John Stossel’s article Government Sets Us Up for the Next Bust outlines how the inflationary policies of the Treasury and Federal Reserve are interfering with the proper functioning of a free market economy. The government bailouts are impediments to recovery, because they enable failing financial companies to prolong their failures, rather than restructure into stronger entities.
The government aided by the media is using scare tactics to cheer on further intervention. Comparisons of the current recession to the Great Depression run amok. Even Federal Reserve chairman Ben Bernanke has felt the need to issue denials. Steve H. Hanke of the Cato Institute debunks the notion that government intervention aids in recovery.
the New Deal held down the spontaneous recovery and contributed to the 1938-1939 slump. Indeed, Higgs’ evidence demonstrates that investment was depressed by New Deal initiatives because of regime uncertainty—”a pervasive uncertainty among investors about the security of their property rights in their capital and prospective returns.”
The more the government interferes with the free market, the greater the negative impact will be to economic recovery, because of the damage it does to confidence in property rights. Consequently, the economy is worse off than if it was left to recover on its own, if private investment were allowed to direct the market.
