This comment in a Financial Times post by Willem Buiter, The end of American capitalism as we knew it, is a perfect illustration of Mises’s point that interventionism is not stable and tends to lead to more and more interventions until parts of the economy are outright socialized:
If financial behemoths like AIG are too large and/or too interconnected to fail but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place?
…There is a long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer.
It is important not to miss the hope in Mises’s gloomy thesis though. The chaos caused by interventions do not have to lead to more interventions. There is a fork we can take that leads to a road less travelled. In this particular case, it requires rejecting the notion that “deposit-taking banking institutions… cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer.” Not only can they exist safely without state involvement, they would ultimately be more safe and stable then the house of cards we are now watching fall apart.
[Thanks Big Contrarian]