Every week these days seems to carry another "bailout" of one form or another. Just today, the Federal Reserve lowered interest rates from 1.5% to 1% in an attempt to spur economic growth.
Interest rates are basically the "price of money" -- for example, what does it cost to take out a loan? When the Fed lowers interest rates artificially and holds them down, it's not an economic boost, it's really just a way of giving away dollars -- basically, burning piles of money through inflation and often the *false* impression of economic growth.
Just like giving away $500k homes to people who can't afford them creates over-built real estate and ends in economic chaos, so too does giving away dollars at reduced rates. We need to stop legitimizing "liar loans" at every level -- whether from the Fed, Fannie and Freddie, or from this Government that keeps writing checks that the people simply cannot cash.
Making our Money Cheap
Lowering the interest rate and the "bailout" are both just ways of making our money cheap. ... They give away dollars to people and firms who don't have the value to warrant them. Why does this happen? Because they are given money from a political entity which has no accountability to create value.
So how do we create economic growth? There's no magic in this, people -- economic growth is the result of increased productivity and efficiency. These are the result of an educated and motivated work force, technology advance, and creating a frictionless environment for small, medium and large businesses to operate effectively.
Problems such as those on Wall Street occur when companies are allowed to externalize risks. In this case, all the banks and Wall Street firms could "cry wolf" that a bailout was needed -- even though many knew the risks all along. Well, they got what they asked for by sending in all their top dogs to lobby for $700 billion in their pockets. Further, unfortunately, many of the "advisors" to these firms have just as little understanding of economics as the Fed and the Government do -- and they're all flushing our hard work down the drain.
There are no shortcuts to economic growth -- production must precede consumption, and a strong and efficient commercial sector must win out over empty political posturing. Yet we continue trying to tweak things from the top without making fundamental and underlying changes that will facilitate steady long-term growth and create a secure future for our dollar, our nation, and the global economy.
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