Liberals' Wall Street PirouetteBy Thomas E. BrewtonLiberals blaming the takeover of Bear Stearns on capitalism is akin  to blaming the homeowner if someone sets fire to his house.Washington Post columnist E. J. Dionne, Jr. blames capitalism   for the Wall Street meltdown that led to the collapse of Bear Stearns and its acquisition by J. P. Morgan Chase with financial support by the Federal Reserve.  Needless to say, Mr. Dionne uses his analysis to praise collectivist government  intervention in the style of Franklin Roosevelt's New Deal alphabet  agencies.He writes:"I don't fault Ben Bernanke, the Fed chairman, for being so  interventionist in trying to save the economy. On the contrary,  Bernanke deserves credit for ignoring all the extreme free-market  bloviation."Undeniably, there was gross imprudence in the fantastic degree of  leveraging by investment banks to underwrite structured investment  vehicles and, in Bear Stearns's case, to carry the riskiest tranches  thereof for a seasoning period before dumping them into the secondary  market.In the same fashion, there was gross imprudence among the baseball  players who used steroids, but that is no reason to condemn the game  of baseball.The real villain in this set of events in the Federal Reserve  itself. 
Human beings, from the wage-earning homeowner to the Wall Street  tycoon, will always find ways to use huge amounts of money when the  economy is awash in liquidity created by the Fed's deliberate  policies (what Fed chairman Bernanke laughably called, a few months  ago, "a worldwide glut of savings").The Fed's rampant expansion of the money supply gave false signals to  the entire economy, leading individuals to go on a spending binge,  buying automobiles, gizmos, and homes on credit.  The New York Times  reported:"...personal debt in the United States is $13.8 trillion, including  mortgage debt, slightly less than the country's $14 trillion G.D.P."In other words, a huge part of everything produced in the United  States has been bought, not out of real saving, but on credit.Equally damaging has been the misallocation of the economy's scarce  resources induced by inflationary expansion of the money supply.  In  the traditional capitalist economy based on savings rather than on  credit, without lenders thrusting home mortgages and credit cards  into the hands of non-creditworthy borrowers, the huge overproduction  of housing would not have occurred.That credit would not have existed had the Fed not flooded the market  with excess money.  The Fed played the role of the man who gives  matches to small children and tells them to set the woods afire so  that shiny red fire trucks, with sirens and bells, will appear.Capitalism is the precise opposite of this mindless splurging.Capitalism is a system in which individuals are free to save or to  spend what they get in return for their labors.  Only when they save  (i.e., abstain from consumption) and invest their savings in more  productive or innovative enterprises can the economy add jobs, pay  higher wages out of the increased productivity, and increase the  supply of desirable goods and services available to producers and  consumers.Capital is savings invested in productive activity.  It is the  opposite of spending phony money created on the books of account at  the Federal Reserve.Thomas E. Brewton is a staff writer for the New Media Alliance, Inc.  The New Media Alliance is a non-profit (501c3) national coalition of  writers, journalists and grass-roots media outlets.His weblog is THE VIEW FROM 1776http://www.thomasbrewton.com/Email comments to viewfrom1776@thomasbrewton.com