Isn’t it a bit ironic that the U.S. government is going to sue a few of the big banks in America when the government’s policies are part of what caused the housing disaster in the first place? Not only did the government’s policies create the bubble, but the federal reserve’s policies also helped to continually build up and add fuel to the ensuing bubble that would inevitably burst. What’s even worse than that and maybe reaches an even higher level of irony is that the same banks that the government is now suing are the same banks it bailed out to the tune of hundreds of billions of dollars a few years ago. Furthermore, not only are they suing the banks they bailed out, the lawsuit they’re bringing forward is going to cost the tax payers millions of dollars and the banks they’re taking to court might even use the bailout money they received over the years to cover their legal expenses. But what’s even worse is that this step by the “critical thinkers” doesn’t address the issue of central banking and central planning by previous and present political hacks.
Now, I’m no economist nor do I have any aspiration to ever become one, but I have a general understanding of supply and demand, and economics 101 to say that in a free market economy, banks and businesses that do not make wise business decisions and who continue to spend recklessly would without a doubt go bankrupt, and not be bailed out by tax payers. Only in America, or a country with a central bank and corrupt politicians would such a practice take place of bailing out a few elitists at the expense of ALL tax payers in the country.
Thanks to Austrian economists like Mises, Hayek, Rothbard, Hazlitt, Woods and Murphy, understanding the business cycle of booms and busts is very logical and simple to understand when you actually take the time to think about the causes and the effects. When the government and the central bank set the stage for a bubble, with artificial prosperity and malinvestments, the only remedy for that is a bust, followed by a market correction. And when the market is allowed to liquidate the debt, it does so in a much more timely and efficient manner than government intervention. We might not like the outcome, but it has to happen if we want to move on and begin to prosper again. So rather than only blaming the banks (I have no sympathy for big, corrupt banks, mind you), we should also be furious that our government and the federal reserve perpetrated such a scheme.
Here’s to hoping that the government stays out of the housing market and allows the market to correct their mistakes.