The opening scene of KatyÅ„ – a World War II film focused on Poland – shows a group of Polish refugees attempting to cross a mist-covered bridge. They are fleeing from the invading Germans. At the other end stands another desperate group of Polish refugees fleeing from the Russians. And after the fog over the bridge dissipates, individuals from both groups shout across the bridge demanding to know where safe haven is.
Today’s refugees are taxpayers who are tirelessly chased by Big Business (the banking establishment) on one end and Big Government on the other. Yet this clash can be wholly prevented.
The Smoot-Hawley Act of 1930 is widely considered a major cause for a lengthening the depression. Prior to its enactment, over 1000 economists signed a petition calling for President Hoover to veto the act (the same Hoover who is continually cited as being hands off). He didn’t.
Contemporaneously, several government organs are creating legislation that could be just as damaging to the long-term economic growth as this Act. And the growing consensus among economists of all political persuasions is that these actions are wholly unnecessary, unjust and would only exacerbate the problem in the long run.
For instance, the SEC, led by Christopher Cox continues to add firms to the short sell ban list. Last weekend it started at 799 and it has increased to 926 firms (two have heroically removed themselves from it).
One wonders since diversified companies like GE are on the list, why not just add every public company? Why let any stock price decline?
Meanwhile, Treasury led by Henry Paulson, continues to not only be given unilateral control over vast swaths of financial regulation, but has authored the largest socialization plan ever. Not only does it force taxpayers to deleverage domestic firms that made poor business decisions, but it now includes the power to bailout foreign firms operating in the US.
Combined with the never ending subsidies from the Fed, these organs have the potential to repeat the disasters of the 1930s.
Contra Krugman, we are all Polish now.