A Series of Unfortunate Blogs: Part III–What caused our current problems? (Hint it wasn’t capitalism).

From the drivel that comes out of the White House, to the palaver that comes from the two-headed monster that is Reid-Pelosi, or the claptrap from the latest Michael Moore film, you would think capitalism was to blame for our current economic problems. However, when you really look at it that’s not the case. Liberals like to blame capitalism and use it interchangeably, and incorrectly with the word greed. But capitalism isn’t about greed…or at least no more than any other system of economics. In socialism, communism, capitalism, anarchy, mixed-economies or some yet undiscovered system you are pretty much going to have one constant, and that is people are going to want more than what they have. And this is because you’re dealing with human beings. Yes we have other natural tendencies, charity, compassion, mercy…but there is no denying that as humans we come with Greed. (For a New Age side note, this is because we know we deserve more, after all we’re part of God and thus entitled to well…everything. The problem is that trying to seek that in the material world is not always the best substitute for the peace and happiness of enlightenment…but I’ve yet to hear of anyone reaching Enlightenment while they had bill collectors beat at their door–let’s keep in mind Buddha was a very rich prince, many saints came from wealth, and if you listen to the yogi Paramhansa Yogananda, Christ was while not rich, living quite comfortably in India during the missing years…the proper use of money never hurt anyone).
But greed you say is the cause of this economic crisis when it was mixed with capitalism. But that’s not really that accurate. First off socialism in practice leads to far worse corruption and economic down turns (remember Greece was far more socialistic than us, and one of the reasons Europe is not as bad off as we are is that they are diving towards capitalism as fast as they can). And it wasn’t really greed either that caused this. The appropriate word would avarice, which is wanting more without any concern for others. Greed can also be the rational-self-interest that Adam Smith decried so long ago in “Wealth of Nations.” However Smith realized that there will always be the avaricious among us, so to keep them in check, a capitalistic system needs to have rule of law which ensures justice, rules, openness, and restrictions on the most egregious acts of stupidity, not to mention strict punishments for fraud and theft. Without these things you do not have a capitalistic system. Guess what, we haven’t had anything that resembles this for some time. But in addition to being the referee, judge and lawgiver of the game of economics, capitalism requires that the government doesn’t actually get involved in the game itself. You don’t see a referee get involved and try and catch a pass from the quarterback, or the umpire at bat…yet this is what our wonderfully stupid government has been trying to do. I’m going to cover those positive actions that the government should have been doing, but didn’t, later, and just focus on its unethical, incompetent, and ruinous negative actions which helped contribute to this current recession (or what may very soon become the Obama Depression).
It worked something like this
(1) Bad business practices, buffeted by corporate welfare, weaken the actual strength of companies and coupled with unethical accounting practices which hide these weakness and simultaneously making them appear stronger than they ever could. Corporate welfare in numerous forms (e.g. tariffs, specific tax breaks, subsidies, providing them infrastructure free of charge) allowed companies to expand in ways the government wanted…not in the way the market demanded. You can’t compete with foreign steel, we’ll charge a tariff so yours seems cheaper by comparison, but the consumer that didn’t necessarily need high quality American steel gets shafted. You’re doing research into a field there isn’t any real market for but we think sounds good on a story on the 6:00 News and might get us reelected, here have a tax break for that worthless research…it’s not as if the market would encourage innovation without tax breaks…we only got PC’s, the automobile, TV, the light bulb, alternating current, DVD’s, penicillin and many other things from free market research, nothing really important. Your corporation isn’t making enough profit selling wheat, well we’ll pay this other corporation to not grow wheat to jack up the prices when supply goes down (so you’re paying both for the wheat that is grown when you buy bread and for the wheat that is not grown through taxes). You get the idea. All of this interference with corporations is socialist in nature. True, it’s not the full on owning and nationalizing of companies, but it certainly isn’t capitalism.
(2) This leads to an inflated economy, because if we can get the government to pay for all of our expansions and research we can just grow in any which way irrespective of how much it will cost us, and this works for a while until somebody somewhere has to pay a bill (please see the Greek economy) but this was further encouraged by a Federal Reserve hell bent on preventing inflation and keeping unemployment low. The Federal Reserve messes with the interest rate to keep inflation low and unemployment low. However this never works in the long run. Doing this is one of the most immediate and direct reasons the stock market crashed when it did in 1929. Milton Friedman got a Nobel Prize (back when they didn’t give them out to whichever retarded dipshit got lots of press, yes Paul Krugman I mean you) for proving that messing with the interest rate is one of the most dangerous things you can do. But the Fed is run by morons, much like the rest of the government. So the economy grew, not because it had a solid base to grow from, but because everyone was an avaricious idiot thinking “the good times will never end” or if they were just avaricious and saw that eventually the house of cards was going to come crashing down they thought “well I’m going to get what I can while I can.” Both thought systems would have been hindered under true capitalism but we didn’t have that. Again, this was assuredly not capitalism.
(3) Among other things, this inflated economy leads the government to push for an increase in the housing market as they believe if the economy is up, then more people should own a house, and it literally forced banks to give out loans. The banks tried not to give out loans to people who couldn’t afford them, but the government in conjunction with several law firms (one in particular had this young lawyer named Barrack) sued the banks and threatened them with fines and possibly imprisonment if they didn’t make these loans that the bank knew would default. At this point the government had outlawed rational business practices, and these guys weren’t dumb enough to think “the good times will never end”, so not being idiots, they took the only legal means left to them (i.e. “I’ll get mine while I can” yes the government made bad business the only legal form). Legal codes that require bad business practices, again not what I think of when I think capitalism.
(4) This then causes an overly inflated housing market, which is further encouraged by government mandated bad loans to buy those houses. Since they’ve got to give the loans, which means more people go house shopping. Anyone who has taken high school Econ knows that in the laws of supply and demand when you suddenly have more shoppers (i.e. demand went up) prices go up. And then people invest in real estate more because they see prices going up. Which causes prices to go up further. Which causes the government to force more bad loans. Which brings buyers in…you see where this is going. Actually, with the exception of the government involvement this is capitalism to a degree. Bubbles do occur in capitalism…but under capitalism they don’t get this insane.
(5) Which when the bubble bursts causes a housing market crash. Eventually the people who couldn’t afford their loan couldn’t, well, afford their loan. And the bank had to foreclose. They didn’t want to foreclose, if you go through the stories, banks were really trying to make some kind of deal with people because they knew they were going to lose money if they had to foreclose, but low and behold these people who couldn’t get a loan if a gun hadn’t been held to banks head, really couldn’t pay the loan. So houses are foreclosed which raises supply, which brings down housing prices, which causes more people to stop paying as their loan is now worth more than the house. Which causes more foreclosures. Which causes prices to drop. yadda yadda yadda. This is also kind of capitalism; this is Adam Smith’s Invisible Hand. The Invisible Hand doesn’t just stabilize and move markets forward. It will haul off and slap you repeatedly if you mess with it.
(6) This bubble bursting then causes a banking and credit collapse. Now banks have all this money loaned out, with no one repaying the loans, and a bunch of houses that are worth next to nothing that they can’t sell…can’t imagine why they collapsed.
(7) If banks collapse it causes ripple effects. And all those bad business practices I described before, which should never have started, have now acted like cancers in their companies and cause them all to become weak–And when a major sector of industry crumbles, the domino effect starts spreading to other weak companies. Which leads to a lot of banks and corporations near bankruptcy. (Oh, by the way, this weakness was also caused by the fact that the government didn’t do its job as referee, but I’ll get to that in a later blog).
(8) Which then leads to the current round of Bush and Obama bailouts! Which is about as far from capitalism as you can get.

Now what’s the problem with stimulus–priming the pump as John Maynard Keyes (who may or may not be referred to here on in as “The Lord of Darkness”) would say. If we spend more shouldn’t that get businesses spending again which should increase the economy? After all don’t capitalists like to say that if one business does well it will spread its prosperity– it will be better for both the supplier of that business, the business itself, and the consumer, which will in turn all grow and further more expansion? Yes, capitalist make that point. But they also point out it has to be driven by market forces and the desires of the consumer. When the consumer is paying the business through taxes and paying for the product the consumer gets screwed. When the business if subsidized by the government, doesn’t encourage better products or services, it encourages the weak and bad business practices which leads to a business that will fail, which means that was a really bad investment…so again everyone gets screwed.

Oh and did I mention Obama’s payoff of Unions. Unions are a great thing under capitalism–they keep businesses honest. However since FDR where unions were granted monopoly status where they can hold businesses hostage, force wages up to absurd levels for little to no work, buy off politicians to give them legal cover, and then force non union businesses out…well they have clearly become worse than the robber barons they meant to stop. Much worse. And now thanks to your President we’re paying them directly with taxpayer funds for giving us the shaft. Not to mention trying to pass legislation that will make them more unstoppable.
…Somehow I fail to see how capitalism was to blame here.

Oh here’s another thing that capitalism doesn’t go for: paying people for things they haven’t done. Let’s extend unemployment benefits, thus encouraging people to not look for work. Let’s raise minimum wage, which causes inflation. Let’s give social security payments far above what a person has paid into the system. Let’s give free medical care to people who haven’t only not paid for it, but not taken care of themselves (often through the use of government subsidized tobacco). Let’s give out obscene salaries and astronomically insane pensions making government work much more attractive than working for the private sector. All of these things we do. All of it causes serious long-term economic problems. None of it is capitalism.

There are a myriad of other causes I haven’t mention here for the sake of brevity. How can you describe them?
Corruption? Yes. Socialism? Yes. Capitalism? Not even close.

1 Comment

Filed under Capitalism, Conservative, Debt, Economics, Government is corrupt, Government is useless, Individualism, Long Term Thinking

One response to “A Series of Unfortunate Blogs: Part III–What caused our current problems? (Hint it wasn’t capitalism).

  1. Pingback: Another piece of BS from the RSA. | The Conservative New Ager

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