More than anything the surge in the stock market today demonstrates the complete failure of government bailouts to fix the current economic downturn. Only yesterday Wall Street tumbled as Obama took office marking the transition from one far too pro-active administration to another, but today after receiving news of a better than expected forecast for tech giant IBM, yesterday’s crash is more than forgotten. The market wasn’t excited because the auto industry had suddenly started doing well. Banks, lenders, mortgage holders, and pretty much anything else bailed out too have yet to show any hint of revival. Today’s growth is a natural, unimpeded market correction that needed no bailout, just a little time and faith that things will work themselves out. Why else would Apple, a maker of expensive consumer electronics, have its best quarter ever?
The father of bailout economics, John Maynard Keynes, had another piece of advice that since Alan Greenspan’s departure from the Fed has been completely disregarded: practice rational consistent and predictable economic policy. Bush, Bernake, and Paulson changed direction every other day and threw money at problems without thinking and often overpaying – not exactly rational, consitent, or predictable. In other words, all people really want is some stability and good news. Bailouts don’t provide stability, by nature they further offset distort and disrupt normal economic processes often leading to further downturn and panic. Bailouts are similar to firing gun shots at an armed and angry mob; instead of calming the storm you make it worse. They are, by nature, bad news. The best thing Obama could do right now is to call off all further bailouts and attempts to unnaturally manipulate the economy and restore natural economic order.
-James Thoburn
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James Thoburn (twitter: @you_count) is the founder of Backyard Politics. Comment here or @reply you_count on twitter to join the conversation.
I agree no bailout, but I don’t think you can extrapolate any trends from one day’s market movements. After all, it is down again today.
Agreed about extrapolations, but the point here is not so much “OMG Wallstreet had a great day!” as it is market performance, or in other words actual business performance versus speculation. What never ceases to amaze me is how “survival of the fittest” is accepted as natural everywhere but in the economy.