You’d better find cover. They’re getting out the big guns.
From Peter Schiff:
This week, with the nation’s financial infrastructure crumbling before our very eyes, the nation’s top two economic policy makers made their way to the Congress for an extraordinary episode of political theater. Fannie Mae and Freddie Mac, the quasi-government entities that form the backbone of America’s gargantuan mortgage market, appeared to be cracking. To the somewhat bewildered members of Congress, Ben Bernanke and Henry Paulson offered radical remedies to save the lenders. Despite the fact that the proposed policies would thoroughly redefine America’s supposedly capitalistic pedigree, the moves were presented as wholly inevitable, and in the end, benevolent and costless.
If you are looking for a new chapter in American history, it has just begun.
The most memorable moment in the episode came when Secretary Paulson explained that the best way to minimize the chances that Fannie Mae and Freddie Mac will need a government bailout would be for Congress to grant the Treasury unlimited authority to lend to the two institutions. His analogy: When the bad guys see a bazooka on your hip, you are less likely to be challenged to a gunfight.
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At present, the best the government can do for housing and the economy is to leave both alone, cease interference in the free market, restore sound money, and allow capitalism to work.
Unfortunately, the laws of capitalism are now demanding that home prices continue to fall precipitously. But, based on the speed in which our government, public and financial institutions are willing to abandon free market principals at the first whiff of economic pain, the likelihood that this impulse will take hold is increasingly remote. So hunker down as the United States finds itself on the express track to state socialism with Paulson’s Bazooka locked, loaded and pointed right at us. When the government pulls the trigger the blast will blow the dollar, and what’s left of our capitalist economy, to smithereens.
