Capitalism Works. It’s Government That’s Buggered!

If I ask you what is different today than a year ago one of your first answers would undoubtedly be the economy. A year ago, while I was watching stock prices give hints that there was some sort of trouble ahead and telling me to back my investments out into more conservative safe havens, most Americans were fumbling along much as they always had. But the economy was sound in its basic respects. People had jobs and they were earning and spending money. Everywhere you turned people were gainfully pursuing the American Dream finding people to pay them for their talents and often getting compensated well above normal because everyone was flush with work. From general contractors making a killing off of home remodeling to the steel industry, everything was humming right along as it should.

I even wrote an article about it when Disney was reporting continued increases in park profits and attendance called, ”Economy Sucks? We’re Going to Disney World!” in which I plainly pointed out that if the fundamentals of economy were not sound then such would be impossible because no one would have money to spend. This of course really upset some know-it-alls who took it upon themselves at the time to email me daily and were complaining how bad thing were out there on the streets. Of course none of this was true. The streets were not where the problem resided and the streets were fine. People were getting up and going about their daily lives as they always had. Then things got all messed up.

Despite people still having money to spend everything came crashing down with a thud. What started with the government takeover of a relatively unknown Southern California thrift and mortgage originator, IndyMac, which dabbled in questionable loans to questionable sorts of folks snowballed from a panic into a full blown recession as one thing after another hit America in the face with the force of a locomotive and so fast that no one could process it all.

People got really scared. And it was not just people but businesses that also began to act like frightened people do. They tightened their wallets and they snapped the purses shut regardless of any hands that might have been in the way.

Since then a lot of reasons for the whole mess we are currently in have come to light which has only worsened the situation. Some who think not with their brains blame the greedy Wall Streeters and even question what role Capitalism had in the whole mess out of ignorance. But for the rest of us with the ability to look at what happened we see that everything from the insanity of mark-to-market accounting which forced entities holding assets to vastly undervalue them and appear financially insolvent to the sub prime housing mess promoted for years by economics illiterates in Washington and which resulted from government prodding banks to make bad loans and then buying up those loans through their front organizations like Fannie Mae and Freddie Mac to past vilifications of intelligent lending practices like “Red Lining” of neighborhoods with high crime rates and low property values (set by market conditions mind you) caused what was sound to fail.

I have been talking about all this stuff for years and how bad things ensue when government hands make unwise and economically idiotic things happen. Now people are starting to realize that maybe I had a point after all and that I am not some sort of monster just seeking to make the babies of Welfare mothers go hungry by cutting back government.

It was not Capitalism that has collapsed. It was government meddling in Capitalism that blew up. Just like it always does.

It was government that buggered everything up. Now we are living with the consequences. Lots of people suddenly woke up and looked around to see how many bad ideas were being promoted and they started to see even more danger ahead. They pulled back and saved more in preparation. While this is good for the banks, it is terrible for other sectors of the economy from the automotive to the housing industry which all rely on not just people being willing to spend money, but usually large amounts of money and often going into debt (rightly or wrongly) while doing so.

But what we have seen in the last year or so is just the tip of the iceberg. We have not even seen the effects of what happens when other portions of our government inevitably fail because that government is trying to make other unrealistic things happen. When Medicare and Social Security go belly up lots of people who rely on those programs are going to crash and burn. Either benefits will be cut or taxes will be raised. If taxes are raised to cover up the problems then instead of those on the programs being hurt it will be the American worker that is hurt. The hurt remains only exactly who is hurt will change. Then with the government spending huge amounts of money on every whim, pet project, imaginary “stimulus” that comes down the pike and borrowing to be able to do so, the looming monster of crushing debt where the interest alone will require so much money that the overall debt will simply spiral out of control is inevitable. Then add on top of that programs like Cap and Trade which by all estimates will cost Americans more and the inevitable costs of “free” health insurance and everything only gets worse.

Meanwhile American citizens want to just fulfill the basic tenants of Capitalism. They want to acquire something and pay someone else to provide it. But they might not be able to accomplish this because government is meddling with the basic tenants of economics which states that you cannot take water from one end of the lake, carry it in a leaky bucket loosing most of it along the way, taking the occasional drink as well and then finally dump it back into the other end while hoping to raise the level of the lake. But as long as government tries this failed tactic, capitalism will never succeed.

If you still doubt that capitalism was not the problem then ask yourself this question. When was the last time you crashed the economy by purchasing a car, a house or a washer and dryer set because you wanted and needed them? The answer is never and that is what capitalism is. End of discussion.