Mises Daily Articles
Why the Crisis Hasn't Ended
Why hasn't the crisis ended as yet? It should have been all over with and forgotten by the first of last February. If so, the whole troubled world would have already issued a huge sigh of relief.
There would be no more impatient dilly-dallying on the part of investors, waiting for the government to decide who are going to be the recipients of the new trillion in handouts, and causing daily upsurges and downfalls in the unsettled Dow.
Assets would have fallen to their normal worth, the present discounted value of their future returns. No need to wrestle with mark-to-market account. No need for Sarbanes and Company to meddle and make newer and stiffer regulations. No need for new super controls.
Mr. Geithner wouldn't be stressed to invent new ways to cajole folks to contribute to the buyout of overvalued securitized junk. Nor would there be the least excuse for more G20s to be needled into bastardizing their overbloated monetary systems. Mr. Bernanke would have stopped acting the role of Santa Claus, distributing the government-invented moonshine to the denuded former greats of Wall Street.
The corpses of the erstwhile automobile empires would have breathed their last, their good assets now transferred to the hands of newer more responsible entrepreneurs. The prior executives would be moving over to Cheapside and brushing off their overalls, perhaps in line to join a new remodeled UAW, in search for some job where they couldn't mess things up any more.
The bankruptcy courts would be finishing up their exequies for the deceased former titans of the packaged debentures. The tombstones of the new economic cemetery would display the once great names of Fannie and Freddie, of Citi, of AIG, of Merrill Lynch, along with the hapless Lehman Brothers, interred several months before. And so many more financial cadavers would have been laid to rest, their memory duly to be forgotten, as perpetrators of a fake capitalism now buried and forgotten. Perhaps the cemetery could be economically located in an enlarged churchyard at Trinity Church at the head of Wall Street, to occupy the now excess real estate in the area and be a perpetual reminder that treason in the capitalist world will always be avenged.
Washington would finally be silenced, even if the Fed were not yet duly junked in the process, and the Treasury's overbearance would be bridled as the rest of the uneconomic trash was being flushed out of the system.
The Case Shiller indices would have completed their downfall to a level that future homeowners could devote the traditional 30 percent of their money incomes towards purchasing their long-wanted love nests. New families would be rushing in to fill the vacant home sites.
True capitalism would be alive again; employment would be rising up to normal. The waiting lines would no longer be for unemployment checks, but rather to be first to enroll in the new jobs daily being created. The new savings of the American people, shocked by the catastrophe, would now offset the strangling of the market rate of interest on the part of the monetary gymnasts, and would reflect the new flow of healthy capital ready to be invested in solid new ventures. The Dow would be healthily aglow with daily increments. All the bubbles would have burst away.
Happy days would be here again! We'd once again be rolling in prosperity!
But why hasn't this happened?
Why is the world still in acute misery, even expecting the worst yet to come?
All that would have been necessary to halt the continuation of the present freefall would have been that on January 20th last, precisely at noon, the newly inaugurated president would have announced to the American people (even before the triumphant parade and the orgies that followed) that his program was NO, but NO. If he had said,
The inflationary monster TARP is out. No more bloating up the money supply and the budget with inflationary inanities. No more bailouts. No more rescues. No more trillions. Those who have received any bit of largesse will promptly return their ill-gotten loot to the Treasury. The bankruptcy courts are now authorized to get on with their interments at once. Nobody is too big not to be interred.
With this no-but-no on the part of the new president, the market would have immediately stood up to perform its traditional job. All bloated prices would have immediately crash-dived down to some normal sustainable level. All talk of newer regulatory agencies would end. Instead of a great inaugural parade, we would have witnessed the opening of a new capitalist cemetery, the funeral cortege bearing the titles of the fallen titans of yesteryear.
By the first of February, at the latest, everything would have been again on the upsurge. The second spring of capitalism would be in bloom all over the landscape and President Obama would proudly be presiding over the greatest boom ever in American economic history.
But, unfortunately, sad to state, the new president never understood the warnings of Ludwig Von Mises, who told us again and again that the market is the only institution that makes and rectifies prices, that money must not be multiplied, and that the interest rate is naturally and untouchably sacred.
On that fateful inauguration day, Obama said YES but YES to all the imbecilities being proposed, by President Bush before him, by the Reids and Pelosis in the Congress, by Paulson, Bernanke, and Geithner, by the great Nobels and the government-adulating economists. Long live Maynard Keynes and the national economic medical corps that will monetize and fiscalize us to perdition. It was the market that was laid to rest in favor of all the new boondoggling experiments that have all but brought America to ruin.
We have to bemoan the fact that the new exponential influx of fake money will make prices surge to an unprecedented infinitum. They will soar; perhaps by year's end, an ordinary egg will cost one hundred or so debased dollars.
We should rue that day, the 20th of January, when the switch to prosperity could have been turned on, the light of freedom would have again begun to shine, and the economy rerouted upwards. But instead, we applauded the death knell of both liberty and prosperity and issued in a new chaos, far greater than that of the Roosevelt era, one that might last for untold years and years to come. We have rejected the enrichments of a healthy capitalism in favor of an impoverishing government-run fascism. We have resurrected another great depression — and made America the crisis leader of the world, instead of, what it once was, the beacon for world prosperity.