Don’t blame capitalism, embrace it

Many people seem to be quick at pointing the finger at capitalism for this economic crisis. What these people fail to realize is that the United States was not truly capitalist in the years leading up to this mess and hence, capitalism is not at blame- anti-capitalism is. In fact, we have been far from the capitalist economy that our founding fathers envisioned ever since the Federal Reserve was created in 1913.

Since 1913, also the year that the income tax was made permanent, this nation has been creeping away from capitalism with more government intervention, taxes, and regulations. Capitalism DOES NOT support any of this. Capitalism is all about having the market in the hands of private individuals, not the government. This nation was once about laissez-faire markets, but it is no where near that right now with Keynesian policies interfering in virtually every market in this country.

The Federal Reserve has been manipulating markets since its creation by setting the interest rate and having control over the monetary supply. It has created bubbles and stagnated growth because in reality it is impossible for any group of people to gauge the whole market and set the rate for it. Most people, including Keynesians, blame Greenspan’s low rates as one of the causes of this crisis. The fact that Greenspan and his people even had the power to set the rate is not capitalist. So how can you blame capitalism for that? If anything, Keynesianism to blame in this case because the Fed was given these powers.

Fannie Mae and Freddie Mac are a another part of the system that are often blamed for this mess. These two entities are GSEs (government sponsored enterprises) and were created in 1938 and 1970 (respectively.) Their purpose was to make the housing market more efficient by improving the flow of credit. They essentially backed the loans made by the banks, no matter how risky the loans the banks made to the people were. This is not capitalism because again, the government got involved in the markets. In a capitalist economy, these companies would have been privatized like their counterpart Sallie Mae, which deals with student loans. Not only would Fannie and Freddie probably have performed better under private ownership like Sallie Mae has, but banks would also know that the government wouldn’t back the two since they were private and hence, they would not have made as many risky loans. The fact that they knew the government would back the two led to riskier loans being made because the government backing essentially turned a “high risk, high reward” situation into a “high risk, high reward and government backing if the move failed” situation. So how can you blame the banks either? They were just trying to do what is in their best interest. It is the banks’ job to care for themselves, not the American people. It is the government’s job to care for the American people, which is why a private Fannie and Freddie would have been better. The government wouldn’t have to back them with taxpayer money and if they failed, it would only be because of bad decisions made by the individuals running the company, not because of government intervention in the process.

On top of the Federal Reserve’s extensive control over the markets and the GSE’s involvement in lending, the government has also had many regulations on the markets that added to the crisis. The unsustainable fractional reserve requirements are playing a big part right now with the bank failures because so many banks are facing the risk of bank runs, like Washington Mutual and IndyMac recently did. It is government policies that have hurt us and it is these same policies that continue to hurt us. The policies that I have mentioned in this post are only a few examples of how disastrous government intervention in the markets has been. The government is distorting markets and creating problems through a plethora of utilities including laws, regulations, and taxes. It is time to move away from these nationalist and socialist movements and to return to capitalism, freedom, and prosperity.

Many Americans have grown too accustomed to the government being involved in every aspect of the market and in turn their lives as a means to establish “equality.” It is time to realize that most of these moves only hurt us in the long run, especially when it comes to the market and money because it is hard to make choices that effect millions of people, each of whom are different and have their own things to worry about. The power to control the markets should be left to the people who are in the market: the buyers and the sellers because every individual knows what he or she wants and he or she will made decisions based on that. It is just too hard to have the government do this for everyone. The government has tried doing it over the last 100 years and we can clearly see how that has turned out. Don’t blame free market capitalism, embrace it because not only will it protect your freedoms, but it will pave the way for true fairness.

GM and Chrysler need more

GM and Chrysler are now asking for about $30 billion more, which they claim is necessary to their survival. Does anyone see anything wrong with this? What have these two companies done in the past few months? They have again failed at selling their product and they are back again asking Uncle Sam to give them the money instead.

The free market capitalists and even Congress were against the first automaker bailout, but it was passed anyway by simply taking the money out of TARP. We don’t have TARP this time around, so what’s next, taking it out of the stimulus plan? It wouldn’t surprise me at this point.

We are really in a sad state of affairs. The Keynesians continue to push their irresponsible logic by trying to make sympathy pleas and not looking at the whole picture. We are rewarding failure and if we don’t stop the whole system will come crashing down. They didn’t realize that the auto bailout was bad the first time around, but hopefully they will have some sense this time (I am not holding my breath though.) They need to really think about it before just throwing money here and there. These companies failed- let them go under.

While GM and Chrysler were burning through government funds, not doing anything productive, and continuing their feud with the naive and greedy UAW, their counterparts continued on. Who says that since a company isn’t American that they won’t help America? The superior competitors of the American automakers do care about the American market as they sell and produce here as well. Many big foreign automakers, including Toyota, Hyundai, and Honda have plants in this country as well. Thousands of Americans are employed by these plants and letting GM and Chrysler finally go under will open up more jobs in those plants as the companies over the market of the “Big Three.” This is not an anti-American thought. In fact, in many ways it is a pro-American thought as the roots of this nation are wrapped around the ideas of capitalism and the failing companies going under is capitalism.

Speedy stimulus- why it is a bad idea

There has been much controversy over the proposed stimulus plan recently and it is with due cause. The proposal is huge in terms of both money and scope. Yet, many supporters of the plan are saying that we should just pass it quickly because it is an emergency. Is this really the way huge government decisions should be made? That is like saying a doctor should quickly give a suffering patient any medicine he or she sees because it is an emergency. Obviously, that is not a good choice because there could be side-effects, which could be avoided. It is the same thing with this plan. We can’t jump into a near-trillion dollar expenditure just like that.

Some of the money in this plan is just ridiculous, going to things that really aren’t important at all. It has been loaded with pork spending and thankfully Senate Republicans are fighting it to reduce the cost. Meanwhile, a lot of the opposition, including the President, insists on passing it as soon as possible. Do these people really think we have an unlimited supply of money? Trying to boost the economy is one thing (I don’t agree with many of their plans on that either, but that’s another story,) but adding billions in random costs really isn’t acceptable considering our immense debt and financial condition. We need to learn fiscal and monetary responsibility as a nation if we hope to return to prosperity.

Even if you want to spend the money, please at least take the time to think over where all the money is going. As we saw with the TARP, speedy stimulus often leads to money basically disappearing. You can make the argument that waiting a week or two to further review the package would mean a week or two of more grief in the marketplace and more job cuts (although that is still going to happen sooner or later,) but even then, wouldn’t you rather have that then realizing a month later that most of the money was wasted and it really hasn’t helped with the problem? To everyone fighting for a fast stimulus: think about it first for the sake of not losing the money.

Update 2/06/09 (later the same day): Apparently, the bipartisan group of Senators working to reduce the cost of the plan have agreed to a new $780 billion plan, which will go up to vote sometime tomorrow. All of the details have not been released yet, but atleast they cut it down. Of course, personally I still oppose most of the money being spent, but at least it was cut a little. I still think more time should have been spent on reviewing and cutting down the bill, but I doubt that will happen again as it will probably pass this time around (although I’m still hoping it won’t.)