...but they really shouldn't have to. What bubbles am I talking about? I'm talking about the mass hysteria that the American media has been pumping into the brains of Americans the past few months regarding the "credit" bubble, the "housing" bubble, the "fuel" bubble, etc. With the crash of the easy-money housing market, sky-rocketing fuel prices, subsequent increase in food costs, saber-rattling against Iran (and with no end in sight in Iraq), it seems that the hysterical socio-psychological mindset of the average American is not without spillover into other countries of the world, and not without reason. So I thought I'd throw in my two cents on the matter.
For one, the credit crisis bubble is popping, and along with it, the housing bubble. I'm convinced many of these problems stem from this country's misguided ideas regarding lending, insurance, the money supply, and government regulation. Without a long tretise on the matter, I boil it down to this: the government created this bubble, and is now scrambling to seal it back up again. As I stated in my earlier post, this country is stuck in a post-Keynesian, "the New Deal was a great idea" mindset in which the government can intervene into this intangible force called "the market" and attempt to get it into a chokehold to force it to act a certain way. This could only work if the government represented all parties in the production, distribution, and consumption areas. But it isn't. There are millions of people in this country, which in turn does business that affects billions of others. No amount of regulation by the Federal Reserve, the Treasury, or any other economic government agency could coerce such a magnificent and awesome force as the market. Of course the bubbles are popping all around us. The ideologies and vehicles which brought us these bubbles to begin with are more than two generations old (the Federal Reserve celebrates its 100th birthday in about 5 years) and were doomed to fail eventually. If you have the time, go read criticism on John Maynard Keynes. It's his philosophies that influenced FDR, which have influenced us today. If there are bubbles to be popped, they'll eventually pop. One cannot convince me that the power to attempt to coerce the economy can remain intact for long.
Secondly, these sorts of things find equilibrium. We've had stock market crashes before in the late 80s and early 90s. We've had fuel crises before. Food has been expensive, and we have fought what seemed like perpetual war before (this time, however, our Dear Leader has declared war on a concept - terrorism - which I don't think is constitutional. It doesn't wear a uniform, it has no borders, is intangible, etc. Moreover, I find it insightfully ironic and Orwellian that Dear Leader uses terrorism to fight terrorism). With each crisis, things generally simmered down, and people got back to their lives. I had a recent conversation with my wife's uncle, whose opinion on things I value above nearly everyone I know, and he opened my mind to something that I hadn't considered before but has set my mind at ease. Hopefully it does the same for you. He said that no matter what, people will strive to get along, they will fall in love, they will carry on with what they have, and things will find equilibrium. Human well-being is even stronger than any bubble under which we may think we live. We may have to adjust some of our habits, but in the end, life goes on.
My last point - an unregulated economy, in my opinion, has far fewer bubbles to allow bursting. Since WE are the market, and WE determine pricing, money supply, interest rates, etc. any bubble that MAY form (if any), would never really "burst." I say this because an open market immediately adjusts to the supply and demand naturally inherent in it. In a regulated economy, there is a delay because the government can impose things like windfall taxes, rent controls, minimum wage requirements, unfair taxes, etc. And again, I'm not convinced those "protections" are meant to be there - the Keynesian philosophy does not consider the risk that builds up or is shifted to the masses when these controls are in place. A true laissez-faire economy (I had a good laugh a few months ago when the WSJ indicated that Greenspan ran a laissez-faire economy as chairman of the Federal Reserve - idiots!) adapts as the market (you and me) adapt, not as some outside force tries to change it.
There need not be any bubbles to burst at all. All we need is (economic) freedom.
Update I (October 10, 2008):
Murray Sabrin over at lewrockwell.com agrees with me - a free economy knows no bubbles. No "stabilization actions" required to keep it "propped up." Anarcho-capitalism benefits everyone.
Thursday, July 17, 2008
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2 comments:
"Since WE are the market, and WE determine pricing, money supply, interest rates, etc."
In a market economy, we are almost completely powerless in determinig these things. Only through democratic political action can "we" impact the market. As consumers, we are pawns.
Chris, I see your point, but as we've discussed before, I diverge from modern liberalism when it comes to economics/fiscal policy. In my opinion, we truly represent the market as a whole - so in that sense, we democratically (if you are hellbent on that word) influence the market by our sheer number.
In my opinion the mixture of politics into the economy was never meant to be, and for good reason (and if you read what I've written and what I link here you'll see ample proof of this). It was probably John M. Keynes, mixed with a little Woodrow Wilson that created the behemoth that can't be stopped - a modern political machine that thinks it can fuck with the economy as it pleases and "make everything alright." Of course, it does this with a supposed free ticket by way of the Federal Reserve, and it's not "if" but "when" our economy implodes upon itself from carrying 14-digit debt, maybe then the economically/fiscally liberal will know that the market is the masses, and that it was a big mistake to allow the government to intervene.
Again, I'm of the persuasion that if the government is to use its political force upon the economy, it should be to lift tariffs (ever wonder why everything has corn syrup and not sugar in it?), protect the border, and deliver the mail, so to speak. The empire-building, the exportation of pseudo-democracy (we're a representative republic, not a democracy), and the meddling of currencies (foreign and domestic) will implode upon us and you and I along with the rest of the survivors will have to pick up the tab. And yes, it's going to suck.
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