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The Motley Fool's worst idea yet, part II

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September 27, 2008 – Comments (10) | RELATED TICKERS: JPM , GS , BRK-A

There's some trouble in saying that you want the government to own the banks for the short term only. And that is, who is going to make the government divest? Voters? I'm not positive, but I would be willing to bet that voters will be thinking about other things 5, 10, or 15 years from now, or whenever we now think will be the right time for divestiture. The historical fact is that when any government anywhere gets more power or more stuff, they find ways not to give it back.

This is from the bailout side, which accuses us on the non-bailout side of being naive. We're not saying this is going to be fun. We're saying that what's wrong is wrong, whether or not it seems to save people some pain. Also, huge corporations failing has often proved good for the economy.

Also, some are saying that letting "Big Lending" fail will hurt the consumer. That means less spending, and that hurts the economy, right? Wrong. Less production and investment hurts the economy, but spending is at least as wasteful as it is helpful. Saying that someone paying someone else to do a particular thing helps the economy is like saying that war helps the economy. That ignores the possibility that the seller (either a gun-merchant or a toy-merchant) could be doing something else. 

Supply and demand are about to correct the massive imbalance between productive labor and consumption that we have in this country. It doesn't take government regulation of credit cards or anti-predatory lending laws. It just takes a few big financials going bankrupt, thousands of their employees having to get other, more productive, lower-paying jobs, and everybody working harder in relation to their standard of living. In other words, it takes all those BMW-driving yuppies starting to live like the rest of us. 

Do we know what it's going to be like living without credit? Well, yes. That's pretty close to what we've been doing. Do we know what it's going to be like with 8% unemployment? Yes, we've been there before, and we came out of it pretty well and pretty soon, unless we had somebody bailing companies out and saving the economy.

This is the political equivalent of panic selling. Instead of selling stocks, though, you're selling out the economic freedom of the United States.

10 Comments – Post Your Own

#1) On September 28, 2008 at 12:19 AM, FleaBagger (28.89) wrote:

I forgot to mention: this is partly in response to this article, as well as to bailout support in general.

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#2) On September 28, 2008 at 12:47 AM, FleaBagger (28.89) wrote:

Here's a Fool article I can agree with. Though she totally misinterprets Tom's article: that is not respect for free market.

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#3) On September 28, 2008 at 1:03 AM, FleaBagger (28.89) wrote:

Here's another decent article on Fool.com.

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#4) On September 28, 2008 at 2:11 AM, Donnernv (< 20) wrote:

Read the latest article and learn something.

wave@frontlinethoughts.com

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#5) On September 28, 2008 at 2:56 AM, goldminingXpert (29.57) wrote:

you are correct. The government will never sell the banks if it buys them.

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#6) On September 28, 2008 at 5:02 AM, jester112358 (28.89) wrote:

A person who sacrificies freedom for security will soon have neither. 

Ben Franklin (I believe)

 Its about time we changed America's leading export from debt to goods and services and stopped living beyond our means.  It will happen sooner and faster if we let the normal creative destruction of the markets occur than if we intervene like Japan did in the 90's (and still hasn't recovered).  Socialism never works because it concentrates power in the hands of a few who have no vested interest in the outcome-and not much intelligence either!

 

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#7) On September 28, 2008 at 9:47 AM, lquadland10 (< 20) wrote:

Just let me get to voting day.I am for ron paul. You never know what will happens next.

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#8) On September 28, 2008 at 11:31 AM, TMFLomax (53.54) wrote:

Great post and comments. I agree that this is a bit of a panic sell-out of our ideals and freedom. If I hear one more person say, "When there's a crisis, your principles have to go out the window!" I may scream. I mean, that's the message and it's a message of fear. And such short-term thinking strikes me as why we're in trouble in the first place. It's not heroic thinking -- what it is, though, is human nature, I suppose -- but I also think it's just prolonging the inevitable pain we are going to feel, regardless, in our economy. 

Thanks for linking to my "Bailout: The Sucker Punch" article. One clarification: that line about Tom, Bill, and Scott's idea being a free market solution and linking to their article was added in by an editor later, because their article was published after mine. This was a well-meaning addition, and I'm glad a link was provided to their article, since I always like linking to all the different viewpoints, and one of the greatest things about the Fool is the utter respect for other points of view, and of course I respect theirs. However, personally, I don't happen to agree with interpretation that demanding equity is a free market solution (and Scott's follow-up article talks more about that). Demanding equity is some plea for some form of justice in a terrible situation that many believe is the lesser of two evils, I suppose, and applies some form of market-based ideas, but I don't interpret it as a free market solution. I am going to ask that the language in that line edited for Monday, and I apologize that I didn't get that done last week, but Thursday and Friday I was a bit underwater with some stuff that was going on (not a very good excuse, but these things happen sometimes). I just wanted to clarify my own opinion since I'm a bit of a zealot about free markets. I frighten some of my friends. ;)

Personally, I called my Congressman mid-week last week and voiced my opinion he should give a "no" vote on the bailout (like it matters, but at least I was able to point out I am one of those dread independent voters that can mean so much to them). "No" is the free market solution, painful as it might be (although I also believe this bailout is just going to prolong the pain, as jester11258 points out with the Japan comparison).  

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#9) On September 28, 2008 at 11:54 AM, TMFLomax (53.54) wrote:

Oops and as you clarified in your comments, my first and third paragraphs in my comment are in regard to bailout support in general. There is no shortage of people who believe the bailout is the lesser of two evils, as much as it's grudging approval (although I'd say there are more people who are just plain outraged). I just can't get behind the bailout, myself. 

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#10) On September 29, 2008 at 9:44 PM, FleaBagger (28.89) wrote:

Thanks Alyce! You may have noticed that I am also free market zealot. (I hope you did.) Sorry I blamed you for that line. Also, I know I am brusque when it comes to government interventionism and the support for it, and I am trying to soften my tone -in the meantime, my apologies to Tom, and anyone I may have offended. My principles on the matter are unyielding, though.

Even if free markets didn't produce the greatest abundance of prosperity and technology (which they do), they would still be right because they're free; freedom is more precious than any material luxury.

Thanks for visiting my blog, and thanks for contributing a voice for economic freedom on Fool.com.

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