First published 7 August 2008
America, the land of the free and the home of the brave, is also the land of government intervention.
This is especially true regarding the economy.
Many of us are actually in favor of it. The popular thinking is that working within the constraints of the Constitution would be too great a price for the USA to pay. If we followed established law and enforced contracts the pain would simply be too great. It is easier to just sacrifice a few nameless, faceless people, and our principles, in the name of stability, smoothly functioning markets, and control.
I mean, what is not to like about Politicians creating a solution that business could not? If you do not like what the free markets brings, change it to suit your immediate needs. Government programs will make sure you and everybody else gets a piece of the action. Intervention is good because it keeps people in their jobs and keeps the money flowing.
No one notices the price you have to pay.
Living with injustice is one.
The trillion dollar bailout of Fannie Mae and Freddie Mac is injustice of the most immediate and palpable type. When times were good, non-investors did not get a check, but now that times are bad everyone gets to pay. Worse still, the costs are so big, the value of the dollar may collapse. That will increase the cost of everything based in dollars forever. You think milk is expensive now, just wait.
Another example is the recently passed housing rescue bill which rewards those who bought more house than they could pay for. It actually reduces the mortgage for some people. What you do not hear is what happens to those people who live by their mortgage contracts, are responsible, and live within their means. They foot the bill for everybody else.
When the Federal Reserve arranged the JP Morgan buyout of Bear Stearns bank last March, they did it using funds the Fed created at the cost of greater inflation for the whole country. Since those who run large banks are a relatively small fraternity (our current Treasury Secretary came from Goldman Sachs), it also stands to reason that JP Morgan personnel are a big part of the rank and file of those who run the Federal Reserve.
Lets see, JP Morgan people deciding if the Fed should create money out of thin air to help out JP Morgan. Suspicious?
The Security and Exchange Commission recently excluded 19 commercial banks from trading rules that every other business still had to endure, such as short stock sales. It does not hurt you unless you were bank number 20 on the list and the stock owned by your poor old grandma drops 50%.
Examples of intervention like this are happening everyday. Several government bureaucracies such as the Exchange Stabilization Bank, the President’s Financial Working Group (executive order 12631) and the Federal Reserve itself are allowed by law to secretly intervene in the market. These secret interventions affect companies, and people like you, in real dollars, everyday. What you think will go up, might go down. What you think might have value, might instead prove to be worthless.
Even though they are part of your government and directly affect your pocketbook, you cannot know what they do. Your role is to just pay taxes and support them.
Living with injustice like this takes away opportunity, and opportunity is the heart of freedom. Because the government has decided to favor some businesses over others, the unfavored businesses waiting in the wings with good balance sheets will never get a chance to grow and make money for their investors. The old business will still be there. The old business will be protected with the weight of law.
In other words, your dreams will take a back seat to someone else not because you work less, but because they were bigger and will stay that way no matter what you do. They have government on their side.
In our land of rugged individualism, government influence has become the most important , and counterproductive, commodity there is.
American business is now not so much about building a better mousetrap than being the king rat who has access to government. This will lead to more graft as more government bureaucrats realize the control they have. Government protected businesses will use their advantage to hurt their unprotected competition every way they can.
Oh, by the way, you and I pay more forever.
What is not to like?
Peter J. Blome