Sadly, as one who admires Thomas Sowell’s writing–he gets it right most of the time–I opposed his position on our bailout, from day one. The most vocal opponents of the bailout–Ron Paul, Peter Schiff, and Vox Day, Austrian-school economists all–were the voices in the wilderness at the time. I’m not in their category of greatness, but I agreed with their assessment.
To me, it was a no-brainer because the Austrian explanation is monetarily sound. At the end of the day, the Keynesian and Monetarist positions are mere variations of Central Planning, with the latter being tantamount to a “we believe in free markets, while letting government centrally control the money to prevent and stop recessions” whereas the former is tantamount to “we believe in free markets, but we believe the government needs to control them to prevent recessions.”
The Austrian school, on the other hand, promotes free markets and a need to keep government out of the business of controlling them. This is because inflation of the money supply–a cause of just about every recession–is made easy when markets accept the practices of (a) central banking and (b) fractional reserve banking. Central banking is just a euphemism for socialist monetary policy.
And we have paid dearly. The solution to this will not be pretty, as it will require us to fundamentally rethink the role of government in our lives, and also in the role of regulator of business, banking, and commerce.
Anyone who calls this a “credit crisis” is missing by a mile.
This is a “value crisis”: our government–in collusion with Big Banking–has been creating money faster than our economy has been creating value, for decades.
Sadly, the proof is in the bailouts: if the solution were merely about throwing $700 billion at the problem, giving the former CEO of Goldman Sachs the authority to fix it–we would now be on our way to prosperity. Greenspan, in his testimony before Congress, stated that the $700 billion was sufficient to fix the problem. He was wrong.
As for the auto industry, the “bailout” merely guaranteed that the impending bankruptcies of GM and Chrysler would not happen on Bush’s watch. But make no mistake: they will happen.
The bailouts will not fix this problem; they will only defer it, at compound interest. Sadly, as Vox Day points out, even the Republicans failed badly on this issue.