As you might have noticed, our economy isn't doing so well. Congress has just passed an enormous bailout bill worth $700 billion of taxpayer money. Along with the high price tag, the bill also gives the Treasury Department and the Federal Reserve unprecedented powers over the free market.
For some reason, ever since the Great Depression, the federal government has felt entitled to interfere with market forces even though the Constitution safeguards against such actions. Apparently, we have come to a point in this country where we have adopted a form of economic socialism.
We have let the government seize whatever powers it wants and spend as much money as it wants. Our national debt just passed the $10 trillion mark and shows no sign of stopping. The federal budget is almost twice what it was 10 years ago, and inflation is at an all-time high.
Whenever a financial crisis grips the economy, the only solution politicians offer is to create more bureaucracy and spend more of our money. This is not a solution; it is the problem.
I am sick of these irresponsible practices, and I hope you are too. The following is a quick summary of what has happened these past few years to make my point.
For the Federal Reserve to keep the economy out of a recession after the dot-com bubble burst in 2000, it lowered interest rates and created billions of dollars out of thin air. Within eight years, the amount of currency flowing through the market had nearly tripled. The actions of the Federal Reserve, along with the Community Reinvestment Act of 1995, caused malinvestment in the housing market, allowing another artificial bubble to grow.
Home prices increased at abnormally large rates, and it seemed that anyone who walked into a bank could get a mortgage. Eventually, home prices reached their peak. When it became apparent the U.S. economy couldn't sustain the housing bubble, Federal Reserve Chairman Ben Bernanke lowered interest rates in hopes of keeping the bubble from bursting. Along with the creation of currency and uncontrollable government spending, this caused severe inflation of the dollar.
The value of the dollar decreased so much that commodities like oil and food became much more expensive. People could no longer afford to pay their mortgages and began foreclosing on their homes, especially those with subprime mortgages. The failure of these mortgages finally caused the housing bubble to rupture and sent the stock market crashing down.
Bureaucrats in Washington, in their infinite wisdom, say we should now give them vast amounts of money and power to solve this problem. The solution they offer, which both Sen. John McCain and Sen. Barack Obama support, is exactly the same solution they offered years ago that ended up causing our current predicament.
To me, it sounds like they're trying to detox a crack addict with crack. When they're done, he's still going to be addicted to crack.
Don't get me wrong, though. The government isn't the only cause of this financial debacle. The loan and mortgage industry deserves a lot of the blame for this economic meltdown, too. Remember: The two institutions at the heart of this mess, Fannie Mae and Freddie Mac, were created by the federal government as part of the New Deal.
We are allowing the government to solve the problem it created by doing exactly what caused the problem in the first place.
Daniel Rood is an engineering junior.
