This has been a bizarre year, bizarre in historic measure, and we’re still only in the third quarter.
For instance, the two men voted least likely by their parties just two years ago are vying for the White House, the Chicago Cubs are on the verge of making a run for the World Series, and the United States government has, in one fell swoop, become the world’s largest mortgage bank and the world’s biggest insurance company.
I’m not sure whether the government has federalized the financial services industry or Wall Street has privatized Washington.
To give you an idea of the fiscal insanity that’s taken place, I refer you to the following chart. It illustrates the explosion in the U.S. government’s debt obligation with the nationalization of Fannie Mae and Freddie Mac:
Net public sector debt ballooned from 44% to 83% of Gross Domestic Product overnight, putting the United States in the same league as the chronically dysfunctional economies of Italy and Japan.
Since the assumption of half the mortgage debt in the country by you, me, and the rest of us tax-paying shlubs, our elected officials decided to bail out AIG, the world’s largest insurance company. The thought of low-level bureaucrats processing claims is chilling.
But why stop there? General Motors and Ford are failing as Americans find themselves unable or unwilling to buy Detroit’s latest offerings. Carmakers want a $25 billion government-backed loan. Senators McCain and Obama want to give them twice that.
This is amazing. The two leading candidates for president are apparently not only comfortable with the idea, they’re positively itching to abandon completely the free market principles on which this nation’s prosperity was founded.
Tonight, as I write this, reports of a developing government sponsored fix for troubled credit markets are flying through cyberspace. Treasury Secretary Paulson and Fed Chairman Bernanke are pitching Congress the idea of creating a new government agency to buy up bad debt. In other words, they want Congress to authorize bailing out failing banks by putting you, me, and the rest of us tax-paying shlubs on the hook for financial instruments that no sane investor wants to buy.
On early rumors of this plan that leaked before the close of trading today, the NYSE rallied to close up 4.3 percent as traders cheered this flimsy bit of not-yet-news. On what basis? If the federal government forms an agency to — as Sen. Chuck Schumer recommends — “inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages”, shareholders in the companies getting the taxpayer bailouts will see the value of their shares drop as the government takes partial ownership.
And that’s the core issue for freedom loving Americans. One of the responsibilities that comes with liberty is living with the consequences of bad choices. Companies that have no value should be allowed to fail. Real estate prices should be allowed to fall to natural levels. The wealth of hard working citizens should not be appropriated by government to prop up failing private institutions. Government safety nets won’t make them profitable, they’ll just eliminate the disincentive for other companies to avoid foolish risks. That’s why Japan’s economy is choked by “zombies” — huge, unprofitable corporations that should by rights be dead, but which continue to live because the government has deemed them too big to fail.
Like Fannie Mae, Freddie Mac, and AIG. And whatever other bank, auto maker, insurance company, or floating crap game the government decides to buy into with our money.
Soon, the U.S. economy will be mired in a hopeless slough of debt obligations foisted on the public by greedy investment bankers and their bought-and-paid-for political front men. Central government control in the style of the old Soviet Union is becoming the new economic order in the USA.
Iraq is not our new Viet Nam; Fannie/Freddie/AIG/et al is our financial Viet Nam.
Where does this end? I don’t know. As a Christian, it’s hard not to see the prophetic implications of placing the control of ever-greater shares of wealth into fewer and fewer hands. Ultimately, the Bible tells us, the world will be under the control of a single government that has the power to require all of Earth’s citizens to carry a mark in order to buy or sell anything.
Won’t that be much easier to enact when only a few interconnected banks are left standing?