Despite the largest economic bailout in the history of the country, the once-free American market is spiraling down, down, down…and other world markets are going down with it.

A London Times report this morning indicates that the global credit crunch is “now moving so fast that governments around the world are finding it impossible to keep pace.”   Last week in Ireland and Germany, government officials moved to guarantee bank deposits, but these efforts have failed to produce the expected rebound or increase in investor confidence in the market.

CBCNewsCanada reports that

Britain’s benchmark stock index, the FTSE 100, lost 220.11 to 4,760.14 - a 4.42 per cent fall. The banking industry led the declines, with the mining and oil industries also suffering drops. HBOS PLC’s share price tumbled 15.7 per cent, while the Royal Bank of Scotland Group PLC dropped 13.6 per cent.

Germany’s DAX index edged down 4.22 per cent to 5,552.27. France’s CAC-40 index fell 4.85 per cent to 3,882.81. In Russia, the RTS stock index fell more than seven per cent in first 20 minutes of trading.

In Asia, the markets were in the red. Tokyo’s Nikkei 225 index dropped to its lowest level in four and a half years, plunging 4.25 per cent to 10,473.09.

Hong Kong’s Hang Seng index edged down five per cent to 16,803.76. Markets in China, Australia, South Korea, India, Singapore and Thailand dropped significantly as well. Indonesia’s key index fell 10 per cent, its largest one-day drop ever.

And with the United States economy appearing to head into a period of recession, Asian investors expressed skepticism about the positive impact of the $700 billion bailout plan passed by Washington on Friday, a concern fueled by a U.S. jobs report that shows an upward tick in unemployment figures.

“There are strong doubts about its implementation,” Yukio Takahashi at Shinko Securities Co. said in Tokyo.

No kidding.

And now Congress is pushing for even greater government regulation of the market, citing the lack of oversight and regulation as the cause of the market tailspin.

However, more government regulation is not the solution to free market corrections.

Despite increasing regulation during the Bush Administration, just look at what has happened since the President took office  (facts and analysis provided by the Heritage Foundation):

Money spent by federal regulatory agencies is up to $44.9 billion in 2007 from $27 billion in 2001, a 44% increase.

Total people employed by federal regulatory agencies is up to 244,000 in 2007 from 172,000 in 2001, a 41% increase.

Total number of pages in the Code of Federal Regulations is up more than 4,500 pages since Bush took office.

Cost imposed on Americans is more than $28 billion in new regulations since Bush took office.

In total, the federal government imposes a nearly $1.1 trillion regulatory burden on the American people every year. Many of these regulations are justified. Providing transparency and creating information are value-added government functions. Regulation is not per se inconsistent with market principles. Some reinforce property rights and market mechanisms.

But creating a massive government duopoly in the residential real estate market does not reinforce market mechanisms. It perverts them, and it perverts them to such a degree that some estimate that Freddie Mac and Fannie Mae purchased more than a third of the $3 trillion in junk mortgages created during the housing bubble. They did so because heavy government regulation required them to push as much money into questionable mortgage buyers as possible.

The current trend in governmental bailout banking packages—whether in the United States, Britain, Ireland or Germany—is a defective solution to prop up institutions that should fail from poor business decisions.
But increasing government interference in the private sector is like jumping out of an airplane with a defective parachute.  And, we know the likely outcome of that scenario.

Sooner or later, this practice may well take the entire global economy all the way down.

As Ronald Reagan said in his 1981 inaugural address: “Government is not the solution to our problem; government is the problem.”

Brace yourself…it’s going to be a hard landing.

This entry was posted on Tuesday, October 7th, 2008 at 11:09 am and is filed under Fiscal Conservative, National Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.