print up money backed by faith in the country to artificially give value to valueless companies that cannot stay afloat themselves, like auto companies.

For this to work the entire world has to play along, which they did when American consumerism drove their economies. Once we start spending less as we save and our taxes increase why would China continue loaning us money. When they stop what exactly happens?

Some people need to fail so the rest of us don’t. My wife and I save our money and have been screwed by low interest rates. But once the house of cards this economy was comes down we and millions of people like us could weather the storm unless we are on the hook to keep GM alive with extra taxes. The bailout spreads the misery to every single one of us, no bailout effects people who got themselves into trouble.

Your post is ignorant on so many levels it’s hard to figure out where to start.

highhopes on November 25, 2008 at 9:49 AM

Have you a mirror in your house? If so, you might want to use it before you post again.

Nice analogy, but an imprecise one.

It’s more like giving a man who has internal hemmoraging going on. Yes, you need to give him a blood transfusion to keep him alive.

But if you don’t fix the root cause, he’ll still bleed to death. And at some point, the Chinese and OPEC nations will stop lending us money.

What happens then?

However, now that we own Citigroup, it should be chopped up into sellable pieces, and the sold to interested buyers.

So unless and until some of these people can come up with a better plan, maybe they should ease up a little on the moral outrage.

Terrye on November 25, 2008 at 6:48 AM

Your post is ignorant on so many levels it’s hard to figure out where to start.

First off, Cavuto is a reporter not a politician. Public policy isn’t part of his job.

Secondly, McCain was NOT the lone voice in the wilderness warning of impending doom. That little bit of propaganda came out cranky old bastard’s recent campaign.

Finally, how in the hell do you know what Cavuto is worth and how much he hates the little people? That’s nothing but your perception and you have nothing to back it up but your own ignorance!!!

Maybe I’m wrong. Bailout naysayers, explain to me again why we shouldn’t be doing what we can to forestall a systemic collapse by injecting huge amounts of capital into the market.

The Irish in me says I should answer this with a question.

What makes this different from the Robert Mugabe school of economics?

If we just print more money, we can pay off our debts. Oh, and make a single square of toilet paper more valuable than the U.S. Dollar.

Bailout naysayers, explain to me again why we shouldn’t be doing what we can to forestall a systemic collapse by injecting huge amounts of capital into the market.

That infusion capital comes from the present economy through T-bills and from the future economy by way of inflation. Prove to me that the price of “bailouts” is less than a systemic failure.

The economy is thre legged – supply, demand and finance. I’m not against propping up one leg, but holding all three is akin to holding yourself up in a swing by the chains, thinking you can take your feet off the ground.

We were first going to “fix” the credit crisis. OK. But now, for that to work, we have to bail out the producers (automobiles, and maybe others) and debt-riddles consumers (economic stimulus packages). We’re attempting to make an economy out of nothing.

If people are buying less, the supply side should manufacture less and the financial side should finance less purchases and fewer investments. This is not a point in our history where increased investment will usher in an economic recovery. This is a pure supply-demand issue with debt loads being a heavy burden regardless of whose shoulders are burdened by that debt, government or business.

but if you’re using hoses on a fire hoping to put it out, you’ve at least got a chance.

This naysayer thinks it’s important to point out that the hose is not coming from the fire hydrant but from the fuel pump.

Rejiggered capitalism with the Government pulling the strings has never worked and will always fall prey to the law of unintended side-effects.

My pea brain thinks that we stopped producing wealth when our manufacturing base bailed out of America for cheap foreign labor.

Didn’t the Second World War pull us out of the last depression? Hmmm.

No.

if only we could eat the paper the Treasury is printing…

The only people I remember showing any real concern about the impending collapse of financial markets was McCain in 2005 when he tried to reform the system, and Bush in 2003 and several times afterward when he tried to move Fannie Mae to Treasury to clean up its books.And how much support did they get from the let them eat cake people?

Zip. Nada. Zilch. Now if they had somehow been able to tie it all up with ties to Harriet Miers or Dubai or Mexico, a lot of these guys might have given a rat’s behind. Otherwise they had nothing to say on the subject.

And Cavuto is a pretty rich guy himself. He might not care what happens to the rest of us, but if people like Cavuto have their way a lot of American taxpayers are going to suffer. They forget that part. There is something worse than paying income taxes, it is not having the income to pay the taxes on.

So unless and until some of these people can come up with a better plan, maybe they should ease up a little on the moral outrage.

The politicians suggesting we just keep hurling money at this problem either haven’t a clue about economics (or that little technicality called the Constitution), or are willfully denying the cause of the problem (or both). The last thing they should have is a fire hose in their hands.

Sounds like someone has OVERdosed on Kool-Aid.

I mean, yea, sure, I may not have been posting enough. And yea, my recent posts may be convoluted and my research may be lacking. But if I go under… there wont be any college conservatives left.

All you need to do is convert the front page of Hot Air to redirect everyone to thecollegepolitico.com and the world won’t collapse in on itself.
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Well… that is until next time when I’m gonna need hotair.com and michellemalkin.com to bail me out because I learned absolutely nothing from this. And your decision to artificially prop me up will, inevitably, lead to a far greater down fall for everyone in the end.

And in case you’re sitting there thinking “they have definitely learned their lesson” here’s a fresh tip: Paulson is seeking to end market readjustment and make credit easier to get