The Government’s Actions Are Making the Financial Crisis Worse

George Washington Blog
Tuesday, October 28, 2008

The government’s previous actions lead to the current financial crisis. See this.

Moreover, the government’s current actions are actually making things worse:

• The bailouts are causing HIGHER mortgage rates for consumers

• The government’s commercial paper buying spree is INCREASING the cost of borrowing

• Arbitrary interventions by the government (AIG rescued, Lehman left to fail) create chaos in the markets. The stock market has steadily plunged since the bailout bill was singed. Indeed, every time Paulson, Bernanke or Bush speak, the stock market tanks.

• They also undermine consumer confidence. For example, consumer confidence is now at an “all-time low”, due partly to “increasing uncertainty about the government’s rescue plan“.

• The bailouts are drastically increasing America’s debt and causing other problems

• The bailouts may actually being INCREASING libor (and see this)

• The bailouts may cause unintended problems for money markets

Ill-advised government actions regarding the economy are not a trivial matter. For example, economists at UCLA have concluded that some of FDR’s policies extended the length of the Great Depression by 7 years.

 

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