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Still Hoping Against A Bailout

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," 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

As my colleague Richard Wagner 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.

Donald J. Boudreaux