Too Much Money Is The Problem

Dear Reader,

An old German saying claims that ‘the dumbest calves choose their own butchers’.
So, how do we rank? Considering whom we send to Washington after each election, I can’t help feeling that we’re right at the head of the line of calves.

Over the past several weeks the federal government, both the Democratic-controlled Congress and the Republican Bush-administration, have engaged in hectic activity in response to the financial crisis.

Political statements, policy proposals and measures taken range from panic-stricken and populist to that old-time political favorite: throwing money at it.

Throwing money at problems has traditionally been the politicians’ substitute for achievement.

This is not really surprising considering that from where they stand money is all that matters: It’s what gets them (re)elected.

It is disingenious when politicians of all stripes now point fingers at financial speculators and blame greed for the economic mess.

After all it is they (the politicians) who, through their actions and inactions, have created the conditions that allowed the gamblers to hijack the financial markets and now hold the whole economy hostage.

Of course, financial crises have been around as long as financial markets have, but is it really that unreasonable to expect politicians - what am I saying? All right, regulators and economists then - to learn from the past?
(It’s a rhetorical question.)

Throwing money at the financial markets is not the solution: money is the problem.
As long as we don’t fundamentally change the way in which those financial markets operate, giving them more money will ultimately only make matters worse.

Yes, it might be short-term fix, but so is giving brandy to an alcoholic.

We only have to look at our recent history to realize that every time the federal government throws money at a financial crisis without changing the rules of the game, it only encourages more gambling, more speculation.

It happened after the Savings & Loans crisis, it happened after the dot.com bust and it is going to happen again now, after the mortgage bubble. All it does is prepare the next meltdown (they seem to be coming at a faster rate, by the way).

We have to change the way we deal with money. Money is not a commodity like corn, oil or iron ore. Money is a means to an economic end, a crucial means, yes, but not the end itself.

As long as we let speculators, gamblers and other politicians create and destroy capital as a legitimate commercial activity we will keep enduring these crises.