How Can they Do This??!!

There was once a move to create a new punctuation mark called the interabang. It was the combination of an exclamation mark superimposed over a question mark and was intended to be the punctuational equivalent of an exclamatory question such as WHAT THE HECK??!!

The question of the day needs to be punctuated with an interabang.

In a former life I was company counsel to middle market manufacturers. Honest capitalists. In-the-trenches sales guys. Make-a-profit or die people. Periodically, one of them would come into my office with some burdensome government regulation in hand that made no sense and would ask, "How can they do this to us??!!" Doing my best not to weep, in my most professional manner, I would respond, "For thousands of years it has been the same, and it is no different now: the government is the group of guys with the most guns, or spears, or rocks. They can do it because they can and in our democracy they can because we let them." Then I would get on my soap box and preach about laissez faire capitalism, limited government and the ethical value of trade, and the freedom to trade versus government coercion – and how the ideals of the Declaration of Independence (which I kept hanging on my wall) had been corrupted. Not that it did much good.

You might ask today, knowing that you will foot the bill through taxes or inflation for every bailout that the government and Federal Reserve undertakes, "How can they do this to us??!!" After all, you were taught in your civics classes in the 1950s (they didn't teach it much later) that we are supposed to have a limited government that protects and respects our rights to life, liberty and equal treatment under the law. The answer is that they can do it because we (meaning the electorate) let them.

James Grant has written a great article in the Wall Street Journal entitled, "Why No Outrage?" You should read it in its entirety but the following comments jumped out at me:

Wall Street is off the political agenda in 2008 for reasons we may only guess about. Possibly, in this time of widespread public participation in the stock market, "Wall Street" is really "Main Street." Or maybe Wall Street, its old self, owns both major political parties and their candidates. Or, possibly, the $4.50 gasoline price has absorbed every available erg of populist anger, or -- yet another possibility -- today's financial failures are too complex to stick in everyman's craw.

I have another theory, and that is that the old populists actually won. This is their financial system. They had demanded paper money, federally insured bank deposits and a heavy governmental hand in the distribution of credit, and now they have them. The Populist Party might have lost the elections in the hard times of the 1890s. But it won the future.

The Congressional Budget Office estimates that the Fannie/Freddie bailout will cost $25 billion. Others, who question the CBO's assumptions, put the top number at $1 trillion.

It is depressing to think that you might not complain loudly, visibly and bitterly that the "heavy governmental hand" will now extract from you the cost, the great cost, of the failures of other people -- some poor and some very rich -- in order to preserve a fascist economic model that exploits you and has proved itself to be morally flawed. Unless you complain, you will continue to be a professional victim, one of the "sheeple."

In his essay, "Alienation" in Capitalism: The Unknown Ideal, Dr. Nathaniel Branden ended with a pointed comment on a poem by A. E. Housman:

“The proper answer to the question—

And how am I to face the odds
of Man’s bedevilment and God’s?
I, a stranger and afraid
in a world I never made.

—is: Why didn’t you?”

The essay (and the book, which also includes Alan Greenspan's now famous article on the gold standard) is well worth reading in its entirety.

If you carefully evaluate what the politicians in charge of the government have done, you will see that they will always take the power that you have given them, line the pockets of their friends, and find new ways to control the masses. And this time they very well may have ruined us all. (Henry C K Liu has written an excellent, detailed, fact-filled article on the Fannie/Freddie debacle, for example.) In the 20th Century, the USA had begun to develop a strong, stable middle class that was growing in affluence and size. That positive socioeconomic development, to say the least, is at risk if not over, having given way to the politics of envy and avarice.

Don't be the kind of populist that uses the government to control and take money from your neighbors. Identify and follow the philosophy that understands such abuse to be morally corrupt. Be the kind of "populist" that wants the government to get out of the people's way, to protect them from fraud and violence, and otherwise to leave them to make it on their own.

Pollyanna versus Chicken Little

The meltdown in the financial markets that became manifest in earnest last summer has generated an incredible variety of commentary -- from Pollyanna to Chicken Little. Where the economy is headed is important to all of us. I will devote extensive space in the coming months to all sides and all aspects of the raging debate, and I will contribute my own evaluation. But it is important to study how these opinions are developed: what are the facts (actual occurrences and things) and are all relevant facts included, what is the context, what is the logic (the validity of the reasoning), and are the conclusions warranted in light of the foregoing?

The economic news and commentary is fast and furious, coming at a rate and volume that is almost impossible to digest. Furthermore, most commentators speak from their own perspectives and are rarely self-critical. Those who own gold mines obviously would like to see the price of gold rise. Financial advisers would like to sell you their services. Newspeople want to improve their stature in their corner of the news industry. Stockbrokers want you to buy stocks and bonds. Et Cetera. So it is all the more important to be skeptical and study the facts to verify any conclusions that are presented to you.

As for myself, I am retired, own my modest home outright and have retirement savings that probably are not near enough to sustain my pre-retirement standard of living to the end of my life expectancy. So my financial self-interest is not much different from the ordinary prudent middle class retiree.

While economics itself is fairly simple, the economic superstructure is extraordinarily complex. For example, one of the largest threats to your personal economic well-being is the stability of the multi-trillion dollar market in over-the-counter credit derivatives that is larger than the annual gross domestic product of the United States. Even more complex are the strictures that governments have placed on the free markets. These strictures distort rather than eliminate market forces, making it difficult to forecast the short term direction of the economy. I will attempt to make these complexities somewhat understandable.