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June 15, 2009

Think Government Ownership is Temporary? You Might Want to Think Again

When the financial crisis was unraveling last fall and continuing into the Presidency of Barack Obama, many Americans supported bailouts because they believed "there was nothing else we could do." Unfortunately, it looks as if the reality of a long-term presence of government in the economy is becoming more realistic, according to TWO articles in the Wall Street Journal today.

Would you surrender your economic freedom for the type of economy we have right now?

http://online.wsj.com/article/SB124507696210915249.html

In this article, the IMF issued a report recently that stated federal exit from the bailout programs is going to be a huge challenge. Exiting bailout programs in a time of recovery could cause interest rates to soar, and tamper any type of recovery that the economy is on.

In addition to this, we must remember that private capital must come in to replace any government exit from the economy. This is going to be hard to do in the autos where long term debt holders are being screwed out of their bankruptcy rights. Would you put up your retirement as collateral to lend to an American auto company?

http://online.wsj.com/article/SB124502150880513761.html

This article is a good example of what has already happened as a result of a similar crisis. In 2002, the Argentina economy was on the verge of collapse (ironically because of government involvement in the company's currency) and as a result, the federal government was given controlling powers over the economy. Seven years later, those powers remain in place as the government is described now as an "owner and regulator."

Is this the type of future we want for America? Maybe this recession hasn't turned this country into a command system, but what happens when the next recession hits in 3, 4, or 7 years and the government still has not shaken its control from the last recession? That, I fear, is the slippery slope we are headed down.

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