When there is a draught there is no little harm done by paying a medicine man to do a rain dance. As it turns out the weather is unmanageable but people might feel better for having tried to do something. Efforts to manage the economy are not at all benign. Can the economy be managed? Of course not, but still the efforts to do so are monumental. A free market economy cannot be enhanced by anything government does, other than removing itself as a source of problems. Notice that every effort to improve the economy requires removing one or more necessary characteristics of a free market.
In a true free market economy an uncertain outcome is the norm. Efforts to reduce uncertainty backfire 100% of the time. Try to reduce uncertainty and the result is poverty. Politicians can only be elected by promising to do what can’t be done. One of those things that can’t be done is to reduce uncertainty.

Ben Bernanke is expected to announce some new magic on Friday geared toward saving the economy and of course supporting the stock market. So far, every economic plan in history has hacked away at various pillars of free enterprise. Is it any surprise that not one plan has worked? I suppose Americans will believe in these schemes a long as they can afford to.
During the Roosevelt administration, government started intervening in private markets in a big way and has not stopped. So far, government has a perfect record of wrecking every market where there has been intervention. The most recent market to be destroyed is the housing market. The health care market is currently being wrecked.
Early in this 21st century efforts began to make sure that investors never again lose money in the stock market. The result is that world capital markets are hopelessly corrupt. In just a little time financial markets around the world are going to fall apart in such severe ways that no one on earth will escape the suffering.
How do I know this? I am just counting on government to maintain their perfect record of destroying every market they touch.

A lot of the tragic unemployment and other economic stress that we have today can be traced back to the spring and summer of 2006 when the book smart genius Ben Bernanke had just taken the helm as Federal Reserve Chairman and Henry Paulson who is arguably the best salesman in the world took over as Treasury Secretary. Together these two brilliant minds engineered a scheme to drive asset prices, mostly stocks, higher. The thinking was that the resulting wealth effect would keep GDP moving higher until other economic forces took over and the economy moved ahead on its own. Of course it was also reasoned that that rising stock prices would generate enough demand in the housing market to keep that bubble from busting.
By the summer of 2008 it was becoming apparent that two years of goosing asset prices had produced a house of cards that was going to crumble regardless of what these wise guys came up with. The Bailout of 2008 was introduced as if it was a brilliant heroic plan to save the world from an accidental set of circumstances that were threatening human kind. The Bailout of 2008 was more than anything a face saving maneuver. The people, who were seen as saviors, should have been walking across our television screens in handcuffs. In terms of misallocated resources and shifted economic burdens the costs of TARP is almost unfathomable.
It seems only the most brilliant minds have the confidence to attempt to do what the rest of us accept as impossible. In my mind, plans to steer the economy forward by dismantling our free market system are always going to end with a tragedy. The public will probably never know just how badly they were screwed by the economic solutions that were introduced in 2008. It is the nature of economics that the most severe consequences of are not likely to be traced back to actual causes.

Curbside Jimmy’s Hobo Experience

What is the cause of the recession? What is the cause of the fall in stock prices? Answer, cooperation between Wall Street and the government to rig the financial markets. Severe problems usually have very simple causes.