The Fed's Last Hurrah

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"The Fed is now inflating the biggest bubble of them all—a bubble in government."

During the 1990s, inflationary Federal Reserve policy fueled a tech stock bubble. When that bubble burst, the Fed inflated a larger one in real estate. Now that, too, has burst, the Fed is inflating the biggest bubble of them all—a bubble in government. While the earlier booms at least provided the illusion of prosperity while they lasted, the government bubble will cripple the economy and deliver widespread misery to Americans.

There will be winners in the government bubble, at least for a while. As was the case with the stock and real estate bubbles, plenty of money will be made by the well-connected and parasitic classes. Government employees will continue to enjoy pay raises at our expense, as will anyone benefiting from the new wave of subsidies (i.e., Wall Street investment bankers, financial speculators, etc.

Our economy is being transformed from a mostly capitalistic one to a mostly socialistic one. More decisions are being made by politicians and lawyers in Washington and fewer by entrepreneurs. The motivation behind this shift is the mistaken belief that the financial crisis of 2008 was caused by too much capitalism and a lack of proper government oversight. This conclusion is self-serving for those in power, and couldn't be more economically misguided. Through corruption or just plain ignorance, Congress and this administration have embraced an ideology that has failed every time it has been tried.

Whether it is in education, housing, health care, automobiles or banking, greater government involvement in the economy means higher prices, lower productivity, more bailouts, bigger deficits, increased taxes, diminished industrial capacity, fewer private sector jobs, less freedom and a falling standard of living.

In the end, when runaway inflation and skyrocketing interest rates burst the government bubble, there will be no more bubbles to replace it—just one hell of a hangover.

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