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Political News and Commentary from the Right

By the Numbers, Job Losses Since the Start of the Democratic Majority

Hat Tip: ARRA News Service

With the failure of the Democratic approach to economic “stimulus” becoming ever more apparent, it’s time to look at the current recession from a different angle. This chart shows that unemployment actually began its steep ascent soon after Democrats took control of the House and Senate in 2006!


November 17, 2009 Posted by | Democrats | , , , , , | 1 Comment

IEA blames gov’t for financial crisis

The British think tank, The Institute of Economic Affairs, released a study that pins the blame for the worldwide financial meltdown on government failure, not market failure. You read it correctly. The 14 leading economists who authored the report “explain how government failure caused the financial crisis and why politicians’ calls for tighter regulation are misconceived.”

The IEA’s blog post introducing the report highlights seven key findings

  1. Central banks created a monetary bubble that fed an asset price boom and distorted the pricing of risk.
  2. US government policy encouraged high-risk lending through support for Fannie Mae and Freddie Mac (which had explicit government targets of providing over 50pc of mortgage finance to poor households) and through the Community Reinvestment Act and related regulations.
  3. Regulators and central bankers failed to use their considerable powers to stop risks building up in the financial system and an extension of regulation will not make a future crash less likely.
  4. Much existing banking regulation exacerbated the crisis and reduced the effectiveness of market monitoring of banks. The FSA, in the UK, has failed in its statutory duty to “maintain market confidence”.
  5. The tax and regulatory systems encourage complex and opaque methods of increasing gearing in the financial system.
  6. Financial institutions that have made mistakes have lost the majority of their value. On the other hand, regulators are being rewarded for failure by an extension of their size and powers.
  7. Evidence suggests that serious systemic problems have not arisen amongst unregulated institutions.

In short, government interference in the free market actually exacerbated the current crisis.

By keeping interest rates artificially low, the central banks created a situation that encouraged borrowers–corporations and consumers–to borrow too much. It turned out, they borrowed more than they could afford to repay when the tide began to turn. What had been the fuel that drove economic growth now became an albatross.

Point two should be obvious to anyone who’s been paying attention. This Free Republic article outlines a lawsuit in which President Obama actually sued Freddie and Fannie to force them to make loans destined to go bad. Rep. Barney Frank (D-MA) actually blocked Republican attempts to reign in Freddie and Fannie long before their collapse. This doesn’t absolve the GOP of guilt in the crisis. With majorities in both houses of Congress and occupying the White House, Republicans should have fought harder to bring about needed changes. In large part, they were content to bask in the glow of an economy that appeared to be humming along just fine to the average Joe, all the while knowing the dangers that awaited.

The regulations in place and the agencies charged with enforcing them served to give a false sense of security to investors, including large investment houses, banks, retirement funds, and others. They underestimated the risk in their investment strategies because of the perceived stability guaranteed by regulations designed to avoid just the sort of collapse experienced last year.

The course consisting of tax and regulatory obstacles that must be navigated by corporations forces them to spin a confusing web of strategies in an effort to maximize profits and minimize liabilities. The resulting structure is so complex it affords less than scrupulous managers and employees an opportunity to hide losses and exaggerate profits for personal benefit.

Financial institutions have suffered for their missteps, their reputations damaged (irreparable in some cases) and stock values worth little or nothing. On the other hand, the regulators who held the power to correct the situation before it deteriorated to its current state are being rewarded with more power and are in no way held responsible for their failures.

Unregulated industries regulate themselves, plain and simple. Their very survival depends on it. Without a safety net, nothing is gained through inefficiency.

So now we clamor for the problem to be fixed by the same institution that created it–government.

More government control is not the answer.

May 12, 2009 Posted by | Economy | , , , , , , , | Leave a comment