A Bailout Means Less Profit

Some are on about how 'we' can supposedly profit from the bailout. Of course, this sort of talk ignores the glaringly obvious moral problems that come from inflation and other government interference with the market. This whole scheme is simply wrong, regardless of profitability.

The very claim that 'we' can make a profit by using the government to buy all these mortgage bases assets at low prices betrays and lack of understanding, because, if we leave the market alone and let everyone trade freely, then we can make an even larger profit. There are plenty of short sellers who could have made a profit in these past days, but they weren't allowed to. Are they not part of this construct that we like to call we? And the people who finally buy the assets of WaMu, AIG, and every other bankrupt company- AFTER free market processes help us determine the fair price, wouldn't they be part of this aforementioned we?

The government has no way of figuring out the value of these things. They shall either lose money, or make less money than we would have in a free market. They will buy this stuff wholesale without allowing a market price to be established. They are also highly unlikely to get down to the individual mortgage level. There is no way that they will be more profitable than the free market, and many ways in which they can lose.

It is, as F.A. Hayek put it, a fatal conceit, one that leads to more ruin. We are suffering in this country precisely because the government has been meddling. We can't figure out the price signals due to all the noise that they have put into the system. David Friedman has an extremely narrow history on our current problems. He focuses on Fanny Mae, but Fanny Mae is merely one story of many.

And the underlying problem of inflation continues to go unchecked. The mortgaged backed securities are atleast somehow tied to a real asset. The currency is just paper, and it's value depends on the world's faith in the U.S. government. That faith will eventually dissappear, and this bailout silliness will only hastened that day.