Spring Break
Government Failure and Stockholm Syndrome
How we are addicted to that which afflicts us
Paul Yacoubian
Issue date: 2/4/09 Section: Opinion
Jim Cramer has been absolutely wrong on some things and absolutely right on others. While it may have been a lucky guess, he was unmistakably shaken when in 2007 he yelled in reference to the looming financial crisis, that "Bernanke has NO IDEA!". Ben Bernanke, Federal Reserve chairman, kept rates artificially low in order to stimulate the housing sector.
The concept of "irrational exuberance" as worded by former chairman Greenspan in reference to the tech-bubble has been used by the Federal Reserve to propel a dead economy with debt financing. Bernanke and the Federal Reserve borrowed money to keep interest rates artificially low in order to stimulate invariably bad investments. Now our government which caused much of the problems we are facing today, including outrageous deficits, is being called asked for help by taxpayers. In what amounted to maxing out the family credit cards, the government has outspent the ability of taxpayers to repay these debts and our country is spiraling downward. So what really brought us to this point?
Say you worked hard all of your life and saved wealth to be invested. Would you invest it with a rich man who has made money for himself by making smart decisions for others, which created employment opportunities for those in need of work? Or would you hand it out to people in need and possibly starving in order to solve their short-term problems and run out of money quickly? I would prefer to invest my money where I get the most benefit, but our government likes to cure effects but not causes.
The idea is that if we let the banks fail then we allow investors to realize that all of their investments are subject to 100% losses. This should make them more cautious when investing and make them more likely to conduct due diligence research before putting money with the financial "banksters". The more oversight there is for financial firms, including banks, the better off the entire economy is in a way that ensures sound decision making in a competitive environment. If I knew that my competitor was better than I at a specific task I would not want a handicap from the government in order to compete. I would appreciate the government allowing everyone to do what they do best. This theory of specialization ensures low costs to consumers at the best qualities.
The concept of "irrational exuberance" as worded by former chairman Greenspan in reference to the tech-bubble has been used by the Federal Reserve to propel a dead economy with debt financing. Bernanke and the Federal Reserve borrowed money to keep interest rates artificially low in order to stimulate invariably bad investments. Now our government which caused much of the problems we are facing today, including outrageous deficits, is being called asked for help by taxpayers. In what amounted to maxing out the family credit cards, the government has outspent the ability of taxpayers to repay these debts and our country is spiraling downward. So what really brought us to this point?
Say you worked hard all of your life and saved wealth to be invested. Would you invest it with a rich man who has made money for himself by making smart decisions for others, which created employment opportunities for those in need of work? Or would you hand it out to people in need and possibly starving in order to solve their short-term problems and run out of money quickly? I would prefer to invest my money where I get the most benefit, but our government likes to cure effects but not causes.
The idea is that if we let the banks fail then we allow investors to realize that all of their investments are subject to 100% losses. This should make them more cautious when investing and make them more likely to conduct due diligence research before putting money with the financial "banksters". The more oversight there is for financial firms, including banks, the better off the entire economy is in a way that ensures sound decision making in a competitive environment. If I knew that my competitor was better than I at a specific task I would not want a handicap from the government in order to compete. I would appreciate the government allowing everyone to do what they do best. This theory of specialization ensures low costs to consumers at the best qualities.
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