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Trump’s Economic Era

risk private bonds held by commercial entities. These
actions helped relieve the panic and conditions
improved. Just as JP Morgan and others envisioned in
1913, the Federal Reserve saved the day by being a
lender of last resort.

TOO BIG TO FAIL?

Keynesians support bailouts because they believe
that the failure of large corporations will systematically
lead to a full-fledged economic collapse. Austrians
argue that the practice prevents the economy from
finding its floor and thus inhibits the system from
seeking equilibrium.

General Motors (GM) was losing billions of
dollars per year before the government partially
nationalized it in 2009. For years, GM routinely agreed
to generous labor contracts with the United Auto
Workers Union (UAW). By the time the 2007-2008
recession hit, GM was uncompetitive due to high labor
and pension costs.
Previously, the company would have declared
bankruptcy and the bankruptcy courts would have
sorted out who gets what. Other businesses would have
purchased the assets of GM and started producing cars.
Instead, the government, with the help from the
Canadian government, granted loans to GM. This
arrangement allowed GM to continue business with all
its baggage intact.
International authorities have bailed out whole
nations. For example, the World Bank granted Greece
a series of loan extensions for years. Puerto Rico, a U.S.

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