How to Ruin the U.S. Economy
Ben Stein on How to Ruin the U.S. Economy:
1) Have a fiscal policy that creates immense deficits in good times and bad, burdening America’s posterity with staggering burdens of repaying the debt.
Motley Fool David Gardner has a contrary view. I’m undecided on the merits of his argument, or whether they apply equally to the trade and budget deficits.
2) Eliminate regulation of Wall Street and/or fail to enforce the regulations that already exist, instead trusting Wall Street and other money managers and speculators to manage other people’s money with few or no regulations and little oversight.
No argument here.
4) Have Congress mandate that banks and other financial entities lend money to persons they know in advance to have poor credit ratings or none at all.
Did they do that?
5) Allow investment banks, insurers, and banks to bet their entire net worth and then some on the premise that borrowers known to be improvident will in fact repay those loans.
How does this differ from 2?
6) Allow the creation of large betting pools called “hedge funds” that can move markets and control the outcome of trading, thus taking a forum for savings and retirement for families and making it into a rigged casino game that exists primarily to fleece suckers like ordinary working men and women.
The hedge funds are doing rather badly at the moment, being forced to sell into weakness. I’ll be frank that I don’t know exactly how hedge funds work or what their involvement in the fiasco has been. I should make a point of finding out.
9) Scare Americans into putting up $750 billion of their hard earned money to bail out the billionaires and their friends who created the market for loans to poor credit risks (The “subprime” market) and the unbelievably large side bets on those loans, promising that such a bailout would save the retirement savings of Americans, then allow the immense hedge funds to make the market crater immediately afterwards.
I have a problem with this “bailout” rhetoric. The word is being used to describe several quite different interventions by Government. There is, for example, a world of difference between extending central bank credit facilities to cash-strapped banks, and purchacing “toxic” debt from them. The former “bails out” depositers, the latter, shareholders. Neither group are necessarily billionaires.