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When Morons Interpret the Economy December 23, 2008

Posted by neoavatara in Economy, Politics.
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What is, ' I don't know jack about the economy?'

What is, ' I don't know jack about the economy?'

Arianna Huffington, a blowhard if there ever was one, has an article today decrying laissez-faire economics and sounding its death knell.

People like Huffington have such a simplistic and naive understanding of the economy, it is almost laughable.  The economy is like a living organism.  It gets healthy, it gets sick, it gets better, often without any outside influence what so ever.  But that doesn’t mean you can’t make it get worse.

First things first.  Laissez faire economics has never (I repeat, NEVER) been applied in the real world, and certainly not in the U.S.A.  We have always had regulation; how much, well, that has varied.  But to say, even under Bush, that we have been in a laissez faire economy is just truly incorrect.

Second, there are multiple reasons for the current economic crisis.  Some are related to too little or incompetent regulation.  This falls squarely on the shoulders of the Bush administration.  And clearly many of the regulations in place are archaic in the day and age of instant transactions and billion share days on Wall Street.

In turn, there has been, in some respects, too much regulation.  Congress imposing restrictions on mortgage lenders to increase lending to the ‘disadvantaged’ (read:  poor and underemployed) to increase home ownership now looks like one of the dumbest ideas in recent history.  Oh, sure, there were good intentions, but we know where the road lined with good intentions leads…apparently, to a credit crunch.

We need to ignore extremists, both on the right and the left.  Sometimes, simple common sense must take over.  First, our regulatory system is a disaster, and needs to be overhauled.  And to my conservative friends, let me state this:  yes, we need a regulatory system.

No system succeeds without boundaries and rules.  Let me make an analogy. Freedom in this country is not absolute; no freedom is.  You have freedom of speech, but you can’t yell fire in a crowded place.  You have the right to bear arms, but not a nuclear weapon.  There are limits to freedom, because without those limits, everyone’s freedom is at risk.

The same is true with capitalism.

However, those on the left who are decrying the free market need to understand something:  a fully regulated economy has failed every time it has been tried.  Show me a fully regulated economy, and I will show you a country with growing poverty and no upward mobility.  People point to China as a regulated economy that is succeeding.  That is absurd.  Look at China today; they are being hit by the credit crunch and worldwide recession as well.  They are regulated, more than many, but totally regulated?  No way.  They are now part of the world economy.

Common sense must rule the day.  We need new regulatory practices, with reforms built around the mistakes of the past.  But we need to allow the free market to thrive within that regulatory system.  Only the combination of both will give us the best chance for economic success.  The past century has shown us that.  And don’t let extremists, especially those on the left, to use their stupidity to tell you otherwise.

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