Tuesday, September 09, 2008
So, the US government acted in a way to prevent a collapse of lenders everywhere. This action undoubtedly will have a major effect on the world economy. To me, this is a time when I have to admit that I was wrong in some of my previous posts. I asserted that there was very little if anything that our government could do to control the economy and in particular to ward off a recession. In my defense, I was thinking specifically about tax policy. I still believe that the rate of taxation has very little to do with the health of the economy. Cutting taxes does not appreciably spur the economy. However, using tax money to prevent the collapse of the home mortgage industry certainly does ward off a big, big recession.