Getting Scary

By: Robert Waxman | Thu, Jul 26, 2012
Print Email

It seems that our fearless leaders are unable to keep their fear hidden. Comments from central bankers during or ahead of market hours wreak of desperation. Price fixing does not fix anything, and we are being given a lesson about the importance of Adam Smith's invisible hand. We will all soon realize that ZIRP is not a good idea just as fixing the price of apples is not a good idea. Price signals are the basis for proper resource allocation, and false signals create misallocation and myriad problems arise as a result. Policy makers are making a mistake in their belief that policy can control individual action and social mood. Bad decisions must manifest into bad results or we will only see bad decisions in the future.

Making pronouncements during market trading hours is disrupting and will result in disastrous outcomes. When those in charge show us their hand during the game it makes us wonder what the rules really are. Sophisticated players who manage enough money to move markets will step aside until they are sure of how things work. This will cause illiquidity to reign and markets will become frighteningly volatile. Markets always work as participants will buy or sell when they see value in those decisions, and capitalism requires real market prices to function properly.

It has become obvious that the US Federal Reserve is engaging in the exact same policies that the Bank of Japan engaged in when the Japan bubble burst, and it is assured to result in the same outcome. We were all taught in school that free market capitalism results in the optimum standard of living and that anything other than free market capitalism results in less than optimum outcomes. It certainly seems to those educated economists that something other than free market capitalism is at work today. That can only result in less that optimum outcomes. This is going to accelerate the inevitable panic/collapse that is due deceitful behavior.

How much lower can the FED push US interest rates and will it matter? The US has had record low interest rates and an admittedly elevated equity market for some time now, and it has not resulted in the virtuous cycle that was promised. Companies are not investing in plant, capital, equipment , or labor for one reason; aggregate demand is declining. Ben Bernanke will soon have to admit that his thesis has been disproven, and before we allow more destructive policy measures to be implemented we must force him to explain what he expects from more of the same. Insanity, said Einstein, is doing the same thing over and over and expecting different outcomes. How long will we allow an obviously insane, desperate individual to continue to destroy the future to pacify the present? It has become a circus act and feels dangerous.

Nietzsche, the famed philosopher, believed that there is no pleasure without pain and no joy without suffering. He was right because nobody would know happiness unless they understood the feeling of sadness. Ben Bernanke and Alan Greenspan have perpetrated a false philosophy unto Americans for several decades, and it has resulted in a continuous stream of bad decisions which has put us on the edge of the abyss. I encourage everyone to read Ludwig Von Mises and Ayn Rand for a brief explanation of what to expect now. It is getting scary.



Author: Robert Waxman

Robert Waxman

Copyright © 2010-2012 Robert Waxman

All Images, XHTML Renderings, and Source Code Copyright ©