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Tuesday, August 11, 2009

Once In A Lifetime

And you may ask yourself
What is that beautiful house?
And you may ask yourself
Where does that highway go?
And you may ask yourself
Am I right?...Am I wrong?
And you may tell yourself
Talking Heads, "Once In A Lifetime"

With friends like these, who needs enemies?

"So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government."

Thus begins nobel prize winner Paul Krugman's column in the New York Times. In one statement, he asserts 3 "facts" that are not facts at all:
We aren't going to have a second Great Depression
-We have been "saved"
-What saved us was "Big Government".

He goes on to correctly state that while the statistics are "less bad", they are still bad. Then makes this assertion:
"For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss."

Was it the economy that was on the abyss, or was it the financial system? They are two different things.

The financial panic of 2008 was caused by one thing: Overleveraged banks that took heavy losses on bad investments. This would not have happened had the financial sector not successfully lobbied "Big Government" to do away with the regulations preventing over leverage. And if those bets go bad? "Big Government" will save the day.

Krugman seems to be either ignorant or badly misinformed when it comes to history. He asserts that in the 1930's, there was very little intervention by the government:

"The point is that this time, unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed. And that’s another reason we’re not living through Great Depression II. "

Good grief, he really believes the government was "hands off" during the Great Depression? The New Deal, confiscation of gold, bank holidays, devaluing the dollar, Hoover's attempts to keep wages high, and too many other interventions to list here, this is "hands off"? I mentioned once the Presidency of Warren G. Harding, who took office in 1921, right in the midlle of a very nasty depression. He refused to intervene, sayiing that it is not government's job to prop up Wall Street, and is almost universally hated by modern day economists.Did the economy collapse? Yes, very quickly, then began an immediate and very strong recovery. It was nearly two decades (and a very destructive war) before we recovered from all the interventions during the 1930s.

"All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution."

A statement so repugnant it does not deserve a response.

When this is over, and the landscape looks very different than what is looks like now, when unnaccountable "czars" are running every aspect of our lives, when our rights have been suspended, when they tell us what kind of car to drive, what klind of house to live in, whether or not we deserve to have an illness treated, when the banks have taken over Congress for good, we will look back and say to ourselves, "My God, what have we done?"

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