Did Osama Bin Laden Win?

The stock market just fell below 9000 for the first time since the 90's after the Dow dropped another 679 points today. The stock market has already fallen almost 40% from its all time high of 14164 in October 9th of 2007 and will probably continue to fall. Huge banks such as Bear Stearns and Lehman Brothers have failed along with insurance giants like AIG. Mortgage foreclosures are up, inflation is up and Americans still save less than 0% of their income. That brilliant $700 billion dollar bailout package doesn't seem to be having its desired effect.

All of this was predictable and I take little pride in the fact I predicted it given how obvious it was (and how bad it could get). Economics is an extremely complicated discipline, but the basics are pretty simple. You cannot dramatically lower taxes, dramatically increase spending (Medicare expansion, No Child Left Behind, Department of Homeland Security, etc.) and start two wars with out bankrupting your country. Our government is worse than a teenage girl with her parent's credit card.

What makes this even worse is that not only did we do it to ourselves, but we fell right into our enemy's plan. We executed it to a T. Osama Bin Laden knew very well he couldn't defeat the United States militarily. What he did know is that he could get us stuck in the Middle East crapping money away fighting endless insurgencies. He bled us. And that was his strategy the whole time! He even stated it publicly saying, "So we are continuing this policy in bleeding America to the point of bankruptcy." He went further and cited Russia, who in the 1980's were bankrupted fighting Bin Laden's insurgents in Afghanistan. Yet we were still too stupid to listen, or at least our politicians were.

So where do we go from here? Well first things first, we have to withdraw our military. Not just from Iraq and Afghanistan, but from the entire world. The quasi-empire can go! As far as Osama Bin Laden is concerned, he'll lose support if the US leaves the region. Radical Islamists will likely turn on their own government instead of worrying about a bunch of infidels on the other side of the planet. Regardless we have bigger problems at home.

We then need to use the saved money to balance the budget. Right now, we just gave a $700 billion dollar bailout to our major financial institutions, but we have no money and our credit line with China is basically maxed out. So we almost assuredly just printed the cash. This crisis will get much worse if we keep that up, the dollar will just collapse and we'll have runaway inflation during a recession. We need to keep taxes as low as possible for the time being and simply be patient while the market liquidates the bad debt. It will take time and it will hurt, but there is no such thing as a free lunch. You have to pay for your mistakes. And the United States has many mistakes to pay for.