The Rescues Ruining Capitalism : Easy money and constant stimulus have undermined the basic dynamics of the free market



When we started this website 10 years ago it was in the wake of the bank bailouts. Your editor remembers in stark detail the fall of 2008 and the winter of 2009. It was a brutal time. But as I looked around and figured out how it was that I was going to keep things together, I watched the money flow into Wall Street from the Federal Reserve. Every morning on CNBC I saw it. I watched as Goldman Sachs, leveraged as much as 30 to 1, as I recall, got bailed out, and then after 2 quarters paid its bankers the biggest bonuses in the bank’s history. All this while the banks foreclosed on people who were barely leveraged at all but had lost their income. It was deeply unjust. And it was a clear departure from anything that looked even remotely like free market capitalism. Many of us knew then that we had entered an extremely dangerous time.


An Illustration Depicting a Large Man in a Suit, with the Words "Big Banks" on His Sleeve, Sitting in Front of a Meal and Wiping his Mouth While Saying "Burp!! What a great bailout! Now I'd like a big bonus for dessert!"—Uncle Sam, Dressed as a Waiter, Stands Glumly at the Ready Holding a Tray Containing a Man with an Apple in His Mouth (Like a Roast Pig), with the Words "Tax-payers" on His Sleeve


In a capitalist system Goldman would have been allowed to implode. At least the bankers would have felt some of the pain the rest of the country felt. But no. The crony class was not only indemnified, they were made richer. Much richer. This “socialism for the cronies” has undermined our economic system and destabilized our political system.

(From The Wall Street Journal)

A growing body of research shows that constant government stimulus has been a major contributor to many of modern capitalism’s most glaring ills. Easy money fuels the rise of giant firms and, along with crisis bailouts, keeps alive heavily indebted “zombie” firms at the expense of startups, which typically drive innovation.

In short we are killing the engine of capitalism while enriching the connected.

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