March 23, 2009 - By True Patriot and
Congressman
Ron
Paul
The distraction on Capitol Hill this week has to do with the
jackpot bonuses that executives at AIG recently received.
The argument is over a relative drop in the bucket. The total
amount of bonuses given out was $165 million. The government
has put $170 billion into AIG so far. Many now are demanding
we get this money back. We ought to be spending our time
and effort doing something more worthwhile, like figuring
out how the Federal Reserve is handling the trillions of
dollars they are creating and pumping into the economy, and
how that is affecting the purchasing power of dollars in
your pocket.
The big mistake was appropriating the TARP funds in the first
place. A Johnny-come-lately bill of attainder won’t stop
the spending epidemic. This whole situation is a perfect demonstration
of why “doing nothing” and letting failing companies
fail would have been much better than sinking valuable money
and resources into them.
When a company makes a profit, it is a signal that it is taking
resources and increasing their value while controlling costs.
When a company operates at a loss, it is a signal that it is
decreasing the value of its resources or letting out-of-control
costs outstrip any value it has created. A company operating
at a loss is therefore an engine of wealth destruction. Bankruptcies
are a net positive for the economy because more productive
competitors are rewarded by opportunities to buy up remaining
assets at bargain prices to strengthen their operations. In
an economy that allows this kind of growth and change, any
jobs lost by bankruptcy are soon replaced by new ones as the
most efficiently managed businesses gain access to more assets
and expand.
Bankruptcy was the stimulus that we needed in the case of
AIG. More bankruptcies would clean out malinvested resources
and enable economic growth again.
AIG, by losing money and maneuvering their operations to the
brink of bankruptcy, was telling us that they were inefficient.
So what did we do? We forced the taxpayer to assume the losses,
and now we are supposed to be shocked that it is not working
out. Had AIG gone bankrupt, it would have been impossible to
hand out these bonuses. The taxpayer would have been fleeced
for $170 billion less last year. Had they gone bankrupt, the
world would not have come to an end, it would just continue
on with one less engine of wealth destruction.
We should have learned from Japan. The 1990’s is referred
to as Japan’s “lost decade” because of the
zombie banks kept on life support by the Japanese government.
Any productivity was redirected through these engines of wealth
destruction, resulting in long term stagnation. We should and
can avoid this outcome if we come to our senses.
A recession should be a time of strengthening and regrouping
for an economy. But as long as the government insists on maintaining
the status quo by propping up failed institutions, we will
continue to dig a bigger hole for ourselves.
Read more Articles by Ron Paul at http://www.house.gov/paul/legis.shtml
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