Bailouts: a threat to national security
Mark Anderson
December 12, 2008
The biggest threat to national security is the Congress and its spending orgy.
First, I would suggest that the purpose of security is to secure liberty. What difference does it make if the threat to your liberty comes from somebody who speaks a foreign tongue or your native tongue, a sporadic criminal or somebody in a government-issued costume? Thus big government in the name of security is a perfect paradox. True security is engendered by economic vitality and prosperity. Economic vitality and prosperity are engendered by free markets and liberty.
Populist arguments of capital controls, trade restrictions, and isolationism in order to "protect" our economic interests as a matter of "national security" are in error, pursuant to economic illiteracy. Take, for instance, the argument that bailing out General Motors is vital for "national security."
The entire country, including the government itself, is bankrupt. Thus bailing out General Motors, refusing to let them restructure - indeed, the entire economy has to be restructured towards a free market - is a case not of creating even a short term fix. Instead, it is all about changing around the victims, while hastening the day of complete insolvency and bankruptcy. In short: it is destroying the health of the economy, which is the true threat to our security interests.
To explain the abstract situation we are facing, the inflationary bubble economy that we had was where the damage was inflicted. We are broke, bankrupt, insolvent. The parlance in the media obfuscates the nature of the problem by focusing on symptoms, such as the "credit crunch." In fact, the problem is a savings crunch. Thus the solution is not to inflate and spend more, but to save.
Falling prices - including that of housing - do not cause economic conditions. Economic conditions determine prices. The best thing we can do is let prices fall and fast. People are losing their homes because homes are unaffordable.
The question: where did all of our money go? Understand that buying a house, contrary to popular belief engendered by the inflationary boom, does not represent an investment. Houses are durable consumption goods. We blew our money. We spent it all on government, ipods, televisions, cars, and were able to do so because of the willingness of foreigners (particularly China) to send us goods in exchange for our dollars. In short: our "liquidity" is overseas. The only possible way that housing prices could be re-flated back to the bubble years would be through a very destructive and massive hyperinflation, in which case you couldn't even buy a house with dollars.
This means that the price of housing has not dropped due to deflation (i.e., a revaluation of the dollar). We simply don't have the money in our possession. We can't afford houses as is. We are now struggling to obtain the basic necessities of life. But even short of being able to re-flate the housing bubble - which we shouldn't be trying to do - the inflationary policies of today will do this: make basic necessities unaffordable, too.
Over the years we have become increasingly dependent upon cheaper foreign markets to supply us with goods. Contrary to popular belief, inflation actually creates a negative balance of payments, encouraging consumption at the expense of productivity. Read this and this.
Now that I have identified the problem, we know what the solutions are. We need to save. Thus we don't need more government spending for "stimulus." We don't need artificially suppressed interest rates. We don't need more inflation. We don't need more inflationary credit expansion. We need to return to a free market and start saving again, allowing for capital to flourish. However, politicians are doing the exact opposite.
Even worse, present policy could very well precipitate a military confrontation in the midst of bankruptcy. Why? Since many people mistake symptoms for causes, not knowing what to do, some people actually believe that since China has dollars, the way to "protect" ourselves from China is to devalue the dollar - i.e., trying to re-create our "savings" on a printing press. Pissing off a creditor isn't the most brilliant of all things to do. Missed in this argument is that we wouldn't just be devaluing the dollars China has, but the dollars that we have! Thus we piss China off in the midst of bankrupting ourselves! This doesn't bode well for the future.
If we only did the right things, then, and only then, could we begin to climb our way out of this mess. In fact, contrary to the idea that a strong and active central government is necessary for the sake of "national security," the most effective way to deal with any government that is a potential adversary is to get your own economy and fiscal house in order. It is strong and powerful central government which is in the process of ruining the country, and thus making Americans vulnerable to threats from within and without.
Suppose we did the right things, by returning to a free market and letting the market bring interest rates where it may, in order to encourage genuine saving and investment. Nothing would be more effective than this in under-cutting potential adversaries. Why? Think about the problem that the U.S. faces, for a moment. The government spends too much, taxes too much, regulates too much, and then prints money. Thus capital flight takes place. Thus we go bankrupt.
If we reversed this trend, and did the right things, then the United States would become a haven for foreign capital. In other words: the most effective way to deal with the Chinese government is not to bankrupt ourselves through the government's spending orgy, but to create a climate that attracts foreign capital. I can almost see why China has been so willing to finance the U.S. government, which is destructive to our economy by not allowing us to get a free market again, and also makes the U.S. government a de facto agent of the Chinese government.
Why won't politicians do what is necessary? Because in order to give us free markets, sound money, and liberty, they would have to relinquish power. So it is all about the accretion of power, even if it means Americans suffer. And even if it means playing right into the hands of the Chinese government, all in the name of "rescuing" the American economy. We are being conquered from within. By whom? Politicians in Washington.
First, I would suggest that the purpose of security is to secure liberty. What difference does it make if the threat to your liberty comes from somebody who speaks a foreign tongue or your native tongue, a sporadic criminal or somebody in a government-issued costume? Thus big government in the name of security is a perfect paradox. True security is engendered by economic vitality and prosperity. Economic vitality and prosperity are engendered by free markets and liberty.
Populist arguments of capital controls, trade restrictions, and isolationism in order to "protect" our economic interests as a matter of "national security" are in error, pursuant to economic illiteracy. Take, for instance, the argument that bailing out General Motors is vital for "national security."
The entire country, including the government itself, is bankrupt. Thus bailing out General Motors, refusing to let them restructure - indeed, the entire economy has to be restructured towards a free market - is a case not of creating even a short term fix. Instead, it is all about changing around the victims, while hastening the day of complete insolvency and bankruptcy. In short: it is destroying the health of the economy, which is the true threat to our security interests.
To explain the abstract situation we are facing, the inflationary bubble economy that we had was where the damage was inflicted. We are broke, bankrupt, insolvent. The parlance in the media obfuscates the nature of the problem by focusing on symptoms, such as the "credit crunch." In fact, the problem is a savings crunch. Thus the solution is not to inflate and spend more, but to save.
Falling prices - including that of housing - do not cause economic conditions. Economic conditions determine prices. The best thing we can do is let prices fall and fast. People are losing their homes because homes are unaffordable.
The question: where did all of our money go? Understand that buying a house, contrary to popular belief engendered by the inflationary boom, does not represent an investment. Houses are durable consumption goods. We blew our money. We spent it all on government, ipods, televisions, cars, and were able to do so because of the willingness of foreigners (particularly China) to send us goods in exchange for our dollars. In short: our "liquidity" is overseas. The only possible way that housing prices could be re-flated back to the bubble years would be through a very destructive and massive hyperinflation, in which case you couldn't even buy a house with dollars.
This means that the price of housing has not dropped due to deflation (i.e., a revaluation of the dollar). We simply don't have the money in our possession. We can't afford houses as is. We are now struggling to obtain the basic necessities of life. But even short of being able to re-flate the housing bubble - which we shouldn't be trying to do - the inflationary policies of today will do this: make basic necessities unaffordable, too.
Over the years we have become increasingly dependent upon cheaper foreign markets to supply us with goods. Contrary to popular belief, inflation actually creates a negative balance of payments, encouraging consumption at the expense of productivity. Read this and this.
Now that I have identified the problem, we know what the solutions are. We need to save. Thus we don't need more government spending for "stimulus." We don't need artificially suppressed interest rates. We don't need more inflation. We don't need more inflationary credit expansion. We need to return to a free market and start saving again, allowing for capital to flourish. However, politicians are doing the exact opposite.
Even worse, present policy could very well precipitate a military confrontation in the midst of bankruptcy. Why? Since many people mistake symptoms for causes, not knowing what to do, some people actually believe that since China has dollars, the way to "protect" ourselves from China is to devalue the dollar - i.e., trying to re-create our "savings" on a printing press. Pissing off a creditor isn't the most brilliant of all things to do. Missed in this argument is that we wouldn't just be devaluing the dollars China has, but the dollars that we have! Thus we piss China off in the midst of bankrupting ourselves! This doesn't bode well for the future.
If we only did the right things, then, and only then, could we begin to climb our way out of this mess. In fact, contrary to the idea that a strong and active central government is necessary for the sake of "national security," the most effective way to deal with any government that is a potential adversary is to get your own economy and fiscal house in order. It is strong and powerful central government which is in the process of ruining the country, and thus making Americans vulnerable to threats from within and without.
Suppose we did the right things, by returning to a free market and letting the market bring interest rates where it may, in order to encourage genuine saving and investment. Nothing would be more effective than this in under-cutting potential adversaries. Why? Think about the problem that the U.S. faces, for a moment. The government spends too much, taxes too much, regulates too much, and then prints money. Thus capital flight takes place. Thus we go bankrupt.
If we reversed this trend, and did the right things, then the United States would become a haven for foreign capital. In other words: the most effective way to deal with the Chinese government is not to bankrupt ourselves through the government's spending orgy, but to create a climate that attracts foreign capital. I can almost see why China has been so willing to finance the U.S. government, which is destructive to our economy by not allowing us to get a free market again, and also makes the U.S. government a de facto agent of the Chinese government.
Why won't politicians do what is necessary? Because in order to give us free markets, sound money, and liberty, they would have to relinquish power. So it is all about the accretion of power, even if it means Americans suffer. And even if it means playing right into the hands of the Chinese government, all in the name of "rescuing" the American economy. We are being conquered from within. By whom? Politicians in Washington.
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