September 16, 2008 | In Business, Politics |
A little over a week after the U.S. government bailed out mortgage giants, Fannie Mae and Freedie Mac, intervention has marred the marketplace yet again. This time it’s AIG, a major insurance company, that’s received an $85 billion lifeline from the Federal Reserve.
You needn’t be an expert in high finance to recognize that this is a bad deal for the American people. The U.S. government is already more than $9 trillion in debt, and now its buying an 80% share in a company that can’t keep its own head above water. The only way to pay for such an “investment” is to borrow more money (primarily from foreign sources), or to print more money out of thin air, further reducing the value of the U.S. dollar and hitting citizens even harder with the inflation tax.
And yet, Wall Street is grateful to its federal government for this seemingly “free” cash infusion.
“Thank God,” exclaimed Loomis, Sayles & Co bond manager, Daniel Fuss. “AIG is interwoven with so many people and touches many companies around the world. This is a huge relief to many parts of the financial markets.”
But government is not God. Government does not create or produce resources or capital. In fact, it must fork out taxpayers’ money to pay for the paper on which U.S. Dollars are printed.
Every time the government issues a corporate welfare cheque or bails out a struggling company, it is only delaying the inevitable economic correction. Borrowing money on behalf the American people so as to bail out corporations does not solve the problem, it only collectivizes it, punishing those who make shrewd business decisions.
Businesses that make greedy and stupid business decisions should pay for those decisions and be purged from the marketplace, rather than expecting taxpayers (especially taxpayers in future generations) to shoulder the debt.
John Maynard Keynes’ economic theories didn’t prevent the second half of the Great Depression. They only delayed it.
