posted on Sep, 27 2008 @ 03:39 PM
Wow, thanks for all the discussion on this. It would take me all day to respond to everyone individually, so I'll just address everything
Why am I saying we need government interference, and why is that consistent as a libertarian?
We do not live in a free market, and we have not lived in one since the Great Depression. Government engineered all of our current problems, and it
forced banks into the situation we have today. Corporations did not agree with the Community Reinvestment Act - if they did, the government would not
have to force them to comply through accusations of redlining and adverse regulation.
So what we have is a problem that government created, in a market that is no longer free. There are two options. I only talked about what I thought
was most likely instead of what I would most likely prefer:
(1) Get out of the market interference entirely. This is my preference, and I think would be the preference of most on ATS. It is not the role of
government to cause companies to fail by crafting stupid policy and then forcing business to follow that policy - even when it doing so causes
business to fail. Government can and should return us to a free market devoid of government intervention. In such a case, I would find it acceptable
to let these companies fail as a sacrifice and a reminder to the total stupidity that occurs when government attempts to intervene in the markets.
This would mean ALL GOVERNMENT INTERFERENCE WOULD CEASE. No more government sponsored entities ready to guarantee bad loans, but ALSO no more FDIC
insurance, student subsidized loans/PELL grants, or any other interference in the market.
The problem is that why people are screaming about this "bailout" (which is not really a bailout but is founded in populism, as the OP described),
they absolutely love their FDIC insurance, interest free student loans, and "free "government money like PELL grants. We cannot selectively decide
to remove government interference. Its all or nothing. The problem is, practically speaking, the population will not go for a total withdraw of
government intervention because they enjoy the benefits of such intervention.
2) Since, practically speaking, (1) is not going to happen - the choice is to do this plan or not. I don't really support the plan, but at the same
time, if government refuses to stop interfering and causing chaos in the markets than what exactly can we do? Government must be held accountable for
its actions, and it must try fix the problems it created. Doing nothing is the moral equivalent of giving government the license to create disasters
and then turn its back on the disasters it creates and not even having to consider trying to fix it.
Yes, government intervention will create problems. The question is this: what is the total cost of allowing government intervention, versus no
government intervention. That total cost includes everything, like for example the ripple effect from banking failures on the entire economy that harm
every citizen. It also includes the costs of the bail out were it to take place, the probability of its success and actual total cost in taxpayer
When economists have crunched the total economic impact of either option, doing nothing costs far more than doing something. That does not mean doing
something is right, it is simply the lesser evil because government refuses to do what IS right, which is getting out of the market. Its not going to
be problem free - everything the government touches causes problems - but the problems created by fixing the government's stupidity in this case
outweighs the only other alternative being considered, which is doing nothing.
We live in a globalized economy where all the sectors are interconnected. One firm, if its large enough, causes pain to every other firm - which they
all pass on to the consumer. Letting corporations fail when government caused the failure does not somehow contain the problems to the failed
institutions. The magnitude of those problems will spread to everyone. Were the government committed to never interfering in the market again - as it
should not - you could consider those problems a final sacrifice to government stupidity. But thats not going to happen. In our economy the success or
failures of large businesses are enjoyed by all through secondary and tertiary market impacts. Part of this is the interconnectedness provided by
government regulation. Until we remove that regulation, it will continue.
Evidence of the populism pushed by the media can be seen in this thread
As stated in the OP, the hatred for corporations has been pushed by the media as part of their populism narrative, and you can see it even in this
thread. Quite a few posters completely ignored the role of government and instead decided to post paragraph after paragraph about how evil
corporations were responsible for all this.
That is part of the lie government is telling you. Government wants you to hate the corporations, because it shifts focus off them. They want you to
get mad at them, and place the blame on them. But its not what happened. Government is responsible for this. Government regulation is what placed
these corporations where they are at, and your hating the wrong entity.
Businesses exist for two purposes: profit AND self-preservation. The two concepts go hand and hand - a business that goes out of business is no longer
a good business, regardless of the profits it made previously. In a free market, without government interference, businesses would have no
incentive to offer subprime mortgages in the large quantities they did, because the big profit was offset by large risk of losing all of their
investment. It is only because government changed how risk/reward was calculated by their policy decision to offer loans to people who could not
afford them, that banks began offering mortgages like this en masse. Government set up a system that artificially decreased risk while not decreasing
profit, while concurrently threatening everyone to offer subprime loans or face the consequences of adverse regulation.
Had the government not intervened, businesses would not have offered subprime mortgages in the large numbers that they did because it would not
make sense either in terms of profit or self-preservation. Then, the resulting problems of such loans would not have causes the domino effect that
leads to the problems we have today.
[edit on 27-9-2008 by LowLevelMason]