This is an excellent article on the economy - not just the economy but on the American way of life. We have the greatest opportunity, because we live in America, to do what is right for our own well being as guaranteed by the Constitution, and therefore the well being of the entire country. We as individuals, operating independently, form the strength of the whole.
The liberal progressive socialists do not see how we can survive without someone doing the thinking for us all - that is a government that controls all aspects of our lives which will create equal opportunities for everyone. What a hoot -
The market economy has always worked and worked well when government didn't interfere in it's operation. Regan proved this when he did nothing in the 1987 when the stock market crash took place. He was reviled by the media and political hacks on the left as an idiot. da - Of course he was right not to interfere as we all know, we have had twenty years of prosperity because of nonintferance.
Now that the market is in a down turn, the fear mongers at it again demanding government interference. Unfortunately we don't have another Ronald Regan to lead us through this but I hope cooler heads will prevail in decisions to leave government out of the solution mix. I also know that this is just wishful thinking. What better way for the socialists to start the process of total population control than through a collapsed economy.
"We need more government controls on our economy" is the cry from Washington these days. I hope and pray this doesn't come to pass.
This November make sure you vote with a cool head - watch and listen to what is said with an inquisitive mind. Do not accept a politician word as gospel.
Keep the faith in the American way, the battle is for freedom of choice.
Economics as Metaphor*
By DAVID RANSON July 25, 2008
Many newspaper readers, recalling what they read at the beginning of this year, must be rubbing their eyes. How can the economy still be functioning despite the perfect storm of recession and housing collapse that was supposed to engulf it?
Although markets are volatile and segments of the country are having a hard time, the national output is up, not down, this year. How has the economy pulled this off? Is there something the pessimists were missing?The answer is yes, and here's why. People tend to anthropomorphize the world around them, and not just in economics. We look at the outside world and assume that it is governed in the same way as our own lives.
For example, we're mystified by Mother Nature's apparent heartlessness and large-scale disregard for what we cherish: order, justice and the sanctity of life. We still resist the notion that we can't dictate the course of the Mississippi, control the way the planet evolves, or equalize the distribution of income. The same parochial streak in human nature is rife in economic commentary.
In the context of a household or a business, debt is a burden and can become a threat. But for society as a whole, debt finance is a prime means of capitalizing production and growth. It's extraordinary, then, that in national debate the narrow view drowns out the broad. Aggregate private debt and trade deficits are widely regarded with equal suspicion and fear -- even by "experts." Instead of celebrating the role that private debt has played in creating prosperity, many blame "excessive" debt when things go wrong, and cite it as a basis for pessimism.
At the micro level, the failure of an institution is often a disaster to those with a personal stake. But from an overall perspective, when one institution becomes insolvent, another can be relied on to pick up its functions. Again, it's the localized human costs that exercise the political imagination. The benefits of systemic adaptability are taken for granted. Government responds to constituencies and takes great pains to preserve the existing institutional structure, sometimes guaranteeing or bailing out failing firms. It's widely assumed that a large enough wave of bankruptcies will bring the economy down. Little or no credit is given to the ability of the economic system to heal itself and find its way back to vitality.
What's excessive now is fear, not debt: Fears of insolvency and private-sector indebtedness are misplaced and harmful. They place obstacles in the way of ill-used capital that seeks to move toward safer and more profitable employment. They plunge the stock market into turbulence. They push government into hasty actions that intrude more aggressively into private choices and decisions. They undercut the market-price system, without which the economy cannot allocate resources productively.
Last but not least, these fears trigger the proverbial false alarm in a crowded theater, sending everyone stampeding for the exits. Economists have a professional duty to transmit the more broad-minded vision of the world that their discipline reveals. But economists are parochial too.
There's an old saying that if your neighbors are losing their jobs it's a recession; if you are losing yours it's a depression. It's therefore unfortunate that such a large fraction of prominent forecasters hails from the financial community. Their views are colored by the turmoil suffered in their industry.
In an earlier generation, many of the best-known forecasters ran economics departments in nonfinancial companies. Today these are a dying breed, thanks to the past decades of corporate cost-cutting. We are not a nation of whiners, but we do have a lot of alarmists. It is becoming politically incorrect to suggest that the economy is basically sound. We shouldn't expect forecasters to shrug off the depressing effects of what's happening in their own back yards. This is human nature. We just need to keep things in perspective when we listen to them.
A more objective diagnosis is especially needed during an election year, in which many unfounded fears are broadcast and amplified by the media.
A natural system has built-in redundancy. It manages and heals itself. The economic system is no exception. On this page about 10 years ago, Penny Russell and I argued against the idea that the economy is a "house of cards," susceptible to collapse as soon as a few cards are dislodged. We suggested that it's more like a beehive. The future of the hive does not depend on full employment for all the worker bees. In fact, an accident can put many bees out of action without compromising the hive as a whole.
Metaphors are important. If they are off the mark, they can deceive. But good metaphors can help maintain perspective amid chaos. The community of banks, for example, can be likened to players in a game of musical chairs. As the music stops, some comfortable backsides are thrown out to be replaced with fresh ones. When the music resumes, wealth has been redistributed, and livelihoods have been turned upside down, but the game goes on.
Most businesses and workers hurt by this financial chaos are as innocent as those whose farms were flooded by torrential rains in Iowa. In nature's rough justice, short-sighted decisions by some can cause much hardship for others. Yet despite the human tragedies at the local level, the system as a whole muddles through.
Failure to recognize this endangers the mental health of our society. We create a far bigger tragedy when we lose heart, change the rules of the game, or act recklessly with quick fixes.*
Mr. Ranson is head of research at H.C. Wainwright Economics.*
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