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The large-scale government intervention in the economy is going to end badly.
Be Prepared for the Worst
Ron Paul, 10.29.09, 09:20 AM EDT
Forbes Magazine dated November 16, 2009
The large-scale government intervention in the economy is going to end badly.
Quote:
“Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan’s excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble’s collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve’s balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?
What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.
Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury’s program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person’s pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.
The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar’s purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.”
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Only when you have lost everything can you truly accomplish anything.
The market can stay irrational longer than you can stay solvent. -John Maynard Keynes
foreigners are cutting back on purchases of Treasury debt and the Federal Reserve’s balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?
India has bought 200 tons of gold from the International Monetary Fund at $1,045 an ounce, which is close to a recent record high of $1,070. The entire transaction is worth almost $7 billion. The move is seen as a way for India’s central bank to move some of its capital away from investments in the dollar. The IMF may sell another 200 tons of gold in the relatively near future and most experts expect that the buyer will be China, which has foreign currency reserves of $2 trillion and might like to have its own hedge against the value of the American buck....
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Only when you have lost everything can you truly accomplish anything.
The market can stay irrational longer than you can stay solvent. -John Maynard Keynes
I haven't even read what you posted, but consider this...
The government had trouble executing a relief effort when Hurricane Katrina hit New Orleans. Do you really think they can save something as inconceivably deep and complex as our economy?
This is a gross oversimplification, but in many ways, it isn't. Something to think about...
While I agree that government intervention in the economy is not good as a broad stroke, I don't believe that a prosperous and growing economy creates peace and justice for all. I believe there are non-economic areas (still costs lots of $$) that the government has to play a major role. Businesses don't have that role, never will.
What I'm saying is this: there are serious corruption issues all throughout business, and also in special interests for business. These are things that don't self-regulate, and the market doesn't correct them. When was the last time the market corrected a fly-by-night scam? When was the last time a credit card company volunteered to make it easy for people to take control of their debt by providing real managing tools and expertise? Quite the opposite, and the penalty fees filled the coffers. It's getting a little better with credit companies, but it is because of legislation, not because they turned over a new leaf, just to be good little citizens.
So in this case, legislation affects business. OH NO, bad. The reason this has to exist is because businesses STILL take advantage of people. They would say as long as the business grows, that is first priority, then they can buy out their competition and then continue to impose their self-interested will on the consumer. But the consumer can just not buy anything, or just not use credit you say?? Yeah right. We know no other lifestyle here.
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While I agree that government intervention in the economy is not good as a broad stroke, I don't believe that a prosperous and growing economy creates peace and justice for all. I believe there are non-economic areas (still costs lots of $$) that the government has to play a major role. Businesses don't have that role, never will.
No system of any sort can create peace and justice for all. It's only a difference between who gets rewarded and who gets screwed.
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What I'm saying is this: there are serious corruption issues all throughout business, and also in special interests for business. These are things that don't self-regulate, and the market doesn't correct them. When was the last time the market corrected a fly-by-night scam? When was the last time a credit card company volunteered to make it easy for people to take control of their debt by providing real managing tools and expertise? Quite the opposite, and the penalty fees filled the coffers. It's getting a little better with credit companies, but it is because of legislation, not because they turned over a new leaf, just to be good little citizens.
It's up to the consumer to decide which businesses should fail, and which ones should succeed. Government interference is exactly how such corrupt companies survive in the first place. Just look at the recent bailouts for example. The crappy banks mostly responsible for this mess were saved by bailouts... yet banks with good business practices received nothing.
As a consumer, we can instantly decide when a business stops receiving our individual support if we deem them corrupt. We simply stop buying from them. What's our recourse with government corruption? Sure we can wait around until the next election... but even then, we need to convince the majority of voters that something/someone is corrupt.
The punishment and regulation of private businesses is done much more effectively and swiftly in a free market. Delegating that power to government at best leads to slow and inefficient results... at worst, corporate protectionism leading to the exact problems you're complaining about above.
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Our forefathers made one mistake. What they should have fought for was representation without taxation. Fletcher Knebel
I don't understand what the big deal is. I would much rather have the government running something I care about than having free enterprise attempt to run it. Does everyone forget the fact that the government has resources that SHOULD be used? I vote for more government intervention because people in the government take their jobs more seriously than people who work elsewhere. If a tree falls over in your town blocking a street...who do you want taking care of it, an individual who doesn't give two sh*ts about the result....or the much better option, the government who will act swiftly to remove the tree.
One example, people make fun of the U.S. Postal Service...could you imagine just ONE company mailing as much mail as they do without messing up a lot?
I don't understand what the big deal is. I would much rather have the government running something I care about than having free enterprise attempt to run it. Does everyone forget the fact that the government has resources that SHOULD be used? I vote for more government intervention because people in the government take their jobs more seriously than people who work elsewhere. If a tree falls over in your town blocking a street...who do you want taking care of it, an individual who doesn't give two sh*ts about the result....or the much better option, the government who will act swiftly to remove the tree.
One example, people make fun of the U.S. Postal Service...could you imagine just ONE company mailing as much mail as they do without messing up a lot?
Your thoughts...
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Originally Posted by 350tarheelz
people in the government take their jobs more seriously
i think i just **** in my pants
Quote:
Originally Posted by 350tarheelz
One example, people make fun of the U.S. Postal Service...could you imagine just ONE company mailing as much mail as they do without messing up a lot?
yep, it stinks over here...
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History doesn't repeat itself, but it does rhyme - Mark Twain
No system of any sort can create peace and justice for all. It's only a difference between who gets rewarded and who gets screwed.
lol...and the free market doesnt create that(and actually biased almost always to the richest)?, utopias dont happen....
i am all for goverment tryign to do what benefits a vast majority of their population... like destroyiing monopolies, managing and supporting commerce, providing competition on innelastic demand market(health care, mail delivery), security. In some cases you DO need a balance of goverment and prive market power. Everybody always cries about a safety net till they use it(btw id give away MANY wellfare programs if it means having a UK-like health care system).
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Originally Posted by tquill
It's up to the consumer to decide which businesses should fail, and which ones should succeed. Government interference is exactly how such corrupt companies survive in the first place. Just look at the recent bailouts for example. The crappy banks mostly responsible for this mess were saved by bailouts... yet banks with good business practices received nothing.
bailouts wasn't the appropriate intervention...they could have intervened the same way FDIC does, maybe ahead of a collapse. Modern attempts at such a utopia you like have failed.
BTW i am actually in agreement with your 1st line(and had systemic failure not been such a problem and federal reserve not been too loose during bush years, had depression era regulations still be in place i don't think intervention would have been necessary), but don't be too naive to ignore how things work....bank runs don't just happen the 1 bank that fails.
For 50+ years regulation forced futures market, price of goods to be almost always based on just supply and demand...not 1/3 to 2/3s in many cases its all just based on speculation, and when things go south, thanks to the free market financial innovations only safe guard those that push such investment and hurt the avg workers. for 50+ years with all the regulation in place from great depression we had a period of great prosperity, real wages rose quite high and all.... the more extreme supply side free market fetish didn't start until with Reagan, and we ever since middle class wages have stagnated.
Quote:
Originally Posted by tquill
As a consumer, we can instantly decide when a business stops receiving our individual support if we deem them corrupt. We simply stop buying from them. What's our recourse with government corruption? Sure we can wait around until the next election... but even then, we need to convince the majority of voters that something/someone is corrupt.
The punishment and regulation of private businesses is done much more effectively and swiftly in a free market. Delegating that power to government at best leads to slow and inefficient results... at worst, corporate protectionism leading to the exact problems you're complaining about above.
haha yeah...just pack your bags and move to another state, just quit your job cause you can find another one right away(with out any federal unemployment)... regulation is more swift if done just by the free market?..whats next, you gonna bring market rational = right?..u gonna blame massive speculation on regulation too?... look up at the 1800s we had what you asked, recessions all seems worst than now, oh but gold as money + 100% reserve banking = stable currency = stable economy....i guess the stone age economy was also a stable economy too if thats all you care .
Just a little FYI, my previous post was simply a mockery of the government. The only thing I trust the government to do is to defend our country against foreign threats/invaders. For the first time in my life, I am truly fearful for the way government has been acting. If Obama continues at his pace (which of course he can cause he can do it all)....there are going to be some scary changes in this country. I do not want the government to lay a hands on anything that is a free market system.
When was the last time the market corrected a fly-by-night scam? When was the last time a credit card company volunteered to make it easy for people to take control of their debt by providing real managing tools and expertise? Quite the opposite, and the penalty fees filled the coffers. It's getting a little better with credit companies, but it is because of legislation, not because they turned over a new leaf, just to be good little citizens.
You're going to place the blame on credit card companies when you have unintelligent consumers who want more than they can afford and use plastic to get it? Blame lies only with the consumer. I agree that CC companies rape the consumer, but it was the consumers choice to enter the contract. It's not the governments job to protect us from stupid financial decisions.
I don't understand what the big deal is. I would much rather have the government running something I care about than having free enterprise attempt to run it. Does everyone forget the fact that the government has resources that SHOULD be used? I vote for more government intervention because people in the government take their jobs more seriously than people who work elsewhere. If a tree falls over in your town blocking a street...who do you want taking care of it, an individual who doesn't give two sh*ts about the result....or the much better option, the government who will act swiftly to remove the tree.
One example, people make fun of the U.S. Postal Service...could you imagine just ONE company mailing as much mail as they do without messing up a lot?
Your thoughts...
This may be sig worthy
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lol...and the free market doesnt create that(and actually biased almost always to the richest)?, utopias dont happen....
i am all for goverment tryign to do what benefits a vast majority of their population... like destroyiing monopolies, managing and supporting commerce, providing competition on innelastic demand market(health care, mail delivery), security. In some cases you DO need a balance of goverment and prive market power. Everybody always cries about a safety net till they use it(btw id give away MANY wellfare programs if it means having a UK-like health care system).
Coercive monopolies can only exist through government force... and they're impossible in a free market.
Healthcare and mail delivery most certainly do not have inelastic demand. Healthcare may be more inelastic than some other commodities... but the demand is certainly not immune to price changes. Mail on the other hand... isn't even close. I find is ironic that you believe that the government has "provided" competition in the market of delivering mail... when in reality it's forcefully monopolized letter delivery, the exact opposite of providing competition.
I agree with defense/security spending. It is a valid role for government to fulfill.
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bailouts wasn't the appropriate intervention...they could have intervened the same way FDIC does, maybe ahead of a collapse. Modern attempts at such a utopia you like have failed.
Are we talking about the same FDIC that requires a bailout of its own?
Quote:
BTW i am actually in agreement with your 1st line(and had systemic failure not been such a problem and federal reserve not been too loose during bush years, had depression era regulations still be in place i don't think intervention would have been necessary), but don't be too naive to ignore how things work....bank runs don't just happen the 1 bank that fails.
For 50+ years regulation forced futures market, price of goods to be almost always based on just supply and demand...not 1/3 to 2/3s in many cases its all just based on speculation, and when things go south, thanks to the free market financial innovations only safe guard those that push such investment and hurt the avg workers. for 50+ years with all the regulation in place from great depression we had a period of great prosperity, real wages rose quite high and all.... the more extreme supply side free market fetish didn't start until with Reagan, and we ever since middle class wages have stagnated.
This is a wall of text that I don't find particularly important. If you want any specific point addressed in it let me know.
Quote:
haha yeah...just pack your bags and move to another state, just quit your job cause you can find another one right away(with out any federal unemployment)... regulation is more swift if done just by the free market?..whats next, you gonna bring market rational = right?..u gonna blame massive speculation on regulation too?... look up at the 1800s we had what you asked, recessions all seems worst than now, oh but gold as money + 100% reserve banking = stable currency = stable economy....i guess the stone age economy was also a stable economy too if thats all you care .
Of course free market regulation acts more quickly... and to suggest otherwise is pure lunacy.
Speculation isn't a bad thing like everyone would have you believe. It decreases market volatility.
I'm not sure that agree about past recessions being worse. Remember that the great depression and this current recession happened when government is supposed to prevent the exact sort of thing from happening.
Recessions obviously happen in a truly free market too, but on average I think they're corrected much more quickly without government interference.
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Our forefathers made one mistake. What they should have fought for was representation without taxation. Fletcher Knebel
The "bailouts" are just prolonging the inevitable imo. This is something that needed to happen and is trying to be avoided via "bailouts". It's going to get worse...just see whats going to happen over the next few months...maybe the media will finally open their eyes to a still failing residential and commercial real estate market.
The large-scale government intervention in the economy is going to end badly.
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