The Financial Panic and the Only Proper Answer to It

Today, we are not fortunate enough to live under a free market. Most Americans seem to like their lives to be controlled by those who claim to act out of the public interest–and today there is no public interest like assuaging need through government controls. If you need to borrow money for a home even though you can’t afford to pay back your loan, the government will see to it that you get your money. If you build your house in a flood plain and the flood comes, the government will tax others so you can rebuild it. If you make poor financial decisions that improperly account for economic risk and that cause your bank to go bankrupt, the government will pay to bail you out. Today we live under an economic and political system where need is a blank check and risk is nationalized.

So just who does our current system of national relief favor? Does it favor the independent, thrifty, hardworking and non-foolhardy? Hardly. Such a person is able to think and act for himself; what need does he have for our government? Instead, our system today favors the unwarranted risk-taker. It favors the person who presses for political favors. After all, there was a reason why the most corrupt (and now bankrupt) home lenders were giving sweetheart home loans to key members of Congress–and it wasn’t to restore the free market in housing. It was to keep the incentives that Congress created to steer money into housing flowing because there was a ton of money to be had doing so.

So unlike the claims of some, the current crisis is not so much a battle between Wall Street and Main Street. The problem we face today rests in every street; it rests in our nation’s unchallenged enshrinement of need as a virtue and its willingness to use government power to assuage that need. Instead of leaving people free to work toward improving their lives though their own efforts, we have created a system of perverse incentives; a system that has now collapsed as a system so-designed must.