Why I Oppose a Bail Out

I oppose any type of bail out plan for many reasons. Here are a few:

First, I believe it is morally dangerous and takes us a few steps further down the socialist road. To quote Peter Schiff :

“When the U.S. government owns all mortgages, the real estate market will be completely subject to political, rather than financial, concerns. Will foreclosures be outlawed? Will loan term easements and principal reductions become standard campaign issues?”

My fear is that property rights could be lost in the name of saving the economy.

Second, for months Paulson, Bush and Bernanke have been saying that the fundamentals of our economy are sound and then suddenly they say they need billions of dollars with complete control? I refer to a quote we posted on our “Where Will We Stand” blog:

"Give me control of a nation's money and I care not who makes her laws." - Mayer Amschel Rothschild.

I am not going to trust the same guys that lied when they said everything was fine. These guys were trying to save face with foreign investors and central banks - our creditors – knowing full well the situation was grim.

Third, these same three amigos of ours have somewhat created their own reality. They have pressured congress to act in such a huge way so quickly and have already bailed out enough firms that were “too big to fail” that they signaled banks and other troubled financial institutions to wait on the sidelines to see what hand out the government would give them. This slowed the lending that typically occurs between banks and dried up liquidity in the market that allows transactions to flow. If they were smart they would have started a long time ago with small incremental changes to build up to what they propose now but as I mentioned before the situation did not really allow – they had to save face.

Fourth, our Amigos are very smart men. But if they didn't have the foresite to see this coming when many others did, why should I believe that they know how to get out of this mess? As I'll point out below I think that there are some important issues they have not even addressed. But why should we expect any more from politicians? I'll ride the free market out thank you very much.

And last, for now, if some type of bail out were to pass, and it appears that the fight for a bail out will continue, I don’t believe that it would improve our final position when the dust settles. In fact, it is likely to make things worse, in my opinion.

The reason why is that the fundamental problems that got is in this position cannot be addressed in a matter of weeks. They run much deeper than that. I think the main long term issues are pretty simple:

1. US consumption is greater than production
2. This consumption has been financed with debt
3. Our currency is no longer backed by gold but is a fiat currency

Now, there is way too much behind each of these statements to address them here. I’d like to attempt that later. In my opinion these are the main issues that will lead to a huge devaluing of the US dollar thru inflation. Stay tuned for more on that …