The Stealth Kicker…

28 11 2008
 “Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, [sound money], and a tolerable sense of government.” – Adam Smith

Peace, easy taxes, [sound money], and a tolerable sense of government. War, taxation, inflation, and over-regulation.

Peace and war. These can’t be controlled, for they rise from the heart of man. Evil exists, as bad as we would like to wish that away.

Taxation. We do have to pay our way. We need to better find our way. Government can’t be the ‘be all end all’ of every wish and desire. While our American government is founded upon the people, by the people and for that people, not everything the people do has to be through the government. Some things function best when left to the individual.

Inflation is a manifestation that arises out of the actions of the people. It most often occurs when things aren’t left to their natural course.

Government. Government should do no more than to act as a construction crew, leveling the ground so the will of the people can be done in a proper and forthright manner. This country was founded upon the principle that its function was to be subservient to the people. Of the people, by the people, for the people.

One very big problem with our economy, one of the main players in what kicked off this current crises, is never ever mentioned in public. It’s government intervention in private enterprise. How’s that you say? Let’s see..

We were in a period of turmoil with the credit markets being overextended. People had huge amounts of credit card debt, and housing had gone through the roof. Banks didn’t care, for interest rates were high enough to cover the losses with those cards, and if a person couldn’t pay their mortgage they could either sell that property (often at a profit) or the loss would be minimal to the institution via foreclosure. Property could be “turned”. Then the bottom started dropping out from under all that.

Along came fuel price increases. These increases came about two separate ways. Short physical supply, and government policy preventing making that physical supply less short. Not only that but government actually hindering the sound alternatives that exist.

Food prices shot up, again do to government intervention. Government mandates for ethanol directly created shortages in the grain market that had some of the most far-reaching and profound effects ever.

Then add in the stealth kicker to it all, and what is almost never mentioned, was an increase in the minimum wage. This, as it always does, killed job growth at the entry level and slowed it all the way up the line. You can’t add costs to the bottom line without it adversely effecting business and industry. This increase (part two of a three step process) added over ten percent to the cost of labor. The WHOLE increase will total over forty percent at its end.

If you kill off jobs at a time when both food and fuel prices are skyrocketing and many people are facing foreclosure and bankruptcy…, well, this is what you get.

Don’t look for this to go away overnight. Round three is still to come, middle of next year.

-Al

 


Based from an article in Human Events by Mark Skousen, The Humpty Dumpty Economy, 11/26/2008

 

 

 

 

 

 

 

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One response

28 11 2008
Tony Orlando

I’ve been reading along for a while now. I just wanted to drop you a comment to say keep up the good work.

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