Saturday, August 11, 2007

This Market Isn't Free

Not by a long shot!

Just so you know, I'm an average working guy. Well, actually a lucky working guy; my employer provides a decent wage and insurance on top of that. So my understanding of the nuances of this American economy are questionable. But the big picture is understandable by most folk.

The cons like to tell us they believe in the free market, meaning of course free from the intrusion of government actions. However, this weeks end at Wall Street proved otherwise. On the basis of the now glaring failure of the housing market, and the evidence the bubble is about to burst and effect markets world wide, it tumbled quite a bit over the last two weeks.

Thursday saw a sell off based on the actions of the French banking system. Friday started into a freefall again, and the government intruded and saved the day. The Feds said they would "infuse" tens of billions into the economy to shore it up. But that's government action. So where were all the conservative voices to cry out against interference in the free market? The fed action will only help things for a little while because the problem exists at the "we the people" level. Not the banking system level, and not clueless Wall Street.

So long as the wealth of the wealthiest is protected by government actions, these hypocrites will cry about a free market all day. But the cost of this "free" market is staggering. Just remember the savings and loan debacle of the eighties. Which incidentally had a Bush family member as a major player in that fiasco.

This market isn't free because the housing bubble is going to burst and there will be a loss of assets and homes at a rate we haven't seen for a long time. The three worst areas facing foreclosures right now are Las Vegas, Detroit, and Newark. And mind you, these problems are just starting to make themselves felt. This market affects two of the three hallmarks of what used to be the economic benchmarks. Those three used to be automobiles, housing, and appliances to go in those houses. We all know now the sad shape of American automobile markets. Sad unless you're the CEO of Ford that is. He gets a 28 million dollar bonus for a third of a year while others are laid off, and then they recall 3.6 million defective vehicles.

So if housing slumps, so will the big appliance makers. Which most likely will affect Chinese workers for the most part. I'm not certain anymore just how many appliances are still built in the US. However, if orders drop off in the US, then profits drop off accordingly. That's the sort of news Wall Street doesn't like. And with Rupert Murdoch in charge, maybe we won't even hear it!

Moving on now to another costly expenditure that has been long ignored; infrastructure. With the explosion of the steam pipe in underground New York city, and the collapse of 35W in Minneapolis, it has been brought to our attention that our infrastructure is not in the best condition. According to the American Society of Civil Engineers(ASCE), Americas infrastructure is in extremely poor condition. If you were a foreign or domestic investor, would you have the infrastructure needed to support your business? How many foreign assets were affected by 35W falling into the Mississippi? How significant will the domestic economy be impacted by the collapse? And the ASCE claims that our energy grid, water systems, dams, bridges, schools, roads and aviation systems all across the country need significant investment to come up to "good" condition.

How free will this be?

And lets look at another category of the booming economy the cons love to talk about. The savings rate. That's right, the rate that Americans save money. Back in the eighties I decided to try my hand at insurance and securities sales. People in this country had a bad habit of buying expensive life insurance policies that had poor rates of return, and charged you for "borrowing" your own money. They called them whole life or universal life policies. And back then, the savings rate for Americans was less than 5%. Today, for the first time since the Great Depression, Americans are actually saving at a negative rate. In other words, they are spending more than they make and save combined.

Now, seeing how companies that go bankrupt are wiping out pension plans while providing golden parachutes to executives, it's had a huge impact on saved money. What many don't realize is that saved money is the resource that government used to use, as well as the commercial market, to fund itself to grow. But as savings declines, than Uncle Sam has to go off shores to borrow from countries like Japan and China. And the national debt climbs into the ionosphere.

How free is that market?

And why do we have the debacles we have now? Partly because of the Reagan administration beginning the rollback of government market regulations designed to protect the citizens and prevent greed and stupidity like that which happened at Bear Stearns from happening.

So next time a con blurbs out the advantages of a free market, educate them to the real market of the real people.

Our "market" isn't free at all.


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