economics free market


If I hear “This whole mess is caused by greedy capitalism run amok” one more time, I am going to scream. I don’t know how many times I have seen the terms Laissez Faire and greed together lately.

First of all, there is a huge difference between Laissez Faire and corporitism. Laissez Faire puts the emphasis on competition. Businesses thrive and fail on their own merits. This is rarely ever mentioned in government circles, what is usually put into place is corporitism. That puts the emphasis on protecting a certain business or sector. Often times, this is masked behind “protecting” the consumer by various means. In any case, a company or group of companies benefit at the expese of all of us. This is what Republicans are famous for. People on the left tend to mistakenly refer to those things as “free market” policies. Here’s a hint, if it benefits a business, it isn’t free market. Businesses hate free market reforms, it means less money for them.

The next thing I would like to address is this; if you think that government regulations had nothing to do with this debacle, you’re delusional. People will always try to make as much money as they can. Is that greedy? When you sell your house, do you sell it for as much as you can get? When you work, do you pick a job that benefits you the most? (Benefits and profits are essentially the same thing, see here for an explanation…) Congratulations! You’re a greedy capitalist!

People work on Wall Street to make money. That sounds obvious, but think just a little bit, people come from all over the world to make big bucks in NYC’s financial sector. Think what you want about those people, but their activities have enormous repercussions throughout the world. Their “greed” propels most of the jobs in the US and probably the world.

You can’t legislate away greed. They will do what makes them the most money for the resources that go into it (capital, time, etc.). Government regulations have shaped what is profitable and generally distorted the entire financial sector. Without going into too mucuh detail, the existence of Fannie and Freddie, tax codes that pertain to real estate, mandates to lend to certain groups of people, and of course the Fed’s monetary policies over the last decade have all come together in the perfect storm.

Once again, this mess can be laid at the feet of government meddling. The economy is not a machine that you can steer. A better analogy would be that the economy is like water flowing downhill. You can try to divert it, and you can try to make it work for you, but it will flow all the same. What we are seeing is the flooding caused by government diversions and dams. The bailout will make things worse long term, who knows what unintended consequence will come out of this intervention. It’s best to allow things to die a natural death, clean up after, and then get back to work without government distortions in the market…

PS. Im not saying that the people and companies involved in this collapse weren’t idiots. Companies make mistakes every day. Most banks did not make these mistakes, but a handful of large ones did. Whenever you hear the phrase “too big to fail” you can be sure we are operating under corporitism. The banks that exposed themselves to this kind of risk should go under, no bailout should be considered..

economics free market

Wealth disparity

There are a lot of people that complain that there is too much control held by wealthy people. I don’t really think it’s that big a deal, if there is buying of power I don’t think the people buying it are as bad as the ones selling it…

Anyway, if you are someone that worries about power being controlled by a few people with money, you should be livid at the prospect of $700 billion being handed over to the treasury secretary. Talk about too much power in someone’s hands! The money part of this whole debacle is infuriating, but the power issue is really scary IMO. I’ll give Paulson the benefit of the doubt and assume that he’s a decent, upstanding guy, but no one should have that kind of discretion with that amount of other people’s money without their say so. To me, this is the last piece of W’s legacy, government power gone amuck. I’m really hoping that this whole mess will finally wake people up. Government needs to be reigned in, there has to be hard limits on what they can do. I hope that this isn’t too expensive a lesson to learn…

economics free market

I’m glad it didn’t pass

I really am. People should be very suspicious whenever the government wants to give money to businesses. Whether we’re talking about farmers, car makers, or investment bankers, it always stinks. Luckily, people in the “I hate rich people” camp are objecting to it too. It’s an odd combination, fiscal conservatives and wealth redistribution types, but hey, whatever works…

I’m still not sure what I’m supposed to see that is so good in the bailout. People made a lot of money assuming the risk of those bad loans, why are we now considering helping them now that the chickens have come home to roost? It was their call, they should bear the consequences.

I’m not dogging them for taking risks. At some point, if you want to invest, you will have to take some risks. It’s up to the organization to determine how much risk to take. Clearly, wall street as a whole took on too much risk. But not all banks did. That brings me to my next point. People say that we need to do something, otherwise the credit markets will dry up and the economy will grind to a halt. There’s a few problems with that thought, first, contrary to the panicky headlines everywhere, not all banks, not even most banks are having problems. This article from WaPo talks about how many banks are having no problems lending. As a matter of fact, they are “drowning in liquidity” because people are liquidating assets they think are risky (like stocks, more on that in a sec) and putting the money into the banks. Imagine that, there are some banks that are run properly, who would’ve thunk it?

The other problem with the “we have to prop up the credit markets” schtick is that the organizations that lend money to make money have to, well, lend money. Think about it, if the business is in the business of lending money to make a profit, they will have to do something to stay in business. In other words, they’ll figure it out. Even if there is a credit freeze, the industry will thaw itself out.

But what about the stock market? We have to do something to stabilize it!!! Yes, the stock market plunged (that’s the only good word), but I’m of the opinion that it was going to do that anyway what with the mismanagement of all of those banks. Do we really want a “stable” stock market is it requires the backing of all US taxpayers to keep it stable? Really? There was a lot of selling selling yesterday, but remember this, for every sale there must be a buyer. People are willingly buying up stocks. Admittedly, at the right price, but still, people still think there is value in them. There was a predictable bounce today (at least early on when I wrote this), a good trader made a killing yesterday and today… Anyway, unlike the bailout, all of those transactions are voluntary. Investors can examine the risks and invest in what they want.

If there’s one thing that Wall Street does well, it’s salvage jobs. If there is something that is worth money offered at the right price, someone will buy it. We should allow that to happen. Let the companies that screwed up go under and let the people that didn’t screw up (JP Morgan, I’m looking at you) prosper. Yes, there is going to be some turbulence and some pain, but we don’t need to add to it or prolong it by sinking taxpayer’s money into it too…

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culture free market

Queasiness, breast feeding, and kidney transplants

My stepsister posted an update on how her one year old is doing. He is the picture of health, and as large as the average 2 year old. The doctor mentioned that they might want to think about weaning him soon to which Kelly responded that she plans on breast feeding him up to the age of three.

My initial reaction was, “WHAT?! You can’t breast feed a kid for that long, he’ll be screwed up for the rest of his life!” With a little more thought, I’ve come to a more nuanced view. It’s true that from a 37 year old’s perspective, breast feeding at three years old is a little weird. But I have to keep reminding myself that that 3 year old will not have the thoughts of this 37 year old. It’s also true that there is all sorts of evidence that breast feeding is very good for kids. I’m not aware of any studies that show mental issues with prolonged breast feeding. I don’t know about them because I’ve never looked for them. Of course I’ve never looked for studies on breast feeding in general, but I still have heard of the studies about the benefits of breast feeding. And of course Kelly has probably looked into this… She could be wrong, but she’s got a better chance of weighing the pros and cons than I do, so I say, “Whatever you think is best..”

I still feel queazy about breast feeding a three year old, but at the end of the day, it’s not my call, and it’s really none of my business. It reminds me of the issues surrounding the idea of selling kidneys. Most people (including myself) have an instinctual revulsion to the idea, but should that be enough of a reason to allow people to keep dying? The usual arguments are that people shouldn’t benefit from giving a kidney, people will be killed for their kidneys, that poor people will be “taken advantage of,” and of course, ewww!

Right now, everyone involved in a kidney transplant benefits, except the donor. The recipient gets off dialysis and will probably live a normal life, and the doctors and hospital get paid. The donor gets a warm feeling for doing the right thing. Imagine how many more kidneys would be available if people were paid for them?

You can’t just slap any old kidney into a person that needs one, so killing people would have to be very targeted and involve a lot of research for it to work… I don’t see that happening.

As far as the poor being taken advantage of, that is just PC talk for the poor are too stupid to be trusted. Besides, who is being taken advantage of, the person that agrees to give up a kidney for cash or the person that is motivated by emotion and/or guilt? In the end, it reminds me of Kelly’s decision. It’s none of my (or anyone else’s) business if someone wants to sell a kidney, it would certainly save lives. Maybe we should just suck it up and deal, I think the world would be a lot better place if we did.