Tuesday, May 14, 2013

The Ultimate Economic Bubble


        We have had some economic bubbles that have burst in our recent history.  The dot-com bubble cost some people their life savings.  I understand the human nature of greed, but common sense should have told us that company values and earnings did not justify the stock price.
        Bank failures caused another economic bubble to burst.  Again the problem appears to have been greed.  Top bank officials looked for short-term profits to create large bonuses.  Don’t get me wrong; I am in favor of the capitalist system that creates value, but not paper profits that contribute nothing to the economy.  The federal government bailed them out.  I thought it was necessary at the time, but now I question that decision.  Current federal legislation could still have the government bail out big banks if they get in trouble. 
        We had a real estate bubble burst.  How could that happen?  Could the fact the federal government was encouraging 100%, loans to people that could not afford the payments have anything to do with it?  The really scary thing is that the government is still encouraging banks to make sub-prime loans for houses.  Can’t be you say.  Don’t kid yourself.  Check it out.
        We had a collapse in the automotive industry.  Again the government bailed them out.  Good or bad?  Good for the United Auto Workers Union, bad for stockholders. Now GM has built a manufacturing plant in China after closing several plants in the US.  Would it have been better to break up GM or let them go into liquidation? 
One thing that really made me mad was the forced closing of small independently owned automotive dealers.  I was a Ford-Mercury dealer, and in spite of what the media said, I know this did not save the company one dime.  What it did do was reduce competition for the large dealers and company owned stores.  Government intervention hurt the small business owner as usual.
        Do we see a trend here?  We see government bailouts for the rich, big business, and campaign contributors.  We see individual savings and small businesses hurt.  I think some states and major cities think the federal government will bail them out if they get in financial trouble.  We see government debt increasing at an unsustainable rate.  Maybe we should get government out of business. 
        If government debt continues to increase, eventually we will reach a point of no return.  The interest on the debt will increase until there is no choice, but to default.  This will be the ultimate economic bubble.  There is no one to bail out our federal government.  We can’t look to other countries for help. 
        What will happen?  The government will be forced to make radical decisions to avoid anarchy. Bank accounts will be confiscated.  Government will be forced to take over all privately owned industry.  Stocks will be worthless.  Private property may also need to be confiscated.  Of course, the second amendment will have to be done away with before this can happen. 
        Does this sound good or bad?  If you believe in individual freedom and capitalism, it sounds unbelievably bad.  In fact many of you say it can never happen in this country.  Maybe not, but if we don’t reduce the size of the federal government, I’m not so sure. 
        If you believe in a socialist country, it sounds good.  If you believe everyone should work according to his or her ability and receive according to their need, it sounds good.  Everyone is equal.  No winners or losers.  Sounds a little like our current education system.  Unfortunately, history has shown us that the result is everyone is equal in poverty, except for the political elite.  The political elite always seems to live in luxury. 
        Which way do we want to go?   Do we want personal freedom and a capitalist country, or do we want socialism ruled by a political elite? 

1 comment:

  1. I'm tired of working to support 50% of the populaiton in this country. What next? 30% supporting 70%? Where does it end?

    ReplyDelete