Politicians add to financial crisis

William O’Crenshaw Greene County
Published: January 12, 2009

Laissez-faire capitalism bears no blame for our nation’s financial crisis. The problem: fiat money, the federal government and the Federal Reserve Bank.

It’s the Fed’s credit creation, monetary inflation and manipulation of the interest rates that causes these bubbles to form. However, it’s not complete without the usual culprits, the Democrats and Republicans. The fact that both Democrats and Republicans are divorced from economic reality, and totally infected by Keynesian economics (the theory that the state should stimulate economic growth) is the very reason we’re in this mess.

As far as a laissez-faire housing market, in 1934 as part of the New Deal, the Federal Housing Administration was created, and since then the federal government’s intervention and distortion of the U.S. housing market has expanded enormously through an alphabet soup of government agencies and government-sponsored enterprises (which would be bailed out if it came to that). With this along with the Fed’s manipulation of the market, one could hardly say we’ve had a laissez-faire housing market.

Both Democrats and Repub-licans have been complicit in adding to our current financial crisis.

On Jan. 23, 2004, in a speech to the U.S. Conference of Mayors, President Bush declared, “I’m asking Congress for $100 million to help people with their down payment … [M]any citizens have the desire to own a home, but they don’t have the dough to make the down payment …” (http://www.americandreamdownpaymentassistance.com/whsp01232004.cfm).

Government folly such as this put people in the housing market who in a free market would not have been there. In a laissez-faire housing market, having a pulse would not be the qualification for a home loan.

The Federal Reserve Bank and the fractional reserve aspects of the system are inherently inflationary.

The systematic flaws of fiat money and fractional reserve banking are exacerbated the longer the system exists.

Whether it’s called a bailout, rescue or stimulus, money that comes from nothing ends up being worth … nothing. Next is default!