Government has always been the problem and will continue to be so as long as we allow ourselves to be directed and manipulated by it. If we as citizens don't start using some common sense in our personal lives by demanding less government and more free market solutions to our problems, we will suffer the consequences in a lower quality of life for ourselves and the next generations. You say it can't happen here, right? Guess again!
As the author of this article points out, government can't fix something by waving a magic wand, it will take sacrifice on all of us by living within our means. Oh, no not that, Obama promised he would solve all of the world problems, why should we give up anything? Case in point, the UAW in Detroit.
The liberal elites in Washington and elsewhere now are saying a fix will take long then they thought and we will have to pay more then they thought and it won't just be the rich that has to pay more but everyone, for generations to come. But guess who won't have to take a pay cut, you guessed it, the liberal elites in Washington and else where that make the laws that will move the entire nation into the poor house.
The cry of the modern liberal is "pull up the rope, I'm aboard".
Do you know people like this, yeah, so do I and they out number us by a big margin. Keep the faith though, maybe common sense will prevail when the battle heats up.
There's No Pain-Free Cure for Recession
Belt-tightening is required by all, including government. WSJ
December 27, 2008
By PETER SCHIFF
As recession fears cause the nation to embrace greater state control of
the economy and unimaginable federal deficits, one searches in vain for
debate worthy of the moment. Where there should be an historic clash of
ideas, there is only blind resignation and an amorphous queasiness that
we are simply sweeping the slouching beast under the rug.
With faith in the free markets now taking a back seat to fear and
expediency, nearly the entire political spectrum agrees that the federal
government must spend whatever amount is necessary to stabilize the
housing market, bail out financial firms, liquefy the credit markets,
create jobs and make the recession as shallow and brief as possible. The
few who maintain free-market views have been largely marginalized.
Taking the theories of economist John Maynard Keynes as gospel, our most
highly respected contemporary economists imagine a complex world in
which economics at the personal, corporate and municipal levels are
governed by laws far different from those in effect at the national level.
Individuals, companies or cities with heavy debt and shrinking revenues
instinctively know that they must reduce spending, tighten their belts,
pay down debt and live within their means. But it is axiomatic in
Keynesianism that national governments can create and sustain economic
activity by injecting printed money into the financial system. In their
view, absent the stimuli of the New Deal and World War II, the
Depression would never have ended.
On a gut level, we have a hard time with this concept. There is a vague
sense of smoke and mirrors, of something being magically created out of
nothing. But economics, we are told, is complicated.
It would be irresponsible in the extreme for an individual to forestall
a personal recession by taking out newer, bigger loans when the old
loans can't be repaid. However, this is precisely what we are planning
on a national level.
I believe these ideas hold sway largely because they promise happy,
pain-free solutions. They are the economic equivalent of miracle
weight-loss programs that require no dieting or exercise. The theories
permit economists to claim mystic wisdom, governments to pretend that
they have the power to dispel hardship with the whir of a printing
press, and voters to believe that they can have recovery without sacrifice.
As a follower of the Austrian School of economics I believe that market
forces apply equally to people and nations.
The problems we face collectively are no different from those we face individually. Belt
tightening is required by all, including government.
Governments cannot create but merely redirect. When the government
spends, the money has to come from somewhere. If the government doesn't
have a surplus, then it must come from taxes. If taxes don't go up, then
it must come from increased borrowing. If lenders won't lend, then it
must come from the printing press, which is where all these bailouts are
headed. But each additional dollar printed diminishes the value those
already in circulation.
Something cannot be effortlessly created from nothing.
Similarly, any jobs or other economic activity created by public-sector
expansion merely comes at the expense of jobs lost in the private
sector. And if the government chooses to save inefficient jobs in select
private industries, more efficient jobs will be lost in others. As more
factors of production come under government control, the more
inefficient our entire economy becomes. Inefficiency lowers
productivity, stifles competitiveness and lowers living standards.
If we look at government market interventions through this pragmatic
lens, what can we expect from the coming avalanche of federal activism?
By borrowing more than it can ever pay back, the government will
guarantee higher inflation for years to come, thereby diminishing the
value of all that Americans have saved and acquired. For now the
inflationary tide is being held back by the countervailing pressures of
bursting asset bubbles in real estate and stocks, forced liquidations in
commodities, and troubled retailers slashing prices to unload excess
inventory.
But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and
significantly higher inflation.
The good news is that economics is not all that complicated. The bad
news is that our economy is broken and there is nothing the government
can do to fix it. However, the free market does have a cure: it's called
a recession, and it's not fun, easy or quick. But if we put our faith in
the power of government to make the pain go away, we will live with the
consequences for generations.
*Mr. Schiff is president of Euro Pacific Capital and author of "The
Little Book of Bull Moves in Bear Markets" (Wiley, 2008).*
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