After following the rapidly developing news of the financial crisis and the efforts of the Fed and other U.S. agencies to prevent the onset of Great Depression Part Deux, I still honestly don’t know what to think. My inclination, however, remains skeptical. Jim Henley‘s had the best line on this so far: “Wouldn’t it save administrative costs if I just started giving my money to random rich people?”
Certainly, Fed chair Benjamin Bernanke and Treasury Secretary Hank Paulson are smarter about these issues than I am. And it’s true that the mere news of a massive bailout bucked up stock markets around the world, creating the largest single day surge in the Dow and even bolstering a Russian market that was imploding on its own merits.
But a what cost?
Bernanke says, “There are no atheists in foxholes and no ideologues in financial crises.” But if there’s ever a time to hold strong to fundamental principles, it would seem that this would be it. We’re setting precedents that will govern the behavior of the international business community for decades to come. Do we really want to signal that risks are public and rewards are private?
For that matter, do we really want such fundamental decisions being made by obscure, unaccountable men like Bernanke, Paulson, and SEC chair Chris Cox? Shouldn’t Congress and the president be more than bit players?
At a practical level, Amity Shlaes is right when she notes that, “The stock market crash of October 1929 and the Great Depression were not the same thing.” And a New Deal II could just as easily lead to Great Depression II as letting creative destruction do its thing.
