Not only is the capitalist system not responsible for the present economic crisis, but any attempt to severely hamstring or regulate the market economy out of existence would only succeed in undermining the greatest engine of economic progress and prosperity known to mankind...
The recession has its origin in years of monetary mismanagement by the Federal Reserve System and misguided policies emanating from Washington, D.C. For the five years between 2003 and 2008, the Federal Reserve flooded the financial markets with a huge amount of money, increasing it by 50 percent or more by some measures. The St. Louis Federal Reserve Bank has tracked the impact of this monetary expansion on interest rates...
The easy money and government-guaranteed house of cards all started to come tumbling down last year, and with a huge crash during the last six months. Now, the same people in Washington who produced the mess we are in say that they need more regulatory authority to repair the very financial and housing markets their earlier actions so severely undermined.
And the same Federal Reserve System that produced the monetary excesses that generated the artificial bubbles that have now burst is busy flooding the financial markets with even more newly created money. Over the last five months they have increased the Monetary Base (cash in the system and bank reserves for loans) by 95 percent and M-1 (cash and checking deposits in banks) by almost 40 percent at an annualized rate. The concern, therefore, should not be deflation, but the likelihood of very serious price inflation over the next few years.
Trillion-dollar Federal bailouts and “stimulus” packages will only prolong the agony and delay any real economic recovery. Any government-created jobs will be at the expense of private sector employment opportunities, and will disappear as soon as the government projects come to an end.
The capitalist system is a great engine of human prosperity. It creates the profit incentives for industry and innovation that over the last half century has literally raised hundreds of millions of people out of poverty around the world. The competitive process of supply and demand brings the productive activities of tens of thousands of businesses into balance with the demands of all of us as consumers, both here in America and around the globe.
There is no economic system in all of history has had the same ability to do so much material and cultural good as the open, competitive free market. But the capitalist system cannot do its job if government interferes with its operation. Burdensome government taxes, heavy-handed government regulation, misguided government spending, and mismanagement of the monetary system only succeed in gumming up the works like so much sand in the machine.
The best pro-active policy the Federal government can undertake right now is to accept that its own past policies have caused the economic crisis we are in, and leave the market alone to rebalance itself and reestablish the basis for sustainable growth and employment in the years ahead.
My thoughts: Brilliant. Only government thinks repeating the mistakes of the past represents solutions.