Market or State

When it comes to making sense of the economic mess we find ourselves in, I have to admit that I’m often stumped by the grandiose reasoning coming from economists. I mean, you don’t have to have to have an MBA to understand that the crisis in America is rooted in its governmental and financial policy.

Anytime I find myself in a discussion about the economy, I point to the central bank, government bail out, and Austrian theory of the business cycle. People usually respond with, “Oh, I don’t know much about that.” They assume it’s too complex for them.

What is a free market? It’s amazing how many believe that we have one now. They believe, as they are taught, that the market is too free and that greedy business men are constantly working to make it hard on the “little guy”.

Well, they are half-right. Yes, there are greedy business men that are constantly working to make it hard on the “little guy”. We call them the federal government and the central banking industry. They are the forces that keep the market regulated and inefficient.

Of course these are just my “many meaningless words”. Retired Professor of Finance, Michael S. Rozeff, addressing the recent bailouts, simplifies it much better than I could here:

This is a time to look at matters carefully and decide: Do you favor free markets or do you favor the State? Do you think that these failures are failures of the free market or do you think they are failures of the State?

The same questions arose when the Great Depression occurred. The government blamed that on speculators, on the stock market crash, on greed, on over-consumption, on under-consumption, on sticky prices and wages, etc. But the real causes of the Great Depression and the real failures owed to government. The government created the Federal Reserve system, and it was the Fed that created the deflation. The government regulated banks and supported unit (isolated) banks, and it was these isolated banks that failed in the thousands. It was the government that raised taxes and tariffs and choked off economic activity. Then, having begun the depression, it was the New Deal that prolonged it. It was the New Deal that over-regulated and cartelized the economy. It was the New Deal that started up a new devaluation of the dollar.

This is a time to look carefully and choose up sides: free markets or the State? There is no in between. Freedom vs. slavery. Which is it? [continue reading]

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