Government Improves A Free Market, Right?

Free MarketEurope is adapting to negative interest rates, per Bloomberg. (Instead of collecting interest from banks, you pay them to hold your money … Government is SO much better than a free market!)

Under a free market, banks must rent your money from you, paying interest to cover your risk plus the fact that you are giving up your own use of the funds. But European government uses its power to reverse that, so banks can charge you for holding (and risking) your money. Such is the effect of negative interest rates imposed in Europe.

In the U,S, the Federal Reserve has begun to RAISE interest rates a tiny bit; the betting is that it will, at first sign of a a slowing economy (which has never been anything but slow since 2008) flee back to zero or even negative interest rates.  Of course, that’s a guess.

It’s because the economic theory du jour says that our economic doldrums are your fault. You simply aren’t spending enough. Thus, the government must spend more to ‘stimulate’ the economy until you pitch in and do your part. (We doubt that many of our leaders actually BELIEVE such nonsense, but it’s their excuse and no voters have called them on it.)

It is obviously nonsense for a couple of reasons. First, because the extra government spending has to be money that the government has withdrawn from the slow economy, thus slowing it further. Government has no other source of money. Yes, it can (and does) print more money, but the effect is the same since it only dilutes the value of the existing money. Because actual wealth available to buy does not increase when more money is printed.  Thus, the new money is worth less; we call it ‘inflation.’

The other reality is, people reduce spending because they have less money. They have become poor. So extracting more money from them is ridiculous on its face. But that is what government is doing. Notice all the tax increases?

It’s all your fault for not spending enough; never mind that you don’t have it to spend. Our governors will fix it by taking more of what you have left. Yeah …

We sometimes think that anyone who wants to run for political office should never be elected. Oh, well …

Government stifles and meddles economically to pursue political, not economic, goals. If you want a stronger economy, remove government intervention. If you want to slow an economy, let the government meddle. It has never been otherwise. But the economy represents power and no government will willingly keep its hands off.

As we have observed before, our species is one of few without a top predator to keep it in line; that works because we do the job ourselves.  (Think about it …)

 

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About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much)
This entry was posted in Economics, Goverrnment, Politics, Uncategorized and tagged , , . Bookmark the permalink.

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