The G20 meet today at the White House to determine how to save the world’s economies. Yet, these are the same folks who for years have promoted easy credit, pushed banks to issue unsound loans, created government programs or sponsored entities to buy up those risky loans, and otherwise corrupted the free market system.
Hopefully, world leaders realize that manipulating financial markets for political gain can only hurt those markets, not help them. As CEI President Fred L. Smith Jr. and John Berlau, the Director of the Center for Entrepreneurship, point out in the Washington Times, the best solution is for government to remove the bad financial rules that got us here in the first place:
The best concrete achievement coming out of this meeting would be for governments to agree to a timetable to end the bailouts and denationalize their banks.
They also point out that the G20 shouldn’t be gripped by the feeling that they have to “do something” to save the world from a second Great Depression
Despite the existence of foolish lending practices and perverse policy incentive, by itself the sheer number of mortgage delinquencies and foreclosures doesn’t justify a crisis of this magnitude. In the Mortgage Bankers Association’s latest National Delinquency Survey, the mortgage delinquency rate is just 6.4 percent – historically high, but not anywhere close to the mortgage default rate of more than 40 percent in the depths of the Great Depression.
So, the G20 ought to get out of the way, not use the talk of crisis and depressions to justify a huge takeover of the financial industry by governments. This is a crisis to be sure, but it’s a crisis that’s best solved by getting government out of the market. After all, it was government that got us here in the first place.