A very clear explanation of how the government shenanigans in the bank and auto company bailouts is undermining our economy and the rule of law is provided in Peter Schiff’s short article “Property Rights Takes a Hit”, quoted at Nathan’s Economic Edge.
Schiff opens with: “Crony capitalism is a term often applied to foreign nations where government interference circumvents market forces. The practice is widely associated with tin-pot dictators and second-rate economies. In such a system, support for the ruling regime is the best and only path to economic success. Who you know supersedes what you know, and favoritism trumps the rule of law. Unfortunately, this week’s events demonstrate that the phrase now more aptly describes our own country.”
He goes on to predict that the blatant disregard for the rule of law involved in recent govenment economic interventions will inevitably undermine capital investment and turn the US assets and capital markets into risky bets with valuations responding accordingly.
When the Supreme Court chose to allow the White House to undermine well established contract and bankruptcy law and give massive handouts to Autoworker’s union at the expense of the investments made by the pension funds for Teacher’s and Fireman’s unions, it became clear that we are well on our way down a very slippery slope. The irony of a decision to steal from one union in order to offer unprecedented handouts to another makes one wonder how such choices will be balanced and made once the fundamental decision to simply ignore the law and violate the constitutional protection of property rights has been reached.