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And the Beat Goes On

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The government, in its various forms, continues to slowly reveal its plans to socialize markets.

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The government, in its various forms, continues to slowly reveal its plans to socialize markets. These aren't conspiratorial conscious thoughts; these are politicians' misplaced reactions inevitable at the heights of a ponzi.

In 2002 the Fed began a credit orgy to add to its credit feast of the previous several years. That credit was used to bid up asset prices. The party went on until there was too much debt in the system for the private markets to manage. The solution is then for the government to take over and manage that debt?

A free market society allows investors to risk their own money to create over the long term efficient production through ingenuity. The risk taken intelligently is rewarded; the risk taken unintelligently is punished. Citizens fill their roles in society accordingly and capital eventually is efficiently priced to allow real liquidity to find production (this has nothing to do with creating certain safety nets like medical care as a "right" for all citizens, especially children).

The various forms of government, from pseudo institutions like the Fed to administrative departments like the Presidency and Congress, have become power based: the individuals that occupy them and the means available to them are really about power and maintaining that power. I only infer this from what I see. There are only two ways to maintain power: through force or appeasement. We are seeing the first in our foreign policy and the second in our domestic.

By employing foreign borrowing and spending taxpayer monies from those that have acted responsibly, the government proposes to step in and re-allocate reward to those that deserve punishment and punishment to those that deserve reward. This has two effects. First, it encourages bad risk taking and bad capital allocation. The conservative and intelligent decision to rent instead of buy a house one can't afford is punished: the renter's tax dollars are taken away and the chance to buy the house he wants cheaper goes down. Second, incentive for proper risk taken is reduced. This causes the production process to break down over time. Socialism by nature infers less income generation and less innovation.

Foreign investment will recognize eventually (foreign central banks delay this inevitability) that investment in the U.S. is not a good return for risk and repatriate their capital. This will cause further dramatic erosion in the dollar, higher U.S. interest rates, and a reduction in our standard of living.

If not for us, then our children.
No positions in stocks mentioned.
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