Regulation Can’t Solve our Problems
How many times have we heard the mantra that the free market is incapable of regulating itself? This claim has been exposed as false many times, yet we still have people whipping up arguments that have been used for centuries to limit economic freedom and steal the power from the citizen and place it in the hands of the government.
What is most troubling is that history is always invoked as being on the side of the government. As if without Big Brother stepping in to save us from ourselves, the population would be in such a state of economic chaos we would certainly be unable to progress as a society. Of course, anybody willing to actually sift through the history will find that the main culprit in almost any economic, and especially social, catastrophe is the government itself. The same is true for the current economic downturn.
Regulation is always praised in times of recession, as if the previous regulations were not stringent enough. Free thinkers such as Adam Smith are assumed to be too ancient in their laissez faire beliefs to have ever imagined the complexities of the modern world. Of course, this type of argument is used in every spectrum of the government to erode civil liberties and create fear of the unknown. However, seeing as how no intellectual of the modern era writing against Adam Smith ever met him, they are absurdly arrogant in their assumption of his ignorance.
People praising the name of regulatory reform completely misunderstand the root causes of the economic downturn. This, unfortunately, will lead to even more problems in the financial system. Of course, once the new problems surface, the individuals who called for the new regulations will not once consider their faults. They will instead begin another round of scapegoating everyone except the perpetrator of the problem.
The current economic problems are not the result of the ineffectiveness of a previous regulatory framework. It is also untrue that every economist agrees on this issue. What is true is that the economists who were blindsided by the recession are the ones who believe lack of regulation was the problem. However, the economists who predicted this recession, such as Peter Schiff of Euro Pacific Capital, never mention lack of regulation as the cause of their worries. Austrian economists, the school of economic thought that seems to be a prophet on issues the government is totally perplexed by, has always blamed the Federal Reserve’s expansion of the money supply for our financial troubles.
Bad business choices happen, there is no stopping them. However, for an entire market to make poor decisions in unison takes a special type of interference. Governments are great at interfering in the economy and blaming their mistakes on the market itself. And when governments or central banks, such as the Federal Reserve, are allowed to inflate the money supply, they send false signals to the economy that eventually end in huge contractions. Therefore, inflation is the culprit of our current situation, not lack of regulation. And even though the economists who are of this free market mindset were able to predict what is being called the worst recession since the Great Depression, Obama isn’t calling on them for help. Obama is relying on the same people who steered us over a cliff. His advisors’ plan is to give the Federal Reserve, the very institution that caused the crises, more power over the economy. What a brilliant team we have in the White House.
One need not look further than Bernard Madoff to understand that government regulation is ineffective at best. Years before his Ponzi scheme had defrauded nearly $65 billion from unsuspecting investors, an independent fraud investigator named Harry Markopolis was warning the SEC about the scam. Of course, the SEC did nothing. According to CNN, Markopolis accused the SEC of being financially illiterate and unwilling to bring cases against the larger firms it oversees. Instead, the SEC was willing to let a $5 billion dollar Ponzi scheme morph into a $65 billion monster. Government at its finest.
Don’t be fooled into believing that more regulation will be able to solve the massive economic problems the US is facing today. Due to government intervention and bailouts, our economy has been transformed from a creditor to a debtor nation. Rising inflation is causing other countries to rethink their American investments. Once our deficit is sufficient enough for foreigners to liquidate their investments, interest rates must go up. This will lead to higher prices along with a devaluation of the dollar. As the dollar goes down, foreign dollars held abroad will come back to our shores and finish killing off the dollars purchasing power. What, then, will be left to regulate?
