Every talking head when asked about the stimulus package replies, “ The government had to do something”. This off the top of their head blurb is supposed to catch on like a popular mantra and go unexamined, muttered incessantly and somehow have credibility and substance. Just once you would like to hear a discussion of whether or not the government could do anything that would help the economy or is it just possible the nature of government makes it impossible for it to interfere in the market place without doing harm.
Many people think it is better to do something than to just let things be. But many more people think the government should do something and they , the recipients of government favors, will stand by and cheer. The do something crowd are the ones who don’t want to be accused of not doing something even if what they do is all wrong and makes a bigger mess. For example, if you spill a can of paint you can smear it around and make a bigger mess or you can think about how best to contain it and take appropriate action. This analogy is exactly what the economic mess corresponds to.
The government by way of C.R.A. made housing available to many people who could not afford the upkeep, increasing payments, taxes and the additional costs of living increases leaving the country with too many houses that no one could afford, a credit system that was bogged down in bad loans and a pile of junk paper that no one wants. Instead of saying , “Look what a mess we made ,how can we clean it up?’ The government pointed to the lenders they had forced to lend to unqualified buyers and Wall Street which collapsed under the burden of distorted credit and said, “ See there are the problem makers. They need more regulation and oversight.” No one asked how a government with a $12 trillion national debt had any credibility in oversight. No one questioned whether the organization causing the mess should be allowed to mess up the situation further. All we could hear was a vast ring of echoes, “ Somebody has to do something” That somebody was quickly dubbed the government, That something was instantly dubbed spending ( stimulus?”) by the government because that is what government thinks is positive action. They think they will make the economy so robust it will have tons more of willing workers and businesses paying more and more taxes to fund further the unending schemes of wealth redistribution that panders to gullible voters.
The question arises. What if the government did nothing? Here is what would have happened. First of all there would not be a bunch of debt piled on the already humongous national debt. Secondly there would not be a bunch of money going to people who overbought their housing needs and being subsidized by the people who made better buying decisions based on what they knew they could afford. Third there would not be a bunch of pork that is designed to bolster politicians favor with their constituents. Fourth there would be less government strain on the productive members of the economy with lower taxes and less regulation. These four things would have been enough to warrant the government doing nothing. The economy would rebound much faster under the do nothing strategy. Why? Because the distortions introduced will only bring back the under qualified buyers plus some new ones. It will place more burden on the lending institutions to make loans they would not normally make and the unbacked currency entering the market will fuel an inflation rate that will make the cost of living soar for everyone. Government trying to “fix” the economy is what prolonged the Great Depression, prolonged Japan’s economic recovery, and led to such disasters as Iceland and Zimbabwe and the fall of the Soviet Union. What do all these incidents have in common? The government was trying to “control” the economy.
You have seen the Treasury Secretary stumble trying to explain what he knows is only a pragmatic guess of the consequences. You have seen the President falter and openly admit this will be a long term crisis bordering on catastrophe. The large cheering crowds that dwelled on abstract spell binding are now being awakened to the reality of what was behind all the uplifting preaching and hype. The promise has become the echo of the past.
Too many equate the way the government operates with the way producers and consumers interact. There is a vast difference. Government is an agency of force. It requires obedience to be effective. Therefore if a government is involved with the banking industry it must necessarily tell the bankers how to behave. Since the principles bankers have learned to keep them in business are overturned by political expediencies ( such as favoring a group of voters) the banking business gets distorted and people who used to be able to borrow are now crowded out by the political favorites who may not be able to make the kind of payments that produce a solid bottom line.
This is why government should stay out of the economy all together. Much like a marketing and production division within a manufacturing company have different roles and one must be the dominant decision maker so too the government must take a subservient role when it comes to the economy. This does not mean the government should work hand in hand or try to help but act only as a security force to prevent the private interchange between producers and consumers from the initiation of physical force. Government is needed but it is not needed to interfere in trade. It has relegated itself to encourage competition yet is on a road to eliminating it. It condemns monopoly yet maintains the Post Office and Amtrak. It prosecutes Ponzi schemes yet uses the method to finance all that it does. It closes banks for insolvency and doesn’t recognize it is in far worse shape than any lending institution has ever been.
All this is true and easily verified but our academics and media ignore these facts and pander incessantly to the possibility that the government is acting on good intentions and that is all that is necessary. The government is not acting on good intentions. It is acting on corrupt altruistic notions and against human nature. It is acting on the same principles Marx spoke of when he said the nature of man needed to be changed. Man’s nature is not something that can be changed. Man has a fundamental rational nature and that works best without coercion. That is because a man can use his mind when he is not forced to act against his best judgement. A banker with years of experience and knowledge of his clientele is in a much better position to assess the risk of a loan than some bumbling politician conjuring a scheme for house loans for people who couldn’t afford to make the payments required. HIs judgement is erased by the law that says he will loan to all who the government says must have home loans. This makes credit easy and this is what happened in the twenties before the collapse. We now have the opportunity and the history to correct past mistakes but the ones making the decisions have not considered they have repeated and accelerating the problem we have already seen. Blindly they must “do something’. Regenerating the Great Depression is all they are doing.Tags: government Politicians