Commentary

Calm Heads Should Prevail on Economy

December is here and the end of 2008 is approaching. As the two year term for the 110th Congress enters its last month there is talk of an auto industry bailout, a stimulus package, and increasing concern over the Fed’s freewheeling monetary policy. While House Speaker Nancy Pelosi has indicated that Congress may come back for one final session, most believe only the auto bailout would be discussed, as House Majority Leader Steny Hoyer has indicated that the 111th Congress will try to have a stimulus package on President-elect Obama’s desk by his inauguration. But if Congress should come back to session this month, they would do well to head the age old wisdom: let cooler heads prevail. The government’s speed to action when the financial crisis was first emerging has probably done more to hurt the nation long-term than help it. Treasury Secretary Paulson told us without tacit totalitarian control of the nation’s economy the world would end. It wasn’t true. And Congress will probably look back with regret at passing “The Bailout” so quickly (and hopefully they’ll regret passing it at all). In England, there is already discussion that the UK should abandon the Pound Sterling in favor of the Euro. European Commission President Jose Manuel Barroso said Sunday, “We are now closer than ever before [to England adopting the Euro]. I’m not going to break the confidentiality of certain conversations, but some British politicians have already told me: ‘If we had the euro, we would have been better off’.” Since the inception of the Euro the Pound has been consistently stronger, one of the strongest currencies in the world. At the start of last summer the Pound was trading 2-1 to the US dollar. Rash action such as abandoning the Pound is unwise. That is not to say whether England should or should not eventually join the Euro, or even to say that state issued currency is the best financial practice. But it is to say that we would all do well to take time in considering what the best economic policies governments should pursue.