the midst of highly unpopular bailouts of Wall Street, many
justifications have been given about why Washington feels the need to
act. Some claim that capitalism and the free market are to blame, but
we have not had capitalism. If you compare our financial capital to
our aggregate debt, this would be obvious. In the same way, we have
not had a truly free market. The monetary
manipulations of the Federal Reserve, a complex tax code, the many
“oversight” agencies and their mountains of regulations show that we
are far removed from a free market economy.
Another unsatisfying argument is that certain entities have to be bailed out because of their economic importance. Supposedly, some entities can be so big, so important, that no matter what they do, citizens must perpetually sustain them.
limited government has a basic duty to defend against force and fraud.
Some argue that force is somehow permissible just because the entity
engaging in it is "economically significant." But one could use this
reasoning to prop up slavery. It could be deemed
unfortunate but economically beneficial, and indeed these arguments
have been used historically to deprive people of their liberty. But
slavery should never be tolerated regardless of any economic benefit,
just as systemic fraud should not be tolerated. Some banks on Wall
Street should fail. Fannie and Freddie should fail. They
are perpetrating fraud against the people. Yet, government insists on
rewarding behavior which should instead be investigated, prosecuted,
has been much evidence of fraud at Fannie and Freddie, but when one
man, Franklin Raines, defrauded the organization out of millions of
dollars through illegal accounting tricks, and ends up agreeing to pay
back just a fraction, one could argue that it was well worth it to
him. Fannie went on to only get more deeply involved in subprime
mortgages after this investigation. Several organizations are
suffering right now precisely because the free market is trying to work
and punish mismanagement, if only the government would get out of the
way and let it. Perhaps banks are not lending to each other because
they know that complicated accounting standards, created in part to
defend against confiscatory tax policy, enables false fiscal pictures
to be presented, which erodes trust.
But this is
not a time for the government to step in with more burdensome and
complicated regulations, or more foolish liquidity injections. This is a time for some banks to fail, and remaining banks to deal honestly and transparently once again. More regulations will only result in more lies.
as economies that turned away from slave labor had a transition period,
our economy would transition as well, but in the end, if we turned to
honest, sound money and a truly free market, we would end up with a
more just society, founded on truthfulness and decency, not subject to
the violence of force or the whims of fraudulent institutions. Unfortunately,
it seems we are headed into a new era of slavery, however, where all
taxpayers will be forced to render to the Fed and big banking interests
the bulk of the fruits of their labor, possibly through higher taxes
but definitely through the eroding force of inflation.