Tuesday, January 26, 2010

Government stimulus failure

If the government was a doctor and you went to it with a broken arm, it would break the arm again then boast about all the good your medical spending will do for the economy.

In the case of the housing bubble, after it broke the government set about doing everything in its power to bring it back. "Rather than allow prices to fall so that the housing market returns to a sustainable level," Ron Paul writes, "the government does everything in its power to try to keep housing prices elevated."

Did underconsumption burst the housing bubble? No. The collapse was caused by "a malinvestment of resources into sectors of the economy that were unsustainable without easy credit. The rise in housing prices was not, in fact, indicative of the new normal but rather an indicator that something was seriously wrong."

Pursuing the same flawed policies in double-time will only hasten the empire's downfall. And when that happens, blame will be laid squarely on the free market, something we've never had and have been getting further away from since the Continental Congress decided to pay for the Revolution with fiat paper money.

As cynics will sometimes say, when a crisis hits, blame the innocent and promote the guilty. This is in fact what is being done.

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