Monday, October 20, 2008

You gotta have faith

Today it was revealed that the British government has repeatedly encountered UFO's in the skies over Europe. While this was probably the most interesting news story of the day, it was unfortunately not the one with which you should be most concerned.

Several days ago I mentioned an op-ed article suggesting that governments bailout the auto manufacturers. This shouldn't come as a surprise due to the widely reported economic troubles of Michigan giant General Motors. After all, if funneling public funds to private companies is the solution to industry instability, then why shouldn't everyone try to get a taste?

In point of fact, French President Nicolas Sarkozy is suggesting that his government do this precisely. In the face of a sluggish European economy, Sarkozy is suggesting that France “take national measures to help the development of electric cars, to create a network of service stations capable of replacing batteries, or supporting research into fuel cells,” in order to, “get the economic machine going.” You can find more in the article here.

But the auto and banking industries aren't the only one's struggling. Electronics giant Circuit City is considering whether they should liquidate millions of dollars in assets, including closing stores and eliminating jobs, or whether they should file for bankruptcy protection. Larger than anticipated cuts in consumer spending, and an inability to acquire sufficient credit to continue day to day operations is forcing them to confront some serious financial decisions.

This is the way it should work in a truly free economy. Some sectors struggle, prices drop, customers step in and buy goods and services at a lower cost, and then businesses begin making money again. To be fair, never having operated in a truly free economy, Circuit City can not be held completely responsible for their failure to compete. They are suffering as a result of the state's interference in the banking and mortgage industries just like you and I are, but when companies are faced with cash shortages, they have to confront tough choices. Either they will have to close stores, find more cash, apply for bankruptcy protection, or shut down completely. And in doing so, their competitors, such as WalMart and Best Buy, will increase market share. That's business. Especially when no one is offering them a bailout.

You see, unlike the government, when private individuals and companies are faced with cash shortages, they can't just print more cash to take care of the problem. They have to find the money somewhere, whether that means freeing up cash by liquidating assets or cutting costs, because they have a finite amount of resources, and have to allocate them wisely.

The government on the other hand has other plans. Already unable to pay for their extravagant spending here and over seas, already leveraged to the hilt, already facing trillions of dollars in debt, already burdening state and local governments with the expenses associated with this election, they are considering cutting everyone another bribe check. You see, people aren't happy that the government is bailing out the banks. And despite their best efforts to convince us it's in our best interest, people aren't buying, and they're concerned. So their solution is to print even more money and send everyone another “economic stimulus” check to get us to quit whining.

Ask yourself where they're finding all the money for these expenditures. Bailouts, wars, “voter stimulus” checks, it has to be payed for somehow. They don't have a big pile of cash or gold somewhere that they're grabbing handfuls of and sending over to Wall and Broad. They're just printing more, and more, and more money to pay for it all.

Someday I'll explain how our money has no real value. How it is fiat currency, printed privately, borrowed on interest, and impossible to repay. I'll explain just how much of a hole we are in by using a currency based on no real asset and only backed by the faith people have in the American government.

But for now ask yourself, how much faith do you have in the American government?

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