In Praise of Vultures
by Jim Davies, 11/12/2010
There was another fascinating part of the Bush-Lauer interview mentioned here on Wednesday; in its Part 6 comes this, about GWB's 2008 decision to print a couple of trillion dollars:
'BUSH: I'm paraphrasing at this point, "You better do somethin' big, 'cause if we don't, you're liable to oversee a depression." So the decision point here is, do you adhere to your philosophy and say, "Let 'em all fail"... Or do you take taxpayers' money and inject it into the system in hopes that you prevent a depression? And I chose the latter.'
There is no shortage of people - especially in politics - who believe in "the free market, but..." or in "the free market, except when..." That kind of "belief" commands a very low price; any fool can use such words, and many do. What reveals a true belief - a well thought out, properly considered rationale - is what you do when some emergency arises. Do you stick with your principles, or toss them overboard like Bush did? In the latter case, the belief was never genuine.
So the banking and financial system was handed a vast bundle of newly-printed money, which Bush said he expected to "save the economy." We now know that it did not, exactly as rational economists predicted; the proof is all around us, and to add confirmation, last month another $0.6T was promised. It may succeed in saving more banks from insolvency, but it's not clear that it will persuade them to lend it out so that businesses can borrow and invest and grow and hire. There is a huge financial hole left in bankers' assets by the bursting of the housing bubble, and this fresh minting is just helping fill it up again. It should not be printed at all - but if it were, and then distributed directly to 120 million families, the $5,000 each would at least stimulate quite a lot of Christmas shopping.
Vultures, and other scavengers and bottom feeders, have had a terrible press - but really perform highly beneficial, necessary functions in nature: an animal dies, they swoop in and gobble up the remains. Just imagine the stink, if they didn't! The same is true of all scavengers, down to microscopic size. Dead tissue decays under their benign influence; were it not so, we'd all be neck deep in indescribable garbage. As it is, the cycle of life spins on and the world is beautiful. Messing with that cycle, as Bush did in '08, puts things out of whack.
Had his government practiced laissez faire and kept its hands off (and that does mean, right off; no help, but no hindrance either, meaning that all laws and regulations restricting commerce be repealed) there would have been a bloodbath of failed banks, which survivors would have purchased for pennies on the dollar and then put the salvageable parts back to work. By now, the economy would be recovering very well. But as it is, nobody knows whether it will, or how soon.
Of course, no real government is going to practice such laissez faire. That would be wholly contrary to its very nature, which is to practice control. That's why there is no rational alternative to doing away with the institution altogether.