It was the singular achievement of Murray Rothbard?s America?s Great Depression to have demonstrated that the Great Depression was a crisis manufactured and prolonged by the attempts to stop an inevitable downturn. The policy response?creating more money, propping up prices, ginning up employment, and a host of other devices?took a stock-market price collapse and a banking liquidation and spread the mess throughout every sector of the economy. What might have lasted a year to 18 months instead lasted 16 years.

Let me state this very plainly: I do not believe for one second that if the government fails to nationalize Freddie and Fannie, the world as we know it will come to an end. Those who are saying so are trying to scare the population, the same as with every other major demand by the regime. It was the same with NAFTA, the WTO, the war on terror, the war on bird flu, the nationalization of airport security, and everything else.

If the government did nothing but sell off the assets of the mortgage giants, we do not know for sure what would happen, but the market has a way of finding value and readjusting. I would expect about 18 months of difficulties. Banks would fail just as many businesses in the free market fail every day. Housing prices would fall more, just as all market prices are subject to change. But the process of readjustment would be smooth and rational. Most importantly, we would all stop living a lie and believing an illusion.

Contrary to what the blogging heads say, there is nothing that makes this nationalization inevitable. We need to let the market handle the entire process, come what may. I guarantee that this solution is a better one than creating another trillion or so to bail out failing enterprises.

?mises.org