There exists two views among Economists: Those who believe that the Economy is a naturally-flowing entity which should be left to find its own way; and Those who believe the Economy is a runaway engine which must be continually manipulated to gain the desired End. One could say this was basically Conservative and Liberal philosophy, except it crosses both economic and political lines. Just when you believe you have settled into a comfortable pattern with Comrades, you find your associates advocating some contrary rhetoric. It is said that Politics makes strange bedfellows, but the scenario reminds more of a ‘Dear John’ Letter.
It all revolves around the Concept of ‘Stimulus.’ One Group of Us, I am one, believe that every Government intervention in the Economy introduces a distortion to the natural flow of the Market, bringing a desired alteration in Market function. The trouble arises when further interventions are introduced, the intervention operating not only upon the Markets, but on the previous interventions; drawing the Markets further away from natural operation, and also canceling natural Market by-pass of un-natural Pricing. Third interventions upon this matrix will actually introduce an artificial taxation upon the Market structure, introducing adverse Costs into the Market; generating a very false Pricing system.
This argument has a very strong relationship to the current economic malaise. We have a Scene where Home Values are vastly overpriced, due to previous Government interventions bolstering Home Values; a basic Tax Credit system where lack of Mortgage meant a higher rate of Taxation. Home Values became overpriced, and Mortgage numbers were increased unnaturally to provide this Tax remission. Mortgage lenders, under Government pressures and promised Incentives, started to provide Mortgages which were basically unsound. Every Student of Markets know that the real Solution to the economic distress is reduction of Home Values to a more realistic Pricing, but too much of the Economy is tied to the artificial Price structure which has been created. The alternative is artificial Price Supports which will further distort the natural economy. lgl
1 comment:
...yes, the repeated government "interventions" into the market -- are like a doctor administering a series of new drugs to patient, in hopes of improving some little understood ailment.
The true effects of the drugs, and the interaction of the drugs themselves are also understood less than the original ailment itself.
First rule -- do-no-harm !
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