The Government Takes Over—Prices, Shortfalls and What Comes Next

One of the most interesting things about the recent $850 billion Wall Street bailout is how foregone a conclusion its passage was. Even with the temporary revolt of House Republicans (and a number of Democrats) in the end there was no question that as member after member of Congress said, “everyone agrees that we have to do something.” The only questions were really when, how much, and to whom, exactly, the money would flow.

The fact is, pumping money into the system at the first hint of trouble has for a very long time been a matter of economic orthodoxy—an orthodoxy so powerful that events like last Friday’s bailout, today’s worldwide coordinated central bank action or last month’s takeover of Fannie and Freddie were, in truth, faits acccomplis years ago (and were predicted—in outline, but with surprising clarity—by numerous observers, including Stephen Leeb, Jim Puplava and a number of others). In a choice between debt collapse and inflation, governments will always choose the latter if they can.