Thursday, June 18, 2009

Obama's plan for Fed worries some in Congress

"President Barack Obama's plan to transform the Federal Reserve into a super-regulator ran into skepticism Thursday from lawmakers who worry that the central bank is not the best suited to keep an eye on firms deemed so big and influential that their demise could hurt the economy." Associated Press


This is my first post on this blog so I am going to begin with a brief and elementary discussion of government and civilization in general. In order to be productive as a society it quickly becomes a necessity to divide labor. There isn't enough time in a day for all of us to do everything. Some farm, others teach, plumbers, carpenters, even bankers, etc. There are some industries that help us perform those tasks better but by nature are not designed to be profitable on their own. Here I am mainly talking about defense, fire, and things of that nature. So we pay taxes to pay for the people and equipment to perform those tasks. As a result we end up creating a body of people in charge of distributing those funds and managing those functions. Alas government is born.

The inevitable problem, that seems to build and build over time, is that you can't ever really trust those people to continue to look out for you the common citizen. Ultimately any group in charge of its own funding and size is going to swell. And that is what I am proposing we are seeing at this point. We have a government that has bent the idea of protecting us from war, crime, and nature to the idea that we need to be protected from ourselves. We have certainly had to deal with government corruption but I argue that worse than that are those that truly believe that government is the answer.

Regardless of party our government has backed a wide range of programs that "protect" us from economic collapse and unemployment by leveraging trillions for some of the biggest corporations. Strangely though, unemployment still occurred and was widespread. My hypothesis is that the government bailouts only help the top 5-10% of each company with any consistency and I further contend that they were designed as such. If a big corporation like GM goes under, thousands of people lose their jobs. That is guaranteed and it would be tragic. But the competition would then be rewarded for making smarter business decisions and would ultimately end up hiring some of those people (probably not the top tier though since they made the bad decisions and have huge salaries).

What we have done now has prevented the natural business cycle. We are keeping businesses afloat that made bad decisions and for the most part the well-to-do have kept their jobs and retirement packages. The problem therefore is spread to the entire industry (and beyond). Now everyone must cut production, even the better-run businesses. Blue collar and entry level jobs are slashed. The competition doesn't reap any benefit for their better practices.

You probably get where I am going here. The natural cycle takes care of the hard workers and punishes the brass and the bailout system protects the errant leadership and punishes the lower income workers (punished for not having a massive lobbying group at their disposal).

All that to say that this seems to be the plan moving forward for the current administration; prevent large companies from failing at all costs. Like a resurgence of "mom and pop" operations would be so hurtful to our country. This plan feeds the government ego so perfectly by "necessitating" an army of bureaucrats to watch over all of these invasive programs.

So my question is how do we move past the stage of being upset about this to a point where we can get our country back?

6 comments:

Anonymous said...

I would argue with a few of these premises – civil protection is done not because it isn’t profitable for private industry, but for supposed fair and equal distribution of basic services. Private police forces would be a HIGHLY lucrative business in places like Highland Park, Beverly Hills, etc. Contrary to your contention, not everything is solved by private business – in fact, private business interests got us into this mess – Wall Street and mortgage/insurance company’s greed. I also would argue that keeping GM afloat only helps those at the top – if GM goes under, so does all the benefits to its hundreds of thousands of retires – plain ol’ regular people. This rant is an oversimplification of the economic cycle with statements like “The natural cycle takes care of the hard workers and punishes the brass and the bailout system protects the errant leadership and punishes the lower income workers”.

Palm boy said...

Civil protection is done not because it isn’t profitable for private industry, but for supposed fair and equal distribution of basic services.

FAICA's point is proven. To evenly distribute basic services to all is simply not profitable for a private firm.
To provide the same utilities to a wealthy district as to a poor district would be terrible business, unless it is a collective goal of the community. Thus, we have government providing those services the same to all, be it Defense, Law enforcement, roads, water, ect.

Private firms do make good money in augmenting these services when they fail, be it additional security, purified water, or driveway pavers.

in fact, private business interests got us into this mess – Wall Street and mortgage/insurance company’s greed.

Dating back to the nationalization of Fannie & Freddie, the finacial industry has been limited as private enterprise. Federal encouragement to increase subprime loan offerings were bad buisness, and not iniatited by successful finacial institutions, until such a time as the incentive by the Feds made it worth the risk.
I would argue also that Wells Fargo is a private enterprise interested in profit, and was not adversely affected by the financial panic as others were. Yet, greed to earn a profit was still there.

So it was not greed that led to this collapse, but a forceful push by the Federal Government to buy votes through manipulating private enterprise.

This rant is an oversimplification of the economic cycle

To pretend that a government solution saves regular people is simplistic and an assumption entirely unfounded either on history or empirical evidence.

Gino said...

off topic...
as for your 'robert's reads' on the sidebar.
i recommend 'lone survivor'. awesome book. a page turner, you'd love it.

another one i loved was 'my grandfathers son' by clarence thomas.

Palm boy said...

What is Lone Survivor about?

I have my Grandfather's Son on hold at the library. Looks good.

Gino said...
This comment has been removed by the author.
Gino said...

Lone Survivor: wiki Marcus Luttrell

and then go to amazon and buy the damn thing like i told to do.

you'll love it. :)