The Whole Idea of a Free Market…

Let me reiterate the point that the free market is not a system that is put in place by a government over an economy. It is human nature, the result of supply and demand and marginal utility etc. It how people determine what they are going to do based on what is best for them. That is an inescapable trait and behavior of humans. Self-interest cannot be avoided.

When you are faced with a decision to purchase a good where you have options, competing products, how do you make your decision? You make it by weighing the quality or usefulness and price. If you have two products that generally are of the same quality or produce the same result to you when using it, but one is less expensive than the other, which are you going to choose? The cheaper one every time.

A common defense of the auto bailout, that is imminent, is that because foreign companies pay their employees lower wages, our domestic companies cannot compete with them in terms of price. While this jeopardizes their existence as an industry, it is in fact a good thing. If foreign companies are able to make a similar product at a better price, than there is little need of our economy to expend resources trying to compete. The workers, capital goods, and resources would be best utilized elsewhere. And they would be.

Furthermore, it is unavoidable. While we can bail-out the autos and subsidize them to a level where they are competitive with the foreigners, we pay the difference via taxes. Let me repeat. Even if Detroit were to be subsidized to a point where the prices of their cars fell to be competitive with foreign firms, we would pay for those subsidies through taxes. Or inflation which is worse.

The alternative is to let the Big 3 fail and let competing firms rise up who can compete with the foreign cars on price via efficiency. Or quality or whatever… maybe it would drive innovation to super-efficient cars or even flying cars, who knows? We certainly will NEVER know if we continue to stifle human nature and the free market by subsidizing poorly managed companies through our own taxes.

“We Can’t Worry About the Deficit…”

Those were the words of President- Elect Obama on a Meet The Press Interview yesterday. Though to be fair, he followed the statement with the words “…short-term.” That is an interesting point to make because all Obama seems to care about is the “short-term”. The contradiction is compelling.

Clearly given the attitude of the past when money was considered irrelvant to facilitate mass-consumption, and the attitudes of the present where money is cast-aside to facilitate grand public-works projects, how can anyone possibly have any faith that the dollar has any worth?

Our own government is now openly exclaiming that they do not care about how much debt they get into. I strongly suggest NOT following your leader.