RELIGION or POLITICS ??? Rules for Economic Recovery ......cont'd.

Hi Ho, and away we go, and since it is friday, like in TGIF, I must complete this weeks topic on Rules of Recovery.  What has been presented here during this week, you all should know the source, and what it has to do with the economy as in past history. Today I will show the Relevance. As you all know the contents of all blogs this week come from the newsletter IMPRIMIS  published by Hillsdale College.  All of it was written by Amity Shlaes, senior fellow in economic history at the Council on Foreign Relations.


RELEVANCE FOR TODAY ---------

        It is not hard to see some of today's troubles as a repeat of the errors of the 1930s.   There is arrogance up top.   The fereal government is dilettantish with money and exhibits disregard and even hostility to all other players.   It is only as a result of this that economic recovery seems out of reach.

      The key to recovery, now, as in the 1930s, is to found in property rights.  These rights suffer under our current politics in several ways.   The mortgage crisis, for example, arose out of a long-standing erosion of the property rights concept - first on the part of Fannie Mae and Freddie Mac, but also on that of the Federal Reserve.   Broadening FDR's entitlement theories, Congress taught the country that home ownership was a "right."   This fostered a misunderstanding of what property is.    The owners didn't realize what ownership entailed - that is, they didn't grasp that they were obligated to deliver on the terms of the contract of their mortgage.  In the bipartisan enthusiasm for making everyone on owner, our government debased the concept of home ownership.

      Property rights are endangered as well by the ongoing assault on contracts generally.    A perfect example of this was the treatment of Chrysler bonds during the company's bankruptcy, where senior secured creditors were ignored, notwithstanding the status of their bonds under bankruptcy law.   The current administration made a political decision to subordinate those contracts to union demands.  That sent a dangerous signal for the future that U.S. bonds are not trustworthy.

       Three other threats to property loom.  One is tax increases, such as the coming expiration of the Bush tax cuts.   More taxes mean less private private property.   A second threat is in the area of infrastructure.   Stimulus plans tend to empasize infrastructure - especially roads and railroads.  And after the Supreme Court's KELO decision of 2005, the federal government will have enormous license to use eminent domain to  claim private property for their purposes.   Third and finally, there is the worst kind of confiscation of private property, which excessive government spending necesssarily encourages.   Many of us sense that inflation is closer than the country thinks. 

      If the experience of the Great Depression taches anythin, it is that property rights must be firmly established or else we will not have thekind of economic that leads to strong recovery.   The Monopoly board game reminds us that economic growth isn't mysterious and inscrutable.  Economic growth depends on the impulse of the small businessman and entrepreneur to get back in the game.   In order for this to happen, we don't need a perfect government.   All we need is one that is "not too bad,"  whose rules are not constantly changing and snuffing out the willingness of these players to take risks.   We need a government under which the money supply doesn't change unpredictabley, there are not too many "Go to jail" cards, and the top hats are confident to the possibility of seeing significant returns on investment.

      Recovery won't happen from the top.   But when those at the top step back and create the proper conditions, it will happen down there on the board - one house at a time.  


I wish all a happy weekend, and that you wise ones will take this presentation to your good senses, because the things that are going to happen in this country will defy your imagination, because most of you will shrug your shoulders and say whatever happens I'll take care of it then.  Well, friend, that will be too late, there are too many factions in this country and around the world who are diligently working to sink America to levels you couldn't believe, UNLESS you listen to people whom you might say, Oh they're crazy.   They are not, but many will learn the hard way and it won't be at all pretty.  Be warned, if only by me, who believes the danger signs rampant all over the place. So Pleasant dreams, and will be back monday with a whole new-old topic which will further make the case.    Cheers.     CJ