As if he were just speaking yesterday, Nobel Prize-winning economist Frederick Hayek has some advice for those "experts" -- and for all those who are giving them their head:
Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. ... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection--a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end. ...It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.We must not forget that, for the last six or eight years, monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.Time to abandon the illusion that inflating the currency to effect price stability can lead to anything but disaster; and time, now urgent, to stop propping up failure so the recovery itself can get going.
He's right you know, and it will work just as well as every welfare programme, won't it. Trouble is, failure on this front means failure of the very financial system on which we all rely for our prosperity.
"America is more communist than China right now," declares maverick investor Jim Rogers. "This is welfare for the rich."
UPDATE 1: Notes Mark Thornton, former Assistant Superintendent of Banking in the state of Alabama,
The financial panic that has engulfed the planet is considered by politicians, bureaucrats, journalists and mainstream economists to be a problem of regulation. I find myself in the uncomfortable position of having to agree with this gang of opinion makers, but it is not a problem of insufficient regulation, inadequate regulation, unenforced regulation, out-dated regulation, or anything of the kind.Contrary to the "solutions" put forward by McCain, Obama and Uncle Tom Cobley and all, more government regulation is not the solution.
The problem is with regulation itself. With regard to financial markets, government regulates everything...
Government regulation is the problem... What the American public needs to be told [and all the "experts" need to be told] is that the crisis is actually the market trying to reestablish some rational order in the economy beset by regulation. It is the market that is tearing down these mega financial firms and disposing of the crazy financial products that they created. It is the market that is punishing those who grew rich on paper money schemes, derivatives, sub prime mortgages, and hedge funds. These are the same people the taxpayer is being asked to bail out--Wall Street fat cats.
What the American public needs to hear [and all the "experts" need to be told] is that regulation is the problem and that the "unfettered market" is the only way to break out of the business cycle.
UPDATE 2: Speaking on the bailouts to Time magazine, economist and executive director of the Ayn Rand center Yaron Brook said, "It's a complete disaster. Its a form of national socialism of the financial markets...This is socialism 101."
"The unfree market has failed," he says. "It’s time for a truly free market.”
Brook doesn't blame speculators, traders or financiers for the market's near-collapse, but instead blames government for having overregulated the markets in the first place. The business leaders bailed out by government this week "are victims," he said, "and the government set it up." Washington underreacted to previous crisis, let Fannie Mae and Freddie Mac spin wildly out of control as quasi-government agencies while taxpayers piled up
unsecured debt in their names. The crisis, he added, was "really fed throughout by government policies."