• Barack Obama’s $787bn bailout is stupidity

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The BBC is reporting that the US$787 billion bailout is described by Obama as a “historic step” and a “major milestone on our road to recovery”. Obama’s economic skills remind me of something that parents find in nappies every day.

Where does this bailout money come from? One of two places:

1. the Federal Reserve prints some new money, which causes inflation (i.e. reduces the value of each existing dollar, thereby stealing wealth from everyone) and is exactly what bought about the present economic problems
2. borrowings, which have to be repaid eventually, either from taxes or from, you guessed it, printing more money

Either way, the people on the street wind up paying for their mythical bailout: why isn’t Obama honest enough to call it a noose?

The nearest analogy on an individual level is using credit cards in times of financial trouble. People who do this just rack up bigger and bigger debts in the hope that they can pay it off in the future: everything looks fine now because they’re spending money, but it’s not real money and in fact their wealth is declining every time they spend. Such a person should stop digging a hole and go for plastic surgery (i.e. cut their card in half): Obama should stop digging a hole also.

At least the person who gets himself into trouble with his credit card does so of his own free will. Obama is digging a hole for all Americans whether or not they want to be in the hole, not to mention the fact that they have to pay to be extracted from the hole at a later date.

If you want to really understand what is behind the economic crisis, bailouts, etc, read this article by Murray Rothbard. It’s long but it’s written so that everyone can understand it. Not only will it change your view of money forever, but after reading it you will have a better understanding of economics than Obama does.

What do you think about the bailout?

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