When the government tries to "fix" the economy, we lose. Politicians' cronies often win. In this week's syndicated column, I take a look at crony capitalism (crapitalism) and "The Great Deformation"--which is what former Reagan budget director, David Stockman, calls what the Fed and the Treasury has done to our economy.
He says both major political parties failed ordinary Americans when the housing bubble burst, and they rushed to bail out cronies at big banks. Government continues to threaten our future by printing gobs of money and guaranteeing trillions in loans to banks, homeowners, students and other politically connected groups.
The political class claims the economy would have been destroyed in 2008 without a bailout of the big banks. Stockman says that's a myth: "The Main Street banks were not going to go into a huge retail bank run ... and (Fed chairman Ben) Bernanke is totally wrong when he says we were on the verge of Depression 2.0. We weren't close. We would have worked our way through it. We've done it many times in history."
Worked our way through it? Without the bailouts, there might have been a bigger stock market drop, and more businesses would have closed! But Stockman says, so what? It would have been worth it. And I agree with him.
Today, taxpayers would be $1 trillion richer and not on the hook for trillions in loan guarantees. Prices would now have found a natural floor, business would be eagerly hiring again, and America would be free of moral hazards like "too big to fail" banks.
The rest of my syndicated column here.