My Sagacious Barber

We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself. We believe in the free market as the best tool to sustained prosperity and opportunity for all.

-Republican Party Platform, 2008


"Laws shouldn't bail out lenders. Laws shouldn't help speculators."

-President Bush 5/19/08


"The fact is, the markets work, and they are working. And people - some of the big companies obviously - have taken risks. Risk means risk. And there's an upside as well as a downside in some of the choices they've made. We have to be careful not to have this set of developments lead us to significantly expand the role of government in ways that may do damage long-term for the economy. We don't want to interfere with the basic, fundamental working of the markets."

-Dick Cheney 11/26/07


"What exactly is our opponent's plan? What does he actually seek to accomplish, after he's done turning back the waters and healing the planet? The answer is to make government bigger"...

-Sarah Palin, Republican National Convention


While I was sitting in his chair a couple of weeks ago, my barber leaned close and said he had a stock tip for me. He said he had just bought some Fannie Mae. When I told him I didn't think that was such a great idea, he scoffed at my pessimism, confidently claiming that "the government will never let it go under." He grew up in Russia during the 1970's, so he knows a good government guarantee when he sees one. And as of Friday he was up nicely on his Fannie stock.

Unless he cashed out already, we'll see what happens to his investment this week. The news about the taxpayer takeover of Fannie and Freddie is both momentous and unsurprising. To the extent it's the latter, I don't have much more to say that I haven't said before. In one sense, the timing is outrageous: just before an election, and right after an inconveniently bad week for the stock market. But for fans of accountability, the timing is good. Far better now than after Inauguration Day. This way, at least the responsibility is clear, and the Kudlows of the world won't be able to spend the next few decades blaming the Democrats. In a perfect world, any political party that presided over this sort of debacle would wander in the wilderness for years or be permanently discredited. Instead, the incumbent party finds itself within a few percentage points of being rewarded with a third term in the White House. If Americans decide to give it that third term, they'll deserve everything they get -- not only financially but, as I've said before, in terms of national security/physical safety.

Who will pay for this? Nominally, every taxpayer. But in real terms and disproportionately, the prudent will pay via inflation. Did you sit patiently on the sidelines during the past few years while building your savings? The unstated message of these bailouts and interventions is as damaging as it is clear: participate in the next bubble. Buy into the "ownership society." (The cheapening of that important concept has been one of the worst big-picture effects of this era.) You're prudent at your own risk, because when the bubble pops you'll be forced to participate whether you like it or not. If people really understood what was going on here -- essentially a system of "soft slavery" in which an ever-increasing amount of one's daily labor subsidizes Wall Street and the speculator class via inflation and the socialization of risk -- they'd be in the street. Of course very few do understand it, which is what policymakers count on.

In the long run, the best way to protect yourself from this madness is to shun the U.S. dollar in favor of other currencies and gold. The nations that have had the gall to do that during the past few years -- Russia, Venezuela, and Iran among others -- constitute an existential threat to Bailout Nation. How much longer can we allow that? It's not too hard to see where all this is going, is it?