Confusion over the continuing impact of the federal government’s “bailouts for everyone but taxpayers” program continues. Tyler Cowen over at Marginal Revolution pontificates:
In my view the real bailout is the existence of the FDIC which, like it or not, is not a commitment we cannot walk away from. Had nothing been done, the required FDIC bailout of bank depositors would have been enormous, given frozen interbank credit markets plus a certain level of panic. So in reality I favored a smaller bailout than did most of the “purer” libertarians, although MR commentators rarely frame it as such.
A combination of bank recapitalization (which I was first skeptical about and thus have changed my mind on) and a greater emphasis on an “identify and isolate the bad banks” approach was the right bailout to do, not to allocate $700 billion for TARP. I agree with everything Arnold writes in this post, but still in my view “doing nothing” wasn’t really an option, again if only because of the preexisting FDIC commitment, not to mention the disaster associated with a plummeting money supply.
Now that financial confidence is partially restored, we can hope that the Obama administration redoes the deal. But the money is being committed rapidly and the demands of the interest groups are piling up, so I hardly expect much ex post improvement.
Here is what I think about the bailout. The people responsible are criminals and they should be locked up. They should be stripped of all offices and titles and possibly tarred and feathered. We are talking about thieves.
The money is all made up anyhow, but these people are cheapening our lives and the lives of future generations by spewing out devaluments that will cause massive inflation in coming months and years. A business that cannot make a profit should be allowed to fail – this is the natural course of things. When you don’t allow that business to fail and go even one step further by rewarding the people who are responsible you are setting up a wider failure.
That’s what is most likely to happen in the next decade – a national and possible global economic crisis unlike anything that has happened in my lifetime. Sure, you could label me as a paranoid doom and gloom type, and I expect that some of you will. No matter how you label me, your government is still robbing you and refusing to act in a responsible manner. You should be worried. For every action, there is an equal and opposite reaction.
A tsunami doesn’t do any damage until it hits the shore. You might want to get to higher ground if you can.