The $30 billion ante by the Fed to help JP Morgan Chase purchase Bear Stearns brokerage house reflects just how much government intervention exists in the American economy.
Republicans are anything but idle as they are accused of being by their fellow democrats when it comes to “doing something” in the economy. Besides encouraging the Fed to act, republicans and democrats alike have authorized handing out checks to the American people beginning the first part of May through their so-called “stimulus” package. The passage of minimum wage laws, health care laws, and all of the other laws that are to help the underprivileged are all done in the name of helping to guide the economy and stabilize economic markets. Regardless of what anyone says, there is definitely much that government officials do in their goal to help stabilize the economy.
However, it is the very government intervention in the economy that triggers all of the current instability and will continue to cause destabilization of the economy. The creation of the Fed and the income tax alone are massive reflections of the road taken in America toward complete socialism. President Bush’s statement that government should not overcorrect the economy is indicative of how government is seen as the responsible party of making sure the American economy remains stable.
The American founders had in mind when they created the United States Constitution a genuine free-market economy. In other words all of the factors of production, land, labor, capital, and entrepreneurial skills were to be privately owned and controlled either through private individuals or corporate entities. Through the competitive forces of supply and demand prices of all goods and services, including labor, would then be determined, and therefore how the factors of production would be utilized.
The success or failure of all individual and corporate businesses would then be determined by the decisions of those individuals involved. If a profit was made, the business remained, if a loss occurred, the business would necessarily have to change their use of resources or leave the marketplace.
Unfortunately, the founders’ vision has not been realized. With the recent bailout of Bear Stearns by the Fed and announcing that it would do whatever it takes to help individuals through their economic plight, there is more government intervention in the economy now, than ever. The more laws and regulations that government approves in order to bring order to American financial markets, the more instability it creates.
Markets cannot be tinkered with without unintended consequences engineering additional economic malaise. The reason is that all individuals act in their own self-interest. It is the price system that tells individuals what to buy and what to sell. If government interferes in the free market it arbitrarily sets a price for goods and services that are misleading to individuals causing them to make an incorrect economic decision.
An excellent example is when the Fed lowers interest rates as is now currently being done in order to “save” the financial markets. By artificially lowering interest rates it signals to individuals to buy instead of save. Then, when the interest rate goes up as it must to balance out the excess spending, the market begins to reel like it has been in the housing market with all of the bank foreclosures.
The current increased government intervention in the economy is equivalent to drinking more scotch to avoid the coming hangover. Instead of letting the financial markets squeeze the excess money out of the system like the body does when it squeezes the excess scotch out of itself during the hangover; the Fed is making matters worse by pouring even more money into the financial system. The current monetary and fiscal policy of the United States government must change to one of non-intervention if individuals are ever to recover from the current economic headache before an economic migraine sets in.
In a free society, one that the United States was founded on, there is no room for government intervention in the economy. The only function government has is to make sure the players in the economy do not initiate force upon one another. In other words government is to prosecute fraud, theft, murder, and the like. That is the extent to which government exists in a free society.
In a complete socialistic society like the one that currently exists in America government intervention is demanded and expected. However, one ought not to look for any real solutions to the current economic situation.
Removing the Fed, the income tax, and practically every federal government department not only free markets to heal themselves and allow individuals to create economic wealth for themselves and others, but also results in more peace and harmony.