What is the correct response to the financial crisis?

Investment banks have collapsed, Congress has not passed the bail out package and the markets have tanked even more. In the Presidential debate Obama said the following in response to the free market policies of the last 8 years and McCain discussing free-market health insurance:

It is not a good deal for the American people. But it’s an example of this notion that the market can always solve everything and that the less regulation we have, the better off we’re going to be.

This is the heart and soul of the liberal mindset. Hardship = something is wrong. Working hard to achieve is not part of the equation. Is this collapse a failure of the free market… or is it perhaps evidence that it works?

Lets suppose that I open a banana stand and sell my bananas for $100 each. Then when I don’t get any business I cry for federal aid. The liberal response is to say – look, the system has failed, it isn’t supporting this poor fruit stand. Lets offer a $99 per banana subsidy. Where does that money come from? It’s effectively pulled at gunpoint from the pockets of those standing around the fruit stand. Or its printed up and I now have $99 that isn’t really worth $99 anymore.

The free market response would be to say there is no demand for $100 bananas. You have to lower your prices or improve your product (hallucinogenic bananas maybe?).

So the investment banks got beyond themselves. They recklessly offered a product the market could not support and it caught up to them. Is the answer to artificially pour money into a proven failure? Or do we let economic Darwinism take place?

What does Obama mean by saying less regulation is a failure? The American people are too stupid to make their own choices. Look at the mess they’ve gotten themselves in with all this debt. And he’s right! There are a lot of stupid people who’ve gotten themselves in a hole, they’ve taken or offered bad loans. They have to learn from their mistake, they have to feel the pain and pull themselves up. They will be better in the long run for it.

What is the alternative? Socialism. The government will decide for you what is good for you to have in order to protect you from bad decisions. And yes, that would work. That would keep us from repeating this problem. But in such a way that breeds dependence and not wisdom. A friend of mine told of his Russian mother immigrating to America and being helpless to make a decision about what kinds of bed sheets to buy. She needed someone to make the decision for her despite his leading her through a simple thinking exercise. “Mom, you don’t have any, these are on sale, you like them, what do you think you should do?” She went home without any.

Pull up your bootstraps America. Its time to show some gut.

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4 Responses to What is the correct response to the financial crisis?

  1. Mom R. says:

    I AGREE!!!!!

  2. Susanna Rose says:

    Very well put and I like the banana stand example as it makes one such as I understand the whole concept a little better! I definitely think we should have to learn from our mistakes of reckless spending habits, etc as a country and not be temporarily bailed out as like any lesson that does not have to be learned, this will only make things worse in the long run!

  3. bchallies says:

    Ron Paul said the other day that “illiquid” investments (like $100 bananas) are just products people don’t want!

  4. Grace says:

    I agree as well!

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