Bitter economic lessons still not learned
In an article entitled "Bitter economic lessons learned" (Saskatoon StarPhoenix Friday November 28, 2008), Joe Jeerakathil writes regarding the current economic downturn:
The ascendant market fundamentalism, which upheld religiously that an unfettered market left to its own devices will offer the best path to economic nirvana, became the gospel of the Reagan revolution. Uncritical embracing of this orthodoxy led U.S. lawmakers to loosen the role of regulatory bodies in the pretext of promoting easier flow of capital. Wall Street enjoyed a free hand. The result has been the current mess. ... [Economists Keynes and Galbraith] warned the world about the endemic instability of the free market system with its cyclical swings.
Whoah. Not so fast there. Since when has Wall Street enjoyed a truely free hand?
A good deal of the current market troubles are a result of the collapse of the sub-prime mortgage markets. The whole sub-prime mortgage market was created by government telling banks that they must make loans into situations where it did not make economic sense. Then the government told the banks how to package up these sub-prime mortgages into packages with other loans and sell them on the market as if they were high-quality investments. One recent loosening of the regulations on US banks has been widely hailed as reducing the severity of this collapse, even by those who initially opposed it.
Another part of the market troubles come from an artifically low interest rate set by the Federal Reserve. With the interest rate being set for long periods of time lower than
the inflation rate, the fed was effectively giving away money. This has the effect of completely skewing long-term investment and purchasing decisions, leading to overconsumption and excessive debt, both personal and corporate. The cyclical swings cited in the article are a result of the Federal Reserve setting the interest rate different than the natural interest rate.
To paint these problems as a result of a unfettered free market is extroadinarily misleading.
(If anybody can find an URL that includes the above article, I would be grateful. It is not on the StarPhoenix's web site with most of the other content from Friday's paper.)
Bruce on 11.28.08 @ 03:31 PM CST [
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Thursday, November 27th
Imbalanced Balance
Many times, when political issues are discussed in the news, you will hear politicians and pundits declare that they are seeking to find a balance in resolving the issue.
This is complete whitewash.
Invariably, the two "sides" to the issue that are presented involve doing little on one side, and doing too much on the other. Notice I didn't say doing "too little". When government decides to change their involvement in an issue, it's normally a question of how much more they are going to do. Doing nothing is effectively never even put up for discussion.
Given how much the state is involved in nearly every issue, the idea of it doing less should be up for discussion. However, heaven forbid any politician should ever bring that up. It's practically a political death sentence, for all but a small minority.
So, when the balance being sought is between doing a little and doing a lot, be sure that no matter what kind of balance is struck, the state will be larger than before. This can mean a number of things, but it usually involves more bureauracy, more laws, and more police or more policing in one way or another.
It also means more taxes. More of your money getting sucked away from productive measures to satisfy those bureaucrats who have a burning desire to be seen as "doing something"... and it's your money their desire is burning.
This is somewhat like the negotiation strategy of demanding far more than you really want to get, knowing full well that the other side will be forced to negotiate down to somewhere in the middle anyways. The difference in this case is that no matter what they ask for, it will be more than before, and any illusion of a balance between two sides is just that -- an illusion.
Bruce on 11.27.08 @ 10:30 AM CST [link] [No Comments]
Sunday, November 23rd
Parade Encounter
While watching this year's Santa Clause parade in our city, I found myself surrounded by a variety of people, as can be expected at this sort of event. Our daughters were performing baton twirling in the parade, so we were there as proud parents to cheer them on and take photos.
The city government ran an entry in the parade consisting of a car with the mayor's name on it and the mayor himself walking behind it waving at the crowd. Later, the local members of the provincial government ran an entry in the parade, which similarly consisted of a couple cars with the MLA's names on them, and one of the MLAs walking behind it. It sounds pretty boring, and it was, but what else would you really expect?
When the mayor's car inched past, I heard generally nothing from the people around me, other than the normal crowd noise, a little cheering, and maybe somebody giving recognition that they knew who it was. When the provincial government car inched past, the man beside me all but spat on the ground in his disgust, using words like "unbelieveble", "that gang" etc. He sounded both disgusted and genuinely surprised that these politicians would want to show their faces in public.
OK, I get that you didn't vote for the current political leaders. I can't say I agree with everything they've done neither. I am however astonished at the level of hostility that was expressed there. What's the deal? Is it normal to villify those who differ in their poitics?
What is doubly surprising to me is the difference in the reception of the two government floats. They are both politicians, just at different levels. Both our mayor and the province's governing party are considered to be "right wing" in their ideologies. Both have passed some bills that have benefitted businesses, and given preferential treatment. So why the indifference to one and disgust for the other?
Bruce on 11.23.08 @ 11:56 PM CST [link] [No Comments]
