Thursday, July 24, 2008

A Slippery Slope towards Socialism

The United States has become a society of overly coddled children that demand all of their whims be satiated while absconding any personal responsibility. Consumerism, fostered by an endless barrage of product marketing, has permeated the psyche of Americans compelling an unsustainable accumulation of material goods and an obsession with image and status. The innovative U.S. financial system facilitates this excessive consumption by readily extending credit to anyone who can sign their name, giving little consideration to such factors as income, debt outstanding, or ability to repay. America has become a society of debtors.

Entranced by a desire to project an image of success and accomplishment, Americans indulge in the luxuries of the world, leveraging their assets and mortgaging their future income in the process. Ultimately, these debts come to bear and the overly extended populace cries foul, claiming they were duped by unscrupulous lenders, shifty salesman, and greedy corporations. U.S. political leaders, who previously embraced the housing boom and pervasive availability of mortgages, now rail against the excesses by casting a net of blame far from their shores. In order to assuage their guilty conscience, Congress recklessly proposes an endless array of bailouts, “stimulus” packages, tax credits, and socialization of privately incurred financial risk. Government intervention encourages the excesses that foster risky behavior and a misallocation of capital, preventing the market from properly revaluing assets and imposing a discipline on both consumers and investors.

A market economy functions properly when it is free of government intervention. Paternalistic bureaucrats, in an effort to rescue their constituents from self inflicted hardship and misfortune, constantly propose policies that incent “desirable” behaviors and distort market driven corrections. When the market imposes a severe punishment for misdeeds, politicians react in earnest by legislating sweeping “reforms” and regulation. As any parent knows, one cannot always protect his children from harm, but instead should provide constructive advice and guidance to foster good decision making. By providing exorbitant tax incentives for home ownership while concurrently promoting consumption as a patriotic duty, the government has encouraged overconsumption and excessive accumulation of debt, especially in the housing market. For many, this burden has become unmanageable, resulting in financial failure and personal hardship. Congressional paternalism, however, absolves personal excesses and reckless behavior while burdening the responsible and cautious with the obligations of others. Until philosophies of responsibility, accountability, and individual choice emerge as guiding principals of the democracy, the United States will continue on a slippery slope towards socialism.


kelee2288 said...

While I would agree that this current rate of government intervention, (bailouts, stimulus packages, housing tax incentives, etc.) will foster risky behavior, mis-allocation of capital - But doesnt that result in a widening of the income distribution between the middle class vs. the rich? Socialism has a tendency towards smoothing the distribution of income - not widening it.

Pancho said...

If things get any worse people will star blaming illegals for all our woes... I already see it.
Like it or not, illegals have kept many creature comforts like food, cleaning services & constuction cheap.
I can see many illegals being deported then Americans attempting to take up the slack, only to find out it really sucks to work 6 days a week, 8-12 hrs a day...FOR YEARS.

While I do not believe in illegal immigration, I do concede that we need reform for people that are begging for the grunt work.

God bless illegals for keeping Americans comfy!!!

Shakedown Crews said...

kelee2288, you are WRONG. Socialism does NOT "smooth" income distribution, at all. What happened in every socialist state was that the majority became increasingly poor while an elite became increasingly rich. Take contemporary Venezuela: the socialist policies of the Chavez regime are destroying the private industry, driving up inflation, making the standard of living crash for the vast majority. However, the political cronies all benefit from the preferential treatment and are becoming massively rich because--when the government forcefully possesses private businesses, they are given to political supporters and become instant millionaires for their support.
And in socialist examples like Britain and France, the tax rates are so high that it stifles creativity and demotivates anyone who would want to open a business. Who wants to work 80 hours a week at a private business if you're going to be taxed so much you earn as much as someone at a lazy desk job?

kelee2288 said...


You have an instant millionnaire in Venezuela, then you have a lazy desk jockey making the same amount as our blogger of 'beyond the margin'.

Two examples were provided in your comment on socialism, your example about venezuela supports widening in a socialist regime, but your argument w/ regards to Britain and France supports an even income distribution in a socialist regime.

What the heck are you trying to argue? Did you even read my whole comment?

The main point of my original comment was that government intervention would encourage more risk taking (moral hazard), which is not a socialist tendency - which you agreed with in your examples of risk aversion in France and UK.

MrMullin said...

I believe the first two paragraphs constitute your best writing to date, however I think your conclusion is completely flawed. The industries that are failing are those with the least regulation, as the slightly stronger commercial banks are coming in and swooping up their failing ibanking competitors (who just recently became competitors due to the misguided Gramm-Leach-Bliley Act). The only reason the BOAs and Barclays have capital is due to the existing regulation of commercial deposits. Similarly AIG blew up not because of their regulated insurance business, which appears to be stable, but greed to chase high returns through bets on questionable and levered assets. You can not count on the market to regulate itself, and if you allow it to continually get overextended and fail not only are the guilty hurt but also the lay person with a savings.
It is also obvious that the market can not claim any regulation by the ratings agencies as they have proven themselves to be complete frauds, greedy for fees at the sake of reputation. If any regulator sat down and took a clear look at the structured CDO/CMO industry in the past few years it would be obvious to them that the bankers issuing these deals did not care about the risks if they felt they could sell the product at a profit. There was often no communication between risk managers and structuring desks, where salespeople and lawyers made fast deals with uneducated investors who were duped by both the rating agency and slimy bankers.

If you want unregulated markets, you better be prepared to put your money in markets where lying, deceit and manipulation run rampant.