Tuesday, July 22, 2008

The Unfree Market has Failed

With the economy slowing and the home mortgage industry reeling from the stupidity of government fostered regulations and money which obviated the need for sound financial judgment, we hear frantic cries, "Save us! Save us!!" directed to the government. If a person is trying to drown you, what good is it to scream for him to save you? Alas, this is the widespread response.

I read an argument last night the point of which was that gas prices are rising not because of rising demand but inflation. I hear scant mention of inflation as the cause and none of those come from Washington. We know when other currencies are rising relative to the dollar our currency is worth less. The dollar has been the currency of choice around the world for years and now people don't want it.

Government control of the money supply is certain, albeit sometimes slow, death and the expanding (once in a while it deflates) money bubble is where we have been perched for about a hundred years. Obviously money is something whose reputation has to be earned, as we are now seeing. It is done by the judicious maintenance of value, a quality that the US Government cancelled via the legal tender laws. See below: Money by Consent Not Force posted June 20.

The government is a political institution, not a business that must maintain its value to the world in order to exist. The governement deals with everything by the use of force, not value, and once it steps beyond the protection of individual rights, that force becomes an enemy of its people.

Every major industry is now regulated to the point that people cannot make rational decisions. Time is spent doing what we can get permission to do rather than what is creative, intelligent and prudent. The human mind is the source of values, production, wealth and happiness. The government, on the other hand, acting beyond its proper purpose, cancels the human mind except as a slave to its needs and whims.

Bribes to the legislators and regulators are commonplace because no other way to get their blessing to be their slave is possible. If you don't know how you are paying them bribes, think about it a minute. You buy a license to drive your car. You buy a license to open a business. You pay them fees and taxes to have a phone. The list is endless and would not be if these goods and services were the products of businesses creating appealing values and we were free. Now isn't this a mess? Nevertheless, it's true.

Government to Blame for Housing and Financial Crisis
by Yaron Brook (7/22/08)

Irvine, CA--In “The Government Did It,” an opinion piece published last Friday on Forbes.com, Dr. Yaron Brook, president and executive director of the Ayn Rand Institute, argued that our government’s massive control over the housing and financial markets has led to many of the problems being blamed on the free market today.

“The financial peril of Fannie Mae and Freddie Mac,” Dr. Brook pointed out, “should help expose the lie that today’s financial problems are the result of an insufficiently regulated market.”

Citing the government’s hand in the creation of Fannie Mae and Freddie Mac, the Federal Reserve Board’s inflationary policy of keeping interest rates artificially low, the irrational lending standards forced on lenders by the federal Community Reinvestment Act, and the quasi-official policy of bailing out large financial institutions deemed too big to fail, Dr. Brook argued that “our government contributed to creating a situation in which millions of people were buying homes they could not afford, in which the participants experienced the illusion of prosperity, in which billions upon billions of dollars were going into bad investments. Eventually,” Brook concluded, “the bubble burst.”

“We do not need more regulation or economic ‘steering.’ What we need to do,” said Brook, “is remove the government’s power to coerce, bribe, reward and bail out irrational decisions. The unfree market has failed. It’s time for a truly free market.”

Yaron Brook is president and executive director of the Ayn Rand Institute.

Copyright © 2008 Ayn Rand® Institute. All rights reserved.

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