Friday, October 10, 2008

Babies, Bathwater and Bail-outs

The current market blowout is being heralded by government and the media as a failure, no, as a direct result of capitalism. Blame for it is being laid at the feet of corporations and banks and business’. This is a lie.

This lie is being told by government and is reinforced by a simpering media who neither understand, nor in any way wish to protect the one and only system of commerce that allows them to function independently and freely. Talk about biting the hand that feeds you.

Capitalism, and when I say capitalism I mean true lassiez faire capitalism could not have created this mess. I want this to be understood, this is not a claim that it wouldn’t happen but a flat statement of fact that it couldn’t happen.

Under laissez faire capitalism there is a complete separation of economics and government. So the initial causal factor that led to this market instability, namely the long line of corporate bail outs would never have happened and this would have fostered an ideal of fiscal prudence in all business sectors. Sure, perhaps the stock market would have risen slower than it did, but it would have risen on actual, hard economic indicators and financial data, not false and whimsical governmental vagaries.

The demand from the US government to that nations banks that a percentage of mortgages be given to people who would otherwise not qualify would never have happened either.

Why? Because any banker in a system of laissez fair capitalism would know two things for sure.

  1. That his policies and his lending practices were his responsibility and his responsibility alone. A foolish gamble on persons who would most likely not qualify for a pay-day-loan much less a $200,000.00 mortgage would in all likelihood cost him his job. No ifs, ands or buts.
  2. That it would be impossible for government to save him or his bank from the result of stupid lending policies.

Another thing that could not have happened were capitalism to truly reign is that Banks would never have loaned money out at a rate lower than the established interest rate. Sub-prime rates are a government construct, which allowed banks to lend money to unqualified persons at a rate lower than what it cost the bank to borrow that money in the first place. The Bankers initially ordered to make the loans possible and then led to believe they would be bailed out by government saw, a win-win proposition.

Was there greed involved? Certainly, but it was not the cause, it was an all too predictable by-product of a system that had been gamed, designed, manipulated and constructed to appear to be real, solid and safe when in actual fact it was built on the vagaries of governmental policies, divorced from any real economic principal, and the worst self-serving political promises.

Capitalism didn’t fail us, the government did. Laissez Fair economics didn’t fail, they were never a part of the equation in the first place.

NB. Mark the intentions of those who claim this is a failure of capitalism. They are not throwing out the baby/capitalism with the bathwater/the market system. No, they are throwing out the bathwater and attempting to strangle the baby in its crib for good measure.

With every bail-out and every subsequent market shock, and every bad news story hyped to fever pitch they get closer to their goal. That goal is nothing less than the state ownership of the worlds banks, and that is nothing less than a stranglehold on the wellspring of capitalistic production… our money.

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