Wednesday, October 15, 2008

When the Government Intervenes in the Economy: Unmerciful Disaster Follows Fast and Follows Faster

Until now I haven't written about the sudden, precipitous descent into socialism that America is undergoing. But with every failed attempt to "stabilize" the economy, the government has pushed further and further into the mire of socialism, until one day I woke up and found the financial system--which was already strangled by regulations--nationalized. These actions are to be "limited and temporary." Naturally. If there is one thing government is good at, it is maintaining power, once it has acquired it.

According to an article on
banks are being coerced into accepting the government's "limited and temporary" assistance:

The opposition [to the plan] suggested that the government may have to continue to press banks to participate in the plan. The first $125 billion will be divided among nine of the largest U.S. banks, which were forced to accept the investment to help destigmatize the program in the eyes of other institutions.
[Emphasis added.]

Here we see the government openly admitting the immorality of this scheme, such that they must force banks to pretend to like it, in order to get other banks to like it. Faking reality, in broad daylight.

"We will encourage institutions to apply," said John C. Dugan, the comptroller of the currency, who oversees most of the nation's largest banks.

In return for its investments, Treasury will receive preferred shares of bank stock that pay 5 percent interest for up to five years. After that, if the companies haven't repaid the government's initial investment, the interest rate goes up to 9 percent.

Participating banks cannot increase the dividends they pay to shareholders without federal permission, they must accept some limitations on compensation for their executives, and Paulson said the government would press companies to limit mortgage foreclosures.
[Emphasis added.]

As if government interference with the mortgage process hadn't been disastrous enough, already. And the friendly element of government "encouragement." How does the government encourage anything? Persuasion? Or force? Telling banks what dividends to pay, what salaries to pay, not to foreclose mortgages: it all adds up to socialism, of the fascist variety.

Also yesterday, the Federal Deposit Insurance Corp. said it will create, essentially, two new insurance programs.

The basic insurance program still guarantees all bank deposits up to $250,000. A new supplemental program guarantees all deposits above $250,000 in accounts that don't pay interest. The program basically covers accounts used by small businesses.

Some European governments had already guaranteed deposits, creating a competitive advantage for banks in those countries. Banking regulators also were concerned that small businesses were transferring deposits from community banks to larger institutions perceived as less likely to fail. Finally, small businesses contributed to the failure of Washington Mutual and the collapse of Wachovia by pulling uninsured deposits from those banks.
[Emphasis added.]

This is a textbook example of the government causing problems, and then blaming them on the free market. What caused the failure of Washingtonn Mutual and Wachovia was not small businesses pulling out their deposits. It was the government's decision to insure other banks that ruined the uninsured banks. How can any business compete with the limitless power and money (the printing press) of the federal government? Either toe the party line, i.e., take government protection (kind of how the mafia works, isn't it?), or try to compete with the omnipotent state. It can't be done.

If this trend continues, how will America be better than any other country? How can I support any military action the US might take, when we aren't any better than whatever country we might do battle with? That is how desperately bad these measures are, if they stick.

If they don't stick, they will merely have been a colossal injustice to all the taxpayers who were forced to bailout all the banks and other companies that failed due partly to their own incompetence, but mainly due to government interventions in the economy.

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