Snatching Defeat Out of the Jaws of Defeat

I flipped on the TV early this morning and was told that yesterday's 290 point stock market rally was "proof" that the bailout of Fannie Mae and Freddie Mac was exactly what the economy needed. How could I dispute it? It was proof.

Using a logical extension of this existing proof, then it stands to reason that today's 280 point plunge is "proof" that the bailout is exactly what the economy doesn't need.

The bailout was therefore exactly what the economy needs and exactly what the economy doesn't need. Dizzying, huh?

Unfortunately, that's not the only paradox. The Government clearly attempted to reduce uncertainty by bailing out Fannie Mae and Freddie Mac. Less uncertainty would translate into less market volatility. Less market volatility would imply less risk. All things being equal, less risk will eventually lead to greater rewards. For example, less risk and companies might be more willing to add jobs. It was a very noble effort. I'll give them that.

Hell isn't merely paved with good intentions, it is walled and roofed with them. - Aldous Huxley

What we actually got was two consecutive days of heavy volatility (280+ point moves in the DJIA). More volatility implies more uncertainty. More uncertainty implies more risk. All things being equal, more risk will eventually lead to fewer rewards. For example, too much risk and people will invest in highly predictable toilet paper and canned goods instead. Wall Street will not find that to be very rewarding. Not that I speak from personal experience or anything. *cough*

So let's summarize what the bailout has done.

• Gives the economy exactly what it needs.
• Gives the economy exactly what it doesn't need.
• Creates less uncertainty, volatility, and risk.
• Creates more uncertainty, volatility, and risk.
• Offers greater rewards.
• Offers fewer rewards.

That's probably exactly what we should expect out of our government. After all, they are using OUR taxpayer money to bailout US taxpayers out. In my opinion, it is like robbing Peter to pay Peter. How can Peter possibly be any better off once he's been robbed and then compensated for the loss?