If our central bank, through its monetary policy of easy credit, generated the housing bubble resulting in the credit crisis, why shouldn’t the government bail out those firms that would have been doing just fine had the Fed not pushed interest rates to artificially low levels? The Austrian business cycle theory demonstrates how entrepreneurs, no matter how mathematically rational they may be, are drawn into malinvestment that wouldn’t have occurred in the absence of credit expansion, so the more money the Fed prints, the less responsible entrepreneurs are for their own demise, so why is it that Austrians are generally 100% anti-bailout? Is the only reason that we don’t want to start a precedent of all-powerful government saving the day? Do we not want to give the impression that it was free-market capitalism (i.e. capitalism that wouldn’t have government bailouts) that caused the crisis?
We’re anti bailout because its a zero sum game: We’re being payed with our own money.
On the other hand… if you were to seize wealth from the individuals who make up the banking cartel, and other lame corporate-welfare industries… we can talk.
The bailout was given to the bankers, not the creditors who as you stated so well, were mathematically doomed.
Austrians oppose bailouts, since bailouts slow economic recovery. Bailouts take resources away from successful entrepreneurs and give them to unsuccessful ones.
How in the world are you going to tell the which firms would have done “just fine” if it wans’t for the Fed? The task is impossible on mere hypothetical grounds. Only the market can sort out the good from the bad.
Look at at it this way. Count Dracula [i.e. the gov’t] sucks the blood [i.e. collects taxes] of thousands of innocent people and uses it to fertilize otherwise useless land. This misleads many honest farmers, who buy this supposedly fertile land,
Well the truth will out, the crops dont grow, because the count ceased to pour the sucked blood on the farms.
Shall we save the poor honest farmers by sucking more blood from the innocents, so the farmers can continue to fertilize their crops?
Who is “the government”. Since the government has no money of its own, bailouts force “some” people to pay “other people” for the Fed’s misdeeds. The bailout is thus equally abominable.
It appears to me that the free market position is not merely 100% anti-bailout. What about the devastating effect of the income tax on capital formation, and thus wealth generation? What about the continued money creation by the central bank? I think the free market position is anti-bailout, and would support abolishing the income tax, the central bank, and reducing the size and scope of government to constitutional limits. These would be considered merely first steps toward liberty, not the “end all”, since we would still be left with a government that will most certainly grow again into omnipotence. My point is, it’s not merely the bailout that is at issue, it’s a much bigger problem than that.
As oppose to the the income tax or sales tax that doesn’t have a devastating effect?
Why? So we can have a greater sales tax? No thanks!
Austrians do not oppose bailouts. Libertarians do.