Tuesday, September 23, 2008

Free Market My A$$

I get so sick of people talking about "market failure."

[T]he quaint notion that America has a free market economic system is gone. In reality, our government is manipulating nearly every aspect of our economy in an inefficient and horribly unjust manner. Market forces, which normally function to sort out winners and losers, have been largely replaced by arbitrary government diktats.

For instance, our government is straining every fiber of its regulatory muscle to raise real estate prices (in a vain attempt to re-inflate the housing bubble). But this is not a socially neutral endeavor. After all, for every person who sells a house, there is also a buyer. When the government manipulates housing prices upward, the practical effect is to steal money from buyers and give the loot to the sellers.

Or consider our interest rates. The Federal Reserve has been holding interest rates at absurdly low levels (even below the inflation rate) for years, because easy credit policies give a short-term "stimulus" to the economy (and help to keep the bankrupt federal government from paying higher finance charges).

But for every borrower, there is a lender. If the government uses its influence to lower interest rates, it is essentially stealing money from lenders for the benefit of borrowers. Thus, folks who buy bonds or CDs are getting a far lower return on their investments because of the interventionist policies of their own government.

Another example is the carefully orchestrated campaign to keep stock prices inflated. It is a poorly-kept secret that our government maintains a "plunge protection team" whose main duty is to prop up the Dow and prevent any major downturns in stock prices.

Aside from the issue of whether stock prices are any of the government’s business at all (they aren’t), the government’s actions are again unfair and confiscatory. If a hypothetical investor analyzes the market and decides that stocks are overpriced, his most logical strategy is to sell short. If this assessment is correct and the market falls, he’ll make money. But government intervention to re-inflate stock prices steals wealth from the short sellers and gives it to long buyers.

In essence, our government has implemented a series of massive interventions in the marketplace which harm certain individuals for the unearned benefit of others.

By what right does the government do this? Why should a person who buys a house, or lends money, or short-sells stocks have his financial livelihood undermined by his own government? Are not lenders also citizens of our republic? Don’t short sellers pay taxes too?

And why should those who sell houses, borrow money, or take a "long" position in stocks be the beneficiaries of arbitrary government interventions? Is the world somehow a better place because these individuals make money at the expense of those on the other side of the trades?


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