THE Treasury Department is now thinking about using some of the $700 billion it has been given to rescue Wall Street to buy ownership stakes in American banks. The idea is that banking is so central to the American economy that the government is justified in virtually nationalizing much of the industry in order to save us from a potential depression.
There are two faulty assumptions here. First, saving America’s banks won’t save the economy. And second, the economy doesn’t really need saving. It’s stronger than we think...
The stock market crashed in 1987 — in 1929 proportions — but there was no decade-long Depression that followed. Economic research has repeatedly demonstrated that financial-sector gyrations like these are hardly connected to non-financial sector performance. Studies have shown that economic growth cannot be forecast by the expected rates of return on government bonds, stocks or savings deposits...
So, if you are not employed by the financial industry (94 percent of you are not), don’t worry. The current unemployment rate of 6.1 percent is not alarming, and we should reconsider whether it is worth it to spend $700 billion to bring it down to 5.9 percent.
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My thoughts: Bubbles have been created. Liquidations must be made. The economy (based on GDP) is doing ok. The gloomy and doom is not coming so much from how the economy is currently performing, it is going from fear and uncertainty. Fear of how bad the housing adjustments will be, fear of governmental takeover of the entire financial sector. Uncertainty of how long Congress will try to fix the unfixable by throwing money at it. The move towards socialism and greater government intervention in the economy is deeply disturbing.
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