October 6, 2008 | In Business, Politics | No Comments
George W. Bush bribed investors throughout America (and the world) last week with a $700 billion+ plan to buy up bad mortgage assets and put global markets back on the right track.
American taxpayers were skeptical, but Congress finally caved in to partisan pressures on Friday and passed the bailout bill. Today’s result suggests that the main argument used to justify such a move (a return to market stability) might have convinced Congress, but has failed to convince the market itself. (The Dow Jones Industrial Average closed almost 370 points lower today.)
The reality is that investors are smarter than politicians. They understand free market economics, and they understand that big government can’t solve economic problems.
I expect that many investors were hoping for a post-bailout surge in the markets, allowing them to regain lost ground, sell out quietly, and break even on their investments. But that’s not how markets work. So long as intelligent investors are playing the market, its value will reflect all information that is known by said investors.
Congressman Ron Paul argued on Friday that the bailout plan would only prolong the upcoming recession, while continuing to overextend an unsustainable credit-based economy at the expense of taxpayers. Paul blames the Federal Reserve and its manipulation of interest rates for the current crisis, and believes that the only way out of this mess is a painful free market correction (the sooner the better)…
Today’s response to the bailout (by intelligent investors) only demonstrates that Ron Paul is right.
