INVESTORS BUSINESS DAILY
EDITORIALS
Excerpt from editorial: Markets, Not Governments
by Investor's Business Daily's Management, Pp. A34, Date 9-21-1998.
MARKETS, NOT GOVERNMENTS
The '94 Mexico bailout helped spread the financial flu in Asia.
This spread to Russia and South America. Now, Mexico may get hit again.
Governments and global lenders have tried all sorts of fixes. But they
haven't worked. Only a free market can.
It's a wonderful myth: Capitalism run amok caused the Great
Depression, and then government stepped in and fixed everything with
resonable regulations. A nice story, taught in classrooms across the
country for decades. But it's false.
Government planning and manipulation of the money supply caused and
prolonged the Depression. Capitalism had nothing to do with it.
It's the arrogance of governemtn bureaucrats and economic planners
who think they can plan and control markets. It doesn't work. It
didn't work for Roosevelt and it won't work for the global FDR's of today.
The problems in Asia, Russia and South America should surprise
no one. The Mexicobailout opened the floodgates. Every money manager
with half a deck dumped billions into Asia and Russia. After all, if
things went sour, the International Monetary Fund and World Bank would
bail them out.
This MORAL HAZZARD problem has shifted the risk to
taxpayers.
Central and private banks also took the bait. They lent money like
drunken sailors. Business invested in all sorts of things-things
many people didn't want. This is called malinvestment. Then the bills
came due.
Hence, the bailouts: $50 billion for Mexico; South Korea,
$57 billion; Indonesia, $43 billion; Thailand, $18 billion; and Russia,
$19 billion.
The cronyism and quasi-socialist economies in Asia and South
America didn't help matters. And the kleptocracy that is Russia today,
well...the mafia runs just about everything. And if the mob's not
involved, corrupt officials are: the personnel flotsam of the centralized
state.
Japan's in dutch because it lent too much to its spend-happy
neighbors. It also loaned too much t its spend-happy old boy network,
the keiretsu. Economic planners there keep trying to stimulate
the economy. It's not working well.
While each of the floundering economies have different problems,
the source of all their poblems is simple: government interference.
There's more to this story, of course. But as government planners
ponder the financial horizon, they should think long and hard and do
nothing.
Let those people who made reckless loans take the hits. Don't
bail out central and private bankers. If they can't manage money, they
don't merit the job in the first place...
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