Mortgage Bailout Policies Drive Out Investment in U.S. Economy

Posted by Hans Bader

The Fed has cut interest rates to ridiculously low levels to try to bail out mortgage borrowers and prop up the U.S. economy.  But that has led to a “vicious cycle.”  The Fed’s cutting rates has led to a severe “credit crunch” and ”flight from the dollar” in foreign currency exchanges, notes Stanford Professor Ronald McKinnon in the Wall Street Journal.  In reaction, “Fed responds to the credit crunch by cutting interest rates” further, and as a result, “capital flies out of the country” even faster.  Mortgage bailouts in general are not only a bad idea, but unpopular in public opinion polls, as we previously noted.

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03/31/2008 @ 1:23 pm | Constitutional & Legal, Economic Liberty, Precaution & Risk | Comments

4 Responses to “Mortgage Bailout Policies Drive Out Investment in U.S. Economy”

  1. Posted by: Senate Poised to Pass Mortgage Bailout and Counseling Boondoggle | OpenMarket.org - 04/01/2008

    [...] opposes mortgage bailouts, and they are a bad idea that turns Aesop’s fable on its head and discourages investment.  But Senators want to be “bipartisan,” a desire based on herd instinct that often [...]

  2. Posted by: Fed’s Interest Rate Cuts Hurt Local Banks | OpenMarket.org - 04/07/2008

    [...] overextended big banks, the Federal Reserve cut interest rates to very low levels, triggering a fall in the dollar, reduced investment in the U.S., and inflationary pressures.   According to the Washington Post, the rate cuts are also hurting [...]

  3. Posted by: Congressman Frank’s Mortgage Bailout Pays A Disastrous “Ransom” | OpenMarket.org - 04/23/2008

    [...] leading to a loss of confidence in our economy by international investors.  That’s triggering a fall in the dollar, reduced investment in the U.S., and renewed inflationary pressures.   addthis_url = [...]

  4. Posted by: Congressman Frank’s Mortgage Bailout Pays A Disastrous “Ransom” | OpenMarket.org - 04/23/2008

    [...] leading to a loss of confidence in our economy by international investors.  That’s triggering a fall in the dollar, reduced investment in the U.S., and renewed inflationary pressures.   addthis_url = [...]

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