Monday, July 28, 2008

Help Wanted: Lazy Fairies

In the 1920's John Maynard Keynes, Britain's Chancellor Of The Exchequer and the economist who wrote the instruction book for government tinkering and intervention in the economy, asked the flippant question, "Do you want your economy governed by a bunch of lazy fairies?"referring to the laissez faire Free Market economics of pre WW1 Europe.
After nearly a century of Keysianism (or worse) by the Big Government geniuses in which they have proven that they can screw up anything that they touch like a kind of negative magic we want those lazy fairies back! The British Empire controlled two fifths of the world's surface. Hitler couldn't defeat it in a six-year conflict. But it was brought to its knees after the war by the British electorate who threw the reactionary Churchill and the lazy fairies surrounding him out of office and installed a government so inconceivably stupid that eight years later Britain was deep in poverty and still had wartime rationing while Germany, completely destroyed by Allied bombing and the battles which took place in the ruins at the end of the war was undergoing an 'economic miracle' brought on by the lazy fairy economics imposed by her American conquerors.
In America in the 1920's two of the most egregious lazy fairies (Harding and Coolidge) cut Wilson's overpadded Federal Government, slashed taxes and then proceeded to take a long nap while the economy exploded, hemlines rose almost as fast as the stock market and bathtub gin flowed like water. HL Mencken described Calvin Coolidge as 'old laughing boy' and accused him of turning the White House into a dormitory. But even Coolidge had a Chairman Of the Federal Reserve, Benjamin Strong, who was committed to supporting the boom with aggressive monetary expansion. In Coolidge's cabinet, frothing at the lack of government meddling and general sleepiness all around him sat Herbert Hoover; engineer, humanitarian, meddler extrordinaire! A sardonic Coolidge dubbed him with the title of 'Wonder Boy'.
"That man's been suggesting ideas to me for six years, all of them bad!" remarked the taciturn Coolidge in one of his longer sentences. But the canny Coolidge could see a train-wreck coming just around the bend as the speculation in securities ran amok (a problem with lazy fairies, they dont prevent people from being really stupid sometimes). People were buying on margin- 10% down and the balance after you cashed out. Nice if every thing goes up. In 1928 there were plenty of signs that this was going to come a cropper but Strong stepped in with a huge expansion of the money supply to deliver a 'coup of whisky' to the out-of-breath stock market.
And that's the biggest danger of Keynesianism; it works for a while, the larger and larger waves of freshly printed money make it seem like the problems are manageable, until one day the point of diminishing returns is reached and the meltdown occurs.
Which brings us to now. The 'stimulation package' which tossed $200 billion or so off the back of the Federal train for us peasants to spend was dwarfed by the rise in gasoline prices and the decline of house prices. The falling real estate market, retreating from stupid lending policies designed to admit 'minorities' and 'the poor' to the joys of home ownership without bothering with formalities like credit ratings invited a crowd of speculators into a market that 'couldn't go down'. Now additional hundreds of billions are being funneled into the banks to try to stave off the ruin brought on by all those now-worthless loans. Jerks like McLame are calling for Federal regulation of executive salaries to punish all those stupid bank executives for their stupid lending policies, as though creating a precedent like that wouldn't lead in a short time to Federal regulation of ALL salaries in the name of 'fairness'. As the feds move in to bail out the banks and stave off panic they bring along a truckload of new regulations, all as stupid as the ones which caused the crash in the first place. The social fascists in Congress keep proposing price controls on pharmaceuticals, nationalizing health care, Global Warming caps and taxes on carbon emissions and draconian tax increases which will chase every penny of investment offshore in a giant bug-out which will flatten the economy like a tire with a spike in it. The Lazy Fairies must be pulling down fat salaries on some government 'Human Rights Commission' somewhere so they can scheme on more creative ways to legalize getting married to each other and have lost all interest in economics. Apparently even less interested in economics is the front-runner in the presidential foot-race, a guy named Barry, who has yet to utter one single syllable regarding the economy that makes sense. When asked why he wants to sharply and progressively raise taxes in these precarious times he replied that it might be bad for the economy and even decrease revenues but that it was surely 'the right thing to do'. Fairness you see. Lazy fairies aren't fair. Neither is the inevitable result of the policies endorsed by the vast majority of our political and business leaders as they attempt to protect their cushy positions from any rivals; national bankruptcy. We're seeing the beginnings now. Huge cuts are in the works in state governments; the bluer the state the bigger the cuts. New York, California and Michigan are visibly sliding toward the edge. The rest of the country is close behind.
Bring back the fairies!

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