“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it; if it keeps moving, regulate it; and if it stops moving, subsidize it.” – Ronald Reagan
“Clear!” yells the President as he presses the defibrillator paddles to hundreds of thousands of bad loans. The button is pressed, the loans jump, but then slump back down. “Someone get me another $38 billion!” he yells in exasperation. The nurses – they know he needs to move on to the next patient, one who has a chance of being saved. But these bad loans got him elected, and he’s not about to give up. Unfortunately, we know how this story will end. The bad loans will never be revived and the opportunity to save the others will pass.
As the Chairman of the Federal Reserve, Ben Bernanke, proceeds through his reconfirmation hearings, one must wonder how people get into office with no real comprehension of how free markets work. There seems to be some great disconnect; few people seem to understand that a market that can go up, outpacing real output, can also go down. Even fewer understand that when a market sector does go down, it must be allowed to do so, lest it start dragging everything else down with it.
Refinancing overpriced mortgages isn’t a solution. Buying toxic assets at the cost of taxpayers isn’t a solution. There’s no point in shoring up a $440,000 mortgage on a 498 square foot house [1]. Economies are viewed the same way civilizations, ecosystems, and other systems are – cyclic environments through which there is always input and output. Waste must always exit or be broken down to provide for new growth. Forest fires are often seen as healthy, clearing the dead undergrowth which would normally choke out new trees, clearing the way for new life.
Strangely enough, though, our politicians and government officials have decided to detach the economy’s large intestine at the end and reconnect it at the esophagus. Such practices force these bad loans to be digested again as we wait for them to lose their toxicity. Recirculating all that waste, though, is sure to give anyone a terrible case of stomach rot. Let’s get real – who thinks that we’re going to start seeing 2-bedroom, 1-bathroom houses selling for $700,000 again any time soon?
We need to let go; we need to let the forest burn down to make way for new growth. We need to stop punishing the whole of America for the misguided actions of a few? Historically, recessions have been followed by dramatic recoveries. Do we really need any other explanation for why our recovery is ‘slow and fragile’ [2]? And maybe it’s just me, but I don’t believe that anyone who is either too corrupt or too incompetent to file his own taxes properly, even after being warned, should be governing our recovery tax policy, either [3].
1. “Real Homes of Genius: Today we Salute you Santa Ana. 498 Square Feet for $440,000, What a Deal!,” drhousingbubble.com, March 26, 2007.
2. “OECD: ‘Slow and Fragile’ Economic Recovery in Sight,” cnn.com, June 24, 2009.
3. “Geithner Tax Woes Examined,” npr.org, January 14, 2009.
