Government spends trillions, carefully leaves problems intact

Government Leviathan rampaging

This is the highest profile person I have seen commenting on how the administration, while spending more money than all previous administrations combined, has done nothing to fix the problems, but has made sure to make the problems bigger:

Yesterday the Inspector General for the Troubled Asset Relief Program (SIGTARP) released theirQuarterly Report to Congress for the period ending 12/31/2009. The executive summary tells us all we need to know about their assessment of the TARP initiatives over the past year. This whole segment is a MUST READ (it’s not a pretty picture):

The substantial costs of TARP — in money, moral hazard effects on the market, and Government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or ten years’ time. It is hard to see how any of the fundamental problems in the system have been addressed to date.

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.
• To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.

• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.
• To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car

Big Brother chooses, you pay

Think about this trend we are seeing playing out. The ultimate causes of the Great Recession are that government wanted to be able to choose who gets what, and give goodies to people. They made a bunch of rule changes so their friends on Wall Street could do whatever they wanted. They didn't require that rating agencies do their jobs.

They even put a gun to banks heads and told them who they needed to give loans to, or else! By forcing banks, under threat of fines, jail, and closing their branches, to lend to people who couldn't afford loans and would have never been gifted them otherwise, government got to choose who got the goodies (houses the recipients couldn't afford) while banks had the risk stuffed down their throats. People were handed houses that would only cause them suffering and embarrassment later when they got foreclosed on, and government house fairies got to walk away clean. Oh, and we pay for the mess -- and pay for the mess on Wall Street too.


Why am I crying about this tomfoolery from the recent past? Well, it's still going on. Have you noticed that these same government "big brother knows best" types are still deciding which companies and industries get to live and which die? Coal must die. Wind farms must live. Goldman Sachs must live. Lehman Brothers must die. Some banks get unlimited cash. Others get none. Banks are all important. Investment banks are evil. Newspapers must live; talk radio must die. Labor unions must live, small businesses...eh, whatever.


Our federal government is in the process of taking over 71% of the economy (like old-school Europeans did before they learned better and fixed most of it). This is the era of vast market manipulation and the government gets to choose and distribute everything.


How's it working out for you? Not only is virtually every economic indicator still heading down or teetering on the edge, all those trillions disappeared with virtually no trace. Hundreds of billions are unaccounted for, and the Treasury and Fed are blocking legal efforts to find out where it went.

Here's my point. Governments have never been good at commanding and controlling economies before, choosing every winner and every loser, and staying ahead of the curve. Remember, these people who want to control every molecule of the economy had no idea one of the biggest crashes in history was coming. I knew! And I'm just...me. These are the people who feel confident they can micromanage every transaction? The people who run FEMA and the DMV and the Post Office? Seriously?

The track record of government bureaucrats doing this stuff is too humiliating to mention. I don't want to embarrass them. Watch how this pans out for the economy. It won't take long for the distortions and waste and fraud and inefficiencies to show up. Mark my words. Government micromanagement doesn't work and we will pay...and pay...and pay.


To read about how Ludwig von Mises destroyed the whole idea of command and control economies working out, just Google him and read about "the central planning problem" and "price discovery problem." It's tragicomic that some people still haven't caught on.

Economic guru finally says it

Here is an excerpt from Market Oracle:

By: Gary_North

Niall Ferguson is an academic hotshot. He is a professor at both Harvard University and the Harvard Business School. This is unique. He is both an economist and an historian. This is rare. He writes very well. He writes widely respected books and very readable articles.
“Of course, history offers more than just the lesson that financial accidents will happen. One of the most important historical truths is that the first draft of history – the version that gets written on the spot by journalists and other contemporaries – is nearly always wrong. So though superficially this crisis seems like a defeat for Smith, Hayek, and Friedman, and a victory for Marx, Keynes, and Polanyi, that might well turn out to be wrong. Far from having been caused by unregulated free markets, this crisis may have been caused by distortions of the market from ill-advised government actions: explicit and implicit guarantees to supersize banks, inappropriate empowerment of rating agencies, disastrously loose monetary policy, bad regulation of big insurers, systematic encouragement of reckless mortgage lending – not to mention distortions of currency markets by central bank intervention.”

Finally an economic guru puts it all together and says the obvious. Despite all the liberal blather about "capitalism failed," out here in the real world we see that massive government intervention was required to cause capitalism to fail in this way. Screwing with capitalism so much then blaming it is like filling up your Corolla's gas tank with maple syrup then complaining that Toyota's suck because your car won't even start. It's ridiculous. Ultimately, the world sees through the anticapitalist gibberish and follows the track record. In the last year 131 countries became more capitalist.

Capitalism isn't perfect, but it has clearly proven throughout its history that it is by far the best we have. If someone comes up with something better, let's take a look at it. For now the main alternatives are based on Marx, which in terms of results is not even funny to bring up.