Politicians love comparing the Great Depression to what is going on today. The reality is that it will never be as bad as it was in the 1930′s. Not because we have such great government institutions in place to make sure something so devastating never occurs again–in fact, we have the opposite in place–but, technology and the free market has improved everyone’s lives so greatly that it would be very difficult to literally relive the 1930′s.

There may be comparable numbers in terms of relative stock market losses, unemployment, etc. but, we still have the technology that we didn’t have back then. No matter what happens, unless we go back to the stone age, we are going to live through this depression in a much more comfortable state.

Now that we have put things into perspective, the heads of state attending the G20 Summit in London are using the threat of a world wide Greater Depression to further undermine people’s Liberties and make the situation worse for the masses. Obama is pitching his monkey-devised economic rescue plan to the world in hopes that everyone will adopt it.

I plea to the rest of the world to ignore what Obama has to say. He is either intentionally trying to feed poison to a weakened world economy or he has no economic understanding–either one is bad for all of us.

“We cannot afford half-measures and we cannot go back to the kind of risk-taking that leads to bubbles that inevitably burst,” he (Obama) said Wednesday.

This line is mostly meaningless. Who is taking risks? What the hell are half-measures? Obama has never said anything meaningful so this is certainly not something new. He is all about vague ideas of hope and change. Obama’s economic stimulus plan is an economic disaster.

The stock markets have rallied in the past week. Some people may call this the beginning of the new bull and that we’ve hit a bottom. It could be possible but, that is highly unlikely. The more likely scenario is that this is a bear market rally.

The sad reality is that ever nation at the G20 has the same plan. They want to argue over how much regulation here and there but, the ideas are all the same. They want to pump in enormous amounts of money into the economy. It doesn’t take an economic genius to understand that you cannot solve the problem of too much spending and credit with even more spending and credit.

However, it is the economic geniuses who will tell you we need to spend more and go deeper into debt to solve the problem of being in too much debt! There is no financial wizardry that makes this a workable solution. Natural laws cannot be defied by government!

The entire G20 hocus-pocus is to make it look like world leaders are doing something to save the world economy from ruin. There is nothing they can do that they also like to solve or mitigate the problem. The real solution is to shrink the size of government all over the world. Politicians don’t like to do that. Why would they want to take power away from themselves?

The real point of the G20 Summit is about how governments around the world can make this economic crisis worse.

The war on drugs has never and will never reach its objective to fixing the drug problem. It only creates new problems while making the existing drug problem worse. In a CNN editorial, Jeffrey A. Miron, a senior lecturer in economics at Harvard University, says that we should legalize drugs to stop the violence.

“Prohibition creates violence because it drives the drug market underground. This means buyers and sellers cannot resolve their disputes with lawsuits, arbitration or advertising, so they resort to violence instead.

Violence was common in the alcohol industry when it was banned during Prohibition, but not before or after.”

It is almost second nature for people to want government to enact laws forbidding behaviors, substances, or activities that they won’t agree with. This has mostly to do with the “government is the solution” mentality. In reality, government is not the solution. This is why prohibition of alcohol failed so miserably in the 1920′s.

“The right policy, therefore, is to legalize drugs while using regulation and taxation to dampen irresponsible behavior related to drug use, such as driving under the influence. This makes more sense than prohibition because it avoids creation of a black market. This approach also allows those who believe they benefit from drug use to do so, as long as they do not harm others.”

This is the sensible policy because the war on drugs is never going to eliminate the use of drugs. Those who want to use drugs are still going to use drugs. The only outcome of the war on drugs is death as black markets are created.

“The U.S. repealed Prohibition of alcohol at the height of the Great Depression, in part because of increasing violence and in part because of diminishing tax revenues.”

Although I would rather see sensible policies enacted and a respect for Liberty displayed when we aren’t in an economic sinkhole, I’ll accept it anyway. Perhaps the government will be forced to legalize drugs in an attempt to generate more revenue in a quickly shrinking economy.

The House defeated the $700 billion bailout plan today and the Dow Jones responded by dropping 777 points–777.68 to be exact. This was the largest single day drop ever. Analyst and politicians may start blaming the people for being non-supportive of this bill but, the market had to fall. It was up or held steady because of speculation that a bailout was coming and due to the naked short selling bans. The market is now merely doing what it is supposed to do: find equilibrium.

TV pundits and Washington elites will try and convince us that we need to do something now more than ever. We should continue to do nothing to bailout Wall Street. Any bailout will only compound the problem and cause more economic problems. We are in the worse crisis since the Great Depression and if government doesn’t keep its hands off, the problem is going to get much worse.

The idea that we need to ensure prices do not fall is a ridiculous notion. By propping up home prices, gas and food prices will go up as well and no one wants that. Housing prices cannot stay at their current levels. In most of the country, home prices have already fallen through the floor from their highs. There should still be more to go. In big cities like New York, real estate prices have held pretty well. It can’t and won’t last.

It was due to the government passing legislation that forced banks to lend money to anyone and everyone so that everyone could “own” a home that caused this crisis. If you cannot afford a home, you should not be buying one. Using “creative” financing is not a good solution. I don’t like to point a finger at any particular party but, in this case, it was the Democrats who pushed through the Community Reinvestment Act. It was originally signed by Carter in 1977 but, not well enforced and amended until 1995. Essentially, it was President Clinton who presided over the increase for mortgage access in inner cities and distressed rural communities.

This act also promoted the use of Fannie Mae and Freddie Mac as a means to unload these mortgages due to their risky nature. Fannie and Freddie were GSEs–government sponsored enterprises–and now they are fully government owned. The two GSEs would repackage the mortgages as securities and sell them on the open market. Because Fannie and Freddie were government backed, their mortgage securities were given high ratings even though they clearly did not deserve it.

The point is, the government caused this horrible financial mess we are in. If left to free market devices, the amount of bad mortgages would have never risen to such levels. So when politicians–especially Democrats–try to blame this crisis on the lack of regulation, they are lying through their teeth or just plainly do not understand economics. Either of which is not a positive for holding public office.

The exponential rise of real estate prices is directly attributed to the massive amount of buyers that flooded into the real estate market due to government demanding everyone own a home and bid prices up higher and higher. Now because everyone’s houses went up in value, some decided it a good idea to refinance and borrow against their home so that they could take that vacation, buy that new car, or whatever. It was fun for several years until people started missing payments and foreclosures started taking place.

Housing prices started to collapse and now millions of Americans have upside down mortgages with negative equity in their homes. The party had ended and here comes the hang over.

Government bailouts and interference of market forces is the equivalent of drinking more and more alcohol in order to delay the hang over. It is logically not a good idea. You need to allow the alcohol to leave the body or in this case, allow the bad debt to leave the market. In fancy-pants talk, we need to liquidate the bad debt. It won’t be painless–hang overs aren’t painless but, they are necessary.

The economy is not in good shape and if we can keep the government from trying to “fix” things, it will start to improve a lot sooner. However, if we allow the government to intervene like it did during the 1930′s, the 16 year Great Depression is going to look like a walk in the park. We do not need government works projects or any other absurd creation of Hoover or Roosevelt.

While it is difficult to do nothing while people are suffering–you and me included, one must remember the ideas of economist Frederic Bastiat. We need to take into account the opportunity costs that we do not see. It may look like a good thing if government provides jobs because in the short run unemployment would be kept in check but, new and more efficient jobs and markets will not get the capital they need because government had directed capital elsewhere. That is exactly how a short painful recession can turn into a long painful depression.

The other danger of government intervention is that the only way government is going to be able to pay for the bailouts and works projects is to increase the national debt by borrowing or by printing more dollars. Both choices are incredibly bad. The current economic crisis won’t kill us, hyperinflation will. Having a lot of dollars is meaningless if they can’t buy anything. The Federal Reserve has already increased the money supply by 8% in the last week to try and “smooth” the gears of the financial system–it won’t work. It is only going to devalue the dollars we currently have.

It was a great victory for the American people today that this bailout of the rich and well connected was defeated. We cannot privatize profits and socialize losses. It is unlikely that Paulson, Bernanke, Bush, and co. is going to let it go. They will try to push some sort of bailout through as best as they can. The Senate will vote on the bill later in the week. This bill does nothing to benefit the people. We need to tell our Senators that we do not support the bill and demand that they vote against it.

Any Senator who votes for this bill should not expect to be re-elected. This is a grand robbery of the American people and I’m glad we didn’t stand for it. The massive public outrage over this bailout bill played a great role in its defeat in the House. Today was a victory for the people. May we continue the fight.

For more insights into the economic crisis and its inner workings, check out LewRockwell.com and The Mises Institute.