LA News Release, "No Bail-out of the British Financial System: Let Failed Banks Fail" (October 2008)
NEWS RELEASE FROM THE LIBERTARIAN ALLIANCE
In Association with the Libertarian International
Release Date: Wednesday 8th October 2008
Release Time: Immediate
Dr Sean Gabb on 07956 472 199 or via firstname.lastname@example.org
"NO BAIL OUT OF THE BRITISH FINANCIAL SYSTEM" SAYS LIBERTARIAN ALLIANCE: "LET FAILED BANKS FAIL"
The British Government's proposed rescue of the financial system is a fraud on the taxpayers and will fail, says the Libertarian Alliance, Britain's most radical free market and civil liberties policy institute.
[The British Government proposes to spend £50 billion of the taxpayers' money on lending to the commercial banks in an effort to ease the liquidity crisis. Full story at http://news.bbc.co.uk/1/hi/business/7657422.stm.]
According to Sean Gabb, Director of the LA:
"Final responsibility for this crisis rests with the authorities. For at least ten years, the Bank of England - and the central banks in most other countries - has kept interest rates below the market equilibrium. The result has been an orgy of credit creation by the commercial banks. This led to an asset price bubble that has now burst.
"This should never have been allowed to happen. Interest rates should have been allowed to settle at levels that equalised the supply of savings and the demand for loans. But the question now is what should be done about it. The British Government is proposing to use £50 billion of the taxpayers' money to buy shares in illiquid banks and other institutions.
"Since this is a state-created problem, some state involvement in solving it might be appropriate. Therefore, if there were any chance that spending the taxpayers' money would restore stability to the markets, the Libertarian Alliance might not object.
"However, it is obvious that £50 billion will not be enough to restore stability. There are trillions of pounds of imaginary money on the markets. The fundamental problem is that no one really believes in this money today, and it just disappears whenever people stop looking at it. No government on earth can painlessly clean up the mess left by the bursting of the credit bubble.
"Governments can stand back and let weak institutions fail. This will bring on the worst financial collapse since 1931, and be followed by a nasty recession. Or they can spray vast amounts of our tax money into the financial markets, which might briefly delay the worst financial collapse since 1931 and a nasty recession to follow.
"The only real beneficiaries of this rescue will be those working in the financial markets. They have spent the past decade stuffing our savings up their noses while telling us they were invested. Now their friends in government have come up with a scheme to use our tax money to pay next year's bonuses.
"The Libertarian Alliance denounces this proposed rescue and predicts bad times for years to come."
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