Free Marketers Strike Back on the Economy, Energy

University of Chicago Business School Professor Eugene Fama, quoted in CityJournal:

The nature of recessions is important because of what may be the free-market economists’ most surprising contention: that the recession triggered the financial crisis, not the other way around. Fama argues that the recession started as early as 2007, with consumers starting to spend less, borrowers falling delinquent on their loans, and homeowners who lacked a vested interest in their houses beginning to walk away from their mortgages. So the complex financial derivatives at the heart of the financial meltdown were not its cause but its victims. “For 25 years, before the current recession,” Fama points out, “the derivatives worked well in lowering the cost of capital.”

What has Fama learned from the crisis, then? “I learned a lot about government overreactions but not much about recessions,” he tells me. Confronted with a sharp economic downturn, governments face political pressure to act; stimulus spending and other state interventions seem sensible, even when the history of past crises suggests otherwise. Worse, the new public debt and regulations then hobble economic recovery. Rebounding from the post-2007 recession would have been quicker, Fama believes, if the government had mostly let free markets clean up the mess, reestablish true prices, and select the enterprises able to survive.

Read on.

A spike in energy prices was also key. So what is our President Barack Obama doing? Shutting down our domestic production in the Gulf. Plus why can't we develop ANWR? And we need to expedite replacement and build more nuclear plants. This is reality. It could also create real, long term private sector jobs that actually create wealth for Americans, in contrast to government which is a burden.

Instead the president touts these expensive risky green schemes--that we're paying for!-- like the one he visited in Menominee Falls, Wisconsin yesterday.

Then there's this, via Morning Bell:

According to U.S. Chamber of Commerce economist Martin Regalia, the impending Obama tax hike "is going to be a bullet in the head for an awful lot of people that are going to be laid off and an awful lot of people who are hoping to get their jobs back."

Remember in November.

P.S. The Republican candidate for Wisconsin governor, Milwaukee County Exec. Scott Walker, challenges Obama on the high-speed rail boondoggle. Watch: