The brilliant Bob Higgs on the crumbling capital markets (read my comments following the “Snip”):
“The failure of Fannie Mae and Freddie Mac, setting in motion the biggest government bailout/takeover in U.S. history, brings a grim sense of fulfillment to competent economists. After all, what did people expect, that water would flow uphill forever?
This financial mega-mess is the same sort of event as the collapse of the USSR’s centrally planned economy, another economically unworkable Rube Goldberg apparatus that was kept going, more or less badly, for decades before it fell apart completely. Along the way, of course, famous (yet actually unsound) economists assured the world that everything was working out splendidly. As late as 1989, when the pillars were crumbling on all sides of the temple, Nobel Prize winner Paul A. Samuelson informed readers of his widely used textbook, “The Soviet economy is proof that . . . a socialist command economy can function and even thrive.”
In the future, we will see a similar breakdown of the U.S. government’s Social Security system, with its ill-fated pension system and its even more inauspicious Medicare system of financing health care for the elderly. These government schemes are fighting a losing battle against demographic realities, the laws of economics, and the rules of arithmetic. The question is not whether they will fail, but when—and then how the government that can no longer sustain them in their previous Ponzi-scheme form will alter them to salvage what little can be salvaged with minimal damage to the government itself.
Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state’s Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants.
Call it democracy in action or utterly corrupt governance; they are the same thing.
Each of these time bombs has at least one element in common: it promises current benefits, often seemingly without cost; but if it must acknowledge a substantial cost, it places that burden somewhere in the distant future, where it will be borne by somebody else. From the standpoint of society in general, every such scheme is a species of eating the seed corn. It satisfies the public’s appetite to consume something for nothing right now, with no thought for the morrow. It represents the height of irresponsibility by permitting people to live higher today than they can truly afford, financing this profligacy by borrowing recklessly and by taxing politically weak and ill-organized people in order to shower benefits on politically strong and well-organized special interests. …
The architecture of the Hotel of Impossible Promises is not arcane. All competent economists understand these things. Ludwig von Mises explained as early as 1920 why a centrally planned economy could not work as a rational system of allocating resources. The reasons why Social Security, especially its Medicare component, and many other such government programs contain the seeds of their own destruction have been explained time and again. Are the politicians who construct these structures really such idiots that they cannot understand the logic of what they are doing? Not at all. …”
[Snip]
The complete article is “Ticking Time Bomb Explodes, Public Is Shocked.” Read it. I disagree with the sentiment expressed in the last paragraph. Bob Higgs would find it hard to comprehend how stupid the corporate, political and academic elites truly are. This is the age of the idiot. Obama is an ass with ears. Ditto McCain. Take them at face value, Bob. Believe their idiocy. As hard as it may be for a man of your intelligence to grasp, they truly do not understand Mises and Hayek and Rothbard or even Friedman. The idea that misallocation of capital is inevitable in socialized systems is anathema to the incontinent legislators and the other cognoscenti. Psychologizing about their motives gives these intellectual tabula rasa more credit than they deserve. (Michael Rebmann of “North Buffalo Journal and Review” liked this rant.)
Update: I just saw CNN’s Campbell Brown, who, as I already noted, is not working with much, and her panel, laud the massive bailouts. Why? Because, as all agreed, the returns on this “investment” will be many times the investment. This is beyond rank utilitarianism. The concept of private property eludes Campbell and her commies. The risks in a bailout are socialized and the profits privatized. Theft is what this is all about–unconstitutional, criminal taking.