By the government artificially sustaining failing companies that are "too big to fail" they are confusing the free market. Failing companies encourage company leadership to make hard changes and investors to consider new (and better) companies. By allowing companies like GM to continue to operate despite the failing in the free market, you confuse investors. Some that would remove their investment and give it to a growing company to fuel it's good choices will leave their investment (or worse invest more) in companies that SHOULD fail, thereby enabling their bad choices. This creates a double hit on competitors because it removes risk from the failing company while increasing it for their legitimate competitors. It also forces competitors to become investors in the very companies that compete with them, with no hope of a return on their forced investment (in the form of higher taxes).
Government can't create jobs (unless they are government jobs that actually drain the economy). The government can't insure fairness. The government can't bail-out or rescue industries. The government doesn't produce revenue, it consumes it.
The bottom line is that the government has no business being involved in the free market. The market is self balancing and when you have the federal government trying to help, it just creates a pendulum affect.
Wednesday, December 30, 2009
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What is currency?
ReplyDeleteWho/what issues it?
"[T]he government has no business being involved in the free market." ?? [emphasis added]
What is the job of the Federal Reserve?
Are banking regulations necessary?
A common currency is a legitimate function of the government, but should be based on something real (like gold).
ReplyDeleteThe Federal Reserve System was created in 1913. It was originally created to help prevent bank runs. This was the 3rd national banking system to be created (the first two were fraught with corruption and misuse…I can’t say the current one is much better…hence the Great Depression and even the recent mortgage crisis). Since it didn’t work well as originally created, our wise leaders decided it needed more authority. It may just be me, but when you do something poorly it is NOT a reason to give you more authority.
Here are some things they say they are trying to do:
Conducting the nation's monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system, and protect the credit rights of consumers.
Maintaining stability of the financial system and containing systemic risk that may arise in financial markets.
Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system.
It also doesn’t give me any peace of mind that the Fed is neither privately owned, nor government owned….not sure what that makes it then. Like most government bureaucracies, a lot is left to interpretation, and who is doing the interpreting matters…a lot. For example it is to be a “lender of last resort” to avoid issues that would have a severe adverse impact on the economy. Well Hmmmmm….since conservative and liberals do not agree on what is best for the economy, how are we supposed to agree on what is “a severe adverse impact on the economy”, or when it is “the last resort”?
The Fed is just another government entity that causes problems and fixes nothing. This is just the type of cluster we create when we legislate out of fear. You can’t have a FREE market without risk. Ever heard the saying, “Nothing ventured, nothing gained.”? Venture requires people to take risks, hopefully educated risks, but risks all the same. All success comes from a willingness to take risks. When we try to cheat by creating “safety nets” with the government we remove risk and opportunity equally.
You can replace the word risk(s) in your response with the word responsibility(s) without changing the meaning.
ReplyDeleteMy concern for our government is its removal of responsibility to protect its citizens. The difference between "giving a man a fish and teaching him how to fish."
Nearly the same meaning, and responsibility is important. If no risk is allowed, there is no need for responsibility.
ReplyDeleteOur government is responsible for protecting our liberty. Liberty provides us the opportunity to choose for ourselves how responsible to be and how much risk to take (and how to mitigate it).
It is interesting what happens when the government tries to protect us from ourselves. People become entitlement minded and think the government is responsible for protecting them from everything they don't like.
Negative on that, good buddy, the responsibility to protect our liberty is ours, or no one's.
ReplyDeleteOur government is responsible for protecting this nation from outside enemies, settling interstate and international disputes, etc. as stated in its constitution. All other responsibilities are those of the states and the people thereof. That's us.
Then we definately agree on this.
ReplyDeleteWe are so far beyond what the Constitution meant for our government to do that I fear we will never get back to what it should be (or even close).