|
As
opposition leader, Stephen Harper once stated, "The
government that governs least governs best," a remark meant
for a former Liberal Party prime minister and his cabinet.
He professed one economic ideology prior to acquiring
governmental power, but a very different economic strategy
after having acquired it. The timing of the bank bailout
suggests that it was intended to win voter support. It may
prove to have merit in the short term, but achieve little to
increase exports to the problem-ridden American economy.
The most recent problems
in the American economy can be traced back to the economic
policies of an influential personality who, in the early
1960s, wrote an article that extolled the virtues of an
independent gold standard banking system. He elaborated on
how adherence to such a system could have prevented the
stock market crash of 1929 and the Great Depression that
followed. In later years, Alan Greenspan became chairman of
the American Federal Reserve and was expected to be very
careful about the rate at which that institution printed
money, given his knowledge of the dangers of rapidly
increasing the amount of money in circulation. He had
identified the artificially low interest rates and easy
credit of the "roaring 20s" as having led to a speculative
boom that culminated in the Monday, October 29, 1929 stock
market crash.
Under Greenspan though,
interest rates dropped to 1% and the Fed provided easy
credit for select sectors of the economy. He may have
believed that he could stimulate development in very
promising sectors of the economy while avoiding the monetary
mistakes of the 1920s through the use of monetary regulation.
He made low-interest credit available to the high-tech and
information sectors of the economy. The problem is that no
central banker could have known when easy credit was being
given to hordes of entrepreneurs whose high-tech and
information-sector business plans had little hope of any
commercial success.
Greenspan's policies gave
rise to the high-tech boom and malinvestments that ended up
in the high-tech bust and dot-com meltdown. Even before the
high-tech meltdown had been liquidated, massive amounts of
money moved toward more secure economic areas such as home
building, housing markets, and the energy sector. The
Clinton administration had initiated super low-interest
loans to encourage more Americans to become homeowners.
Interest rates were only raised after June 2004. Over a
period of several years, that policy essentially compelled
banks to make such loans to large numbers of very high-risk
clients. The market has begun to correct itself with the
mortgage meltdown of recent months.
|
