The Government’s Actions Are Making the Financial Crisis Worse

The government’s previous actions lead to the current financial crisis. See this.

Moreover, the government’s current actions are actually making things worse:

  • The “Central Banks’ Central Bank” says that all of the “central bank intermediation may in some cases weaken banks’ incentives to resume their intermediation function”.
  • The bailouts are causing HIGHER mortgage rates for consumers
  • The government’s commercial paper buying spree is INCREASING the cost of borrowing
  • They also undermine consumer confidence. For example, consumer confidence is now at an “all-time low”, due partly to “increasing uncertainty about the government’s rescue plan“.

Ill-advised government actions regarding the economy are not a trivial matter. For example, economists at UCLA have concluded that some of FDR’s policies extended the length of the Great Depression by 7 years.

The government’s attempt to stop the inevitable deleveraging process will also backfire.

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