Friday, December 05, 2008

The Road to Serfdom?

These are some of my thoughts on the economy and the government at this juncture in history:

The disastrous economic stimulus is a euphemism for a full out socialist economy, and I believe it could lead to the Republican party's destruction. (In a sense, we’d be lucky; it would be reformed on sound principles as opposed to what it’s become.) Washington has, in essence, nationalized banking and insurance, and under Obama, healthcare will likely be next. Talking to people I know, even those in the financial and insurance sectors, it is clear many, if not most, believe that deregulation is the primary cause of this crisis. They've bought the official state/intelligentsia explanation hook, line, and sinker.

We are not financing this "stimulus" - stupid as that would be in regardless - with tax dollars in some reserve, but by printing money. Thus far, we've "spent" 60% of GDP on this so-called rescue. (When will it reach 100%? At that point, will people scratch their heads and wonder how you can save an economy by spending its entirety on itself? Or perhaps they’ll finally stop equating money with wealth?) This freshly created money is currently on banks' balance sheets because, at the present time, nobody is borrowing. A short term "recovery" will occur in the future because of inflationary effects, but will only lead to an even greater downturn. There is reason to think that once banks resume their uneconomical lending with this cheap money we may experience hyperinflation, an unprecedented happening in this country and the start of severe misery. Since government rarely admits error, it will be blamed on private greed of a sector or unfair wages, and so the next logical step will be price controls, coupled with more regulation.

If this sounds apocalyptic, then consider my sources of inspiration: Thomas Jefferson, Adam Smith, Frederic Bastiat, and F.A. Hayek, to name a few. In the opposing corner are Marx, Keynes, the Federal Reserve, and the government. Matter of fact, looking back through American history, we can discern that this is not the first time we’ve had this debate, albeit never on this scale and with such immediate consequences. Jefferson held cheap money as a chief enemy to a free society and Andrew Jackson ran a campaign based on it. In modern times, the impotence of government intervention has been demonstrated by the failures of the New Deal and the Great Society. Reagan was correct in doing little after Black Thursday in the 80s (and he was, incidentally, a student of Hayek). We don't have anything like that political will in office now. All that is reported each day are more government bailouts: for mortgages, for banks (even healthy banks), for a sick auto industry, for bankrupt state governments. There is apparently no end in sight, and no talk of restraint. Will credit card holders be next?

Government intervention of this scope is unprecedented: according to the Wall St. Journal, we have spent, since March, twice as much as was spent on WW2, taking into account inflation, and still they talk of spending more. As a population, we seem incapable of taking the necessary steps back and examining the situation objectively. Panic has set in, and we have put ourselves at the will of political masters who we ostensibly believe are capable of economic magic. They are not.

This power grab by the government has occurred under a Republican president. I've spent the last 8 years defending Bush for a variety of things he's done right and trying to criticize him for what I've disagreed with in a civil and measured manner. But after this scandal I believe he may blamed for creating terrible, indeed, unspeakable, misery. These economic distortions can only be put off so long; someone has to pay the piper and it won't be Senators, Congressmen, or the President.

There is an alternative. It is one which requires people to believe that they are no more competent at life than their neighbor; it demands trust of one another; it is respectful of reality and not based on fantasy; it is thus humbling. It is the free market.

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