Part 1 of 1 Trillion or however much money we dont have

I imagine the title has thoughts of tarp and spending being the first thing wrong with DC. Well .......no. I just thought it was a catchy phrase, but I could spend the next 700 years explaining what's wrong with it. Instead, I'll talk about the socialist society we have created. A lot of pundits would have you believe that all the bailouts are very much needed to "save" the financial system. This couldn't be further from the truth. In fact, I would argue we're setting ourselves up for further and if possible, greater failure in the future.

I'll be nice to start and call it "selective capitalsim." Honestly, how do you decide which companies fail and succeed? Size? Come on. You see if you have capital and are considering starting a business, why in the world would you do so with an uneven playing field? The way capitalism works is free trade uninhibited by government. If you let companies and individuals fail, new capital comes in with more risk management to avert future miscalculations. New capital creates jobs. Jobs create paychecks. Paychecks allow consumers to consume. The world continues to spin. By allowing companies to get so big that they can't fail, they never abide by the same rules. I hate people are losing jobs. To blame it on greedy lenders or unregulated markets is wrong. Markets go up and go down. Regulation, taxes, etc. keep the markets from properly pricing assets. If you don't believe me- see "The New Deal." If memory serves, you learn of how this got people back to work in 4th Grade. Problem is that the new deal inhibited markets for years to come. You don't quite learn this because our government ran education program doesn't want you to see the truth. In fact, World War II, for all of it's misgivings, got us out the rut of the 30's.

Today, we have the government trying to artificially stimulate the economy and financial system through price manipulation, spending, etc. If a seller is willing to sell widgets at 80 and buyers are only willing to pay 40, there is a disconnect. However, eventually a seller, who needs cash in exchange for his widgets, will lower his price. If this doesn't happen, a buyer will raise his price if he thinks the widgets have some value. I use this as an example because the all world mad man Jimmy Cramer suggested a government ran trading desk for collateralized debt obligations. In this plan, buyers and sellers come together for a certain price. This inhibits the market. In a government ran program, both are now losers. In this suggested program, those widgets may never move, freezing the markets which will in turn freeze the economy. It really doesn't matter if you're widgets are stocks, bonds, diamonds, real estate or even clothes, the underlying principal remains the same. Pundits will tell you to look at money supply, taxes, interest rates, etc, but the fact is the economy is driven by how fast money changes hands.

Remember this short lesson when a government official tells you we have to do this in order to save us from disaster. Instead, ask them to lower taxes on capital so that we have buyers come into the market place. By doing this, we'll keep taxes lower longer because we will not be in debt to foreign nations for the next 60 years.

Quote of the week comes from Vice President Joe Biden.

"We could do everything right and still get 30% wrong."

Hope and change we can believe in.

Dreaming of lower taxes and less regulation,


CapitalismTalks