Defeat of the Bailout

Lew Rockwell on the Failed Bailout

In any case, no matter how you look at it, the defeat of the bill is a victory for freedom. The defeat of the power elite is essential for liberty to thrive. For the free market to function, we need the government/corporate cabal to lose its capacity to get its way in every area of life. They need to feel fear. They need to lose security. They need to have a sense of uncertainty as to whether their every wish is our command. The House defeat of the bailout is a magnificent rebuke in that sense.

But does it mean that the economy is going to tank and we will all suffer? On the contrary, it could mean that we can begin an economic recovery from the Fed-generated bubble that should have and would have burst years ago but for artificial props by the Fed. If the stock prices of these troubled institutions can fall to where they need to be, they can be taken over, and their assets used productively and traded by the market. Once this deleveraging takes place, we will be ready for a new round of economic growth...

More great things happened after the bailout failed. Commodity prices including oil fell dramatically. This is a magnificent thing. Right now, consumers are not threatened by the possible failure of another paper-addicted investment-banking house. Consumers are threatened by ever-higher prices for all goods. If we are in a recession, especially if it lasts and lasts, low prices are precisely what we need to start economic recovery again.

It is not entirely clear why prices fall. It could be the worldwide economic slowdown. It could be that the markets are beginning to doubt the capacity of the Fed to actually achieve the hyperinflation that it wants, since banks have become quite risk averse. In any case, we need ever-lower prices on all things, including gas and groceries – and, yes, houses. This is the basis for economic recovery.

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