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Here’s a letter that I sent yesterday to the New York Times:
Deeply upset that the House of Represetatives voted against the bailout
plan, David Brooks writes that "We’re living in an age when a vast
excess of capital sloshes around the world fueling cycles of bubble and
bust. When the capital floods into a sector or economy, it washes away
sober business practices, and habits of discipline and self-denial"
("Revolt of the Nihilists [2]," September 30).
So, pray tell, how
will a massive government bailout of persons who behaved imprudently –
a bailout inevitably injecting hundreds of billions of dollars of
additional paper capital into the economy – solve the underlying
problem?
As my colleague Richard Wagner [3] points out, markets
aren’t intoxicated by large flows of capital per se. Such bubblicious
drunkenness results from capital that is politically supplied and
directed – just the sort of capital promised by the bailout plan.
Sincerely,
Donald J. Boudreaux