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Years from now conspiracy theorists will no doubt contend that the historic $700 billion 2008 bailout package came about because the Federal Reserve and U.S. Treasury wanted to further cement their control over the U.S. economy and government. Focusing on Bernanke and Paulson’s apocalyptic words leading up to the bailout vote, not to mention some anti-Fed writings from Thomas Jefferson, conspiracy theorists will note how powerful men scared Congressmen into adopting their plan, how the rules of the financial game were changed to help Wall Street, and how the American public, once again, saw their hard earned dollars stolen from them. Needless to say, what the conspiracy theorists will be doing is giving Bernanke and Paulson far more credit than they deserve.
The reality is that over the last 13-months Bernanke and Paulson have been bumbling around throwing every conceivable bailout weapon in their arsenal at the financial crisis, and each attack has proven to be a larger failure than the one before. Exhausted and privy to information that no doubt foretold of an unfolding meltdown in the financial system, Paulson released a 3-page bailout idea he desperately hoped would help calm things down. Little did Paulson realize the melee that would ensue…
As imperfect as the revised bailout package is (how in the world can anyone conclude that tax cuts a prudent course of action for America?), it is nonetheless required. The global financial markets are at risk of complete seizure, complete collapse, and the U.S. will be completely to blame if this occurs. And while the bailout package itself doesn’t guarantee averting seizure and collapse, it is nonetheless the only weapon currently armed and aimed at a marketplace in dire need of immediate assistance. Scrap the bailout now and attempt to start over and the defaults piling up by Monday morning may make deciphering what or whom to bailout next to impossible.
All unbacked fiat money eventually fails, the Austrians were/are right, and if Ron Paul was in charge things would be very different. No disagreement here. But this doesn’t mean that decades of malinvestments need to be corrected in a matter of hours.
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