Ensuring that the public has control over their earnings and savings led to the creation of Bitcoin. However, has this actually made a difference? The public, in actuality, does not have control over the spending of capital. Case in point, the policy of state governments to bail out banks at the taxpaying citizen’s expense.
A History of Fleecing the Taxpayers
The policy of bailing out companies in crisis is nothing new and has been practiced by practically all state governments across the world. Whenever a major MNC is in trouble they look upon the government for a helping hand. This help is acceptable to the public given the jobs of many working-class citizens are at hand. Directly giving funds or just sweetheart loans to physical companies such as car manufacturers, airlines and the like is harmful to the economy, yet tolerable. Bank bailouts, on the other hand, are almost universally hated.
For the economists, the bailout policy is a cushion which helps or rather encourages them to invest or initiate a risky project. They know that in case of a major fallout the taxpayers money will save them while any gain made will simply be pocketed. This is a creation of bad incentives for company executives. The general public argues against ‘fat cat’ bankers getting enormous sums of money due to their crony connections to politicians. This is the reason why central banks and state governments create a rhetoric of a national emergency and warn that a cleanup of the banking system might cause a complete economic collapse.
The United States’ 2008 mass bank bailouts are a perfect recent example of the redundancy and criticism of the bailout process. Banks in America became insolvent after the 2007 subprime mortgage crisis. The Bush administration was quick to save them. The Troubled Asset Relief Program (TARP), which propped up the too-big-to-fail banks with hundreds of billions of the taxpayers’ dollars, was passed with much protest both from the ideological right and the ideological left. The controversial process is credited with triggering both the Occupy Wall Street and the Tea Party movements.
What Can Be Worse Than a Bailout? A Bail-In
The bank bailouts do sound troublesome but there are other ways which also illustrate how the general public lack control over their money. Bail-ins are a relatively newer strategy where it is the depositors who are at risk instead of the taxpayers. This being a comparatively more obvious and direct confiscation of wealth, governments will try to avoid bail-ins if they can just print more fiat or take on debt.