Limits to government power

In Alan Greenspan’s autobiography, he says that the Fed could not control interest rates; if the Fed had insisted on a high rate of interest for dollars, banks could have borrowed dollars at lower rates from Chinese holders of dollars.

In today’s New York Times, “Why Markets, Not the Treasury, Determine Bank Capital”, tries to explain why the government’s scheme for bolstering bank capital turned into higher dividends for shareholders, acquisitions (e.g., Bank of America buying Merrill and Countrywide), executive bonuses, and just about anything other than more bank capital.

Looking at my economic recovery plan it seems that it still makes sense in light of information that the government is not all-powerful. All of the changes that I propose are to things that the government does control or run, e.g., tax rates, rules for corporate governance, schools, public employee unions, immigration decisions.