Adam Smith in his book "Wealth of Nations" used the
term 'the invisible hand' to describe the idea that individuals acting in their
own self interest would in turn provide for the betterment of the economy and
society at large. Unfortunately, our federal government, even with a
conservative at its helm, tends to lose faith in this fundamental principle of
free enterprise when the economy cycles downward, which it inevitably does for a
time. Instead of trusting that the markets will right themselves, the government
succumbs to political pressure and looks for the quick fix in the short term to
the detriment of the people in the longer term. The bottom line is the
government cannot intervene to guarantee prosperity.
The American consumer - not the American taxpayer -
should support private industry. When the Federal Reserve put up $30 billion to
shore up Bear Stearns for a merger with JP Morgan, it contravened the economic
principles that have made the United States the largest economy in the world. In
so doing the Federal Reserve insured the risk of Bear Stearns' investors by
extending it to taxpayers. This is inimical to the fundamentals of free market
economics. Not since the days of FDR has the federal government interceded in
the economic affairs of the nation.
History tells us that government intervention in the
American economy can be counter productive. Many economists believe that the
policies of the New Deal actually prolonged the Great Depression.
Rhetoric of Hillary Clinton indicates she is in
panic mode. Her idea to freeze rates is not what the mortgage market needs. And
another Clinton presidency is not what America needs
Milton Friedman believed that government printing
more money to deal with an ever growing mountain of debt caused inflation and
invariably harmed the economy, and this appears to be the course we are now on.
Sub-prime mortgage companies chose to business with
individuals who ordinarily would not be qualified for the mortgage, and the fact
that when adjustable rates went up so did foreclosures. Both sides made bad
business decisions and they must face the consequences. Pain is the greatest
teacher. Businesses and individuals need to learn the lesson and move on. It was
ridiculous to believe that house prices would continue to rise at 25 to 30
percent per year indefinitely as they were in some parts of the country.
What can the federal government do to help the
economy? Make the Bush tax cuts permanent, eliminate the death tax, cut
corporate taxes, keep interest rates at a level that does not cause a decline in
the value of the dollar, privatize social security, reform entitlements, and
open up more land for oil exploration and refinery construction.
