The Bush administration’s failed $700 billion bailout of the financial markets “constitutes the single greatest case of ignoring the free market in modern history,” according to Chuck Butler. Here’s what Chuck says should be happening in a free market. It starts with “an effective cleansing period” and is followed by “a healthy recovery period.”

Availability of credit allows money to flow between savers and borrowers.

Resources and funds are allocated to various projects or investments during a boom phase.

Eventually borrowing becomes excessive and leads to malinvestment, thanks to the suppression of the real rate of interest by our illustrious Federal Reserve Banking system.

At this stage, adherence to the free market theory would allow for an efficient cleansing period and a healthy recovery period. How? Irresponsible and unprofitable businesses fail. Bad debts get liquidated. Excess resources go on sale, flow into more stable ventures and pool together with more profitable resources controlled by healthy corporations or entities.

Sure, pain is felt by certain parties who can’t keep things going. But the moving parts become more efficient and stronger. Healthier, more efficient businesses emerge.

As the Austrian School of economists says, the bigger the boom generated by manipulation of money and credit, the bigger the ultimate bust.

That’s important, because thanks to the massive manufacturing and sale of derivatives, there has never been a boom supported to such a large degree by thin air. And since the laws of gravity haven’t been outlawed yet, what goes up must come down.

And here’s what’s actually happening in “CEO president” George Bush’s version of the free market:

Unfortunately, self-proclaimed free enterprisers – President George W. Bush is one among many – are either ignoring or are unable to accept the fact that some people must suffer as the purging process runs its course.

Often their vision is blurred by their quest for a tighter grip on the private sector. They call it “compassion,” but I call it “zeal for power.” Worse yet, they use other people’s money – namely, yours!

In its infinite wisdom and undying compassion for the public, our government does all it can to hamper the market’s cleansing tools – recessions and deflation.

Instead of one swift painful smack in the head by the invisible hand, their very visible hand “helps” to ensure the economy will grow much less efficiently AND remain much more vulnerable to future shocks to the system.

PS: Just minutes ago, President Bush warned Congress today that the country’s economy was at a “very critical moment,” and that its to pass his administration’s bill would “painful and lasting” economic hardship. The question is: Who’s listening?