Friday, October 17, 2008

Soon to end

So when Henry Paulson argues that it is necessary to pump money into credit markets to prevent them from freezing up, he doesn't bother to realize that the money he pumps into the credit markets is coming directly out of the very same credit markets. He is doing little more than rearranging the deck chairs on the Titanic; shuffling the money from one set of financial intermediaries to another does not increase either liquidity or solvency. It merely delays the problem for a few brief moments.

Even the failing banks pay lip service to their fiduciary responsibility, but any privately funded firm that took money from more-productive people to give it to less-productive people would soon go out of business. Only the government can violate Hazlitt's logic and survive, because only government can socialize its losses through the tax system.
...but not forever.