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  • Capitalism kicked to the curb 0 comments
    Apr 16, 2009 1:38 PM | about stocks: GM, AIG

    While I have great pride in my country and its people at this time my sense of pride cannot extend toward my government and the current path on which it has embarked. This nation was founded on a very powerful and important contract, The Constitution.  Throughout our existence, as a nation, it has demonstrated incredible genius and flexibility in its base structure, time and time again.  When accepting this notion of contractual obligation as a foundation for our America, one can then begin to observe the erosion of this component and its effect on our society.

    A free country consists of a free market made up of companies and contracts. Obligations made by sellers to buyers in an intricate chain.  It’s also imperative to understand that while Wall-Street absorbs all the blame in this current crisis, WE THE PEOPLE = THE MARKET.  By allowing companies that cannot fulfill their “contracted” obligations, to continue to exist, is a crime to the flow and freedom of the market and in turn, a slap in the face to the American people. Companies go out of business and new businesses begin everyday.  It is part of the natural cycle of capitalism and the free market.  However, capitalism, while allowing greed to manifest, is always tempered with fear.  Fear of failure.  Fear, that something must be done, BEFORE it’s too late.  Fear of having capital to pay employees well before bankruptcy is even uttered.  In short, fear that contractual obligations will not be met.  By bailing out these failures, we hinder the market from its natural correction.  Jobs are at stake during bankruptcies, but we must all understand that while our nation changes, jobs that existed in particular sectors may no longer be needed.  Jobs will always be created in new sectors, this concept holds true in any economy.  The auto industry is a good illustration.  While there are productive and successful aspects of the autos, much of them exist as dead weight, exhausting valuable resources in our economy.  Why not liquidate these aspects and resources being misallocated?  Again, I understand this will lead to rising unemployment while the transition is made, but unemployment is rising anyway.  By not giving up on these sectors, we stifle economic growth.

    GM and Chrysler are having trouble because they cannot meet their obligations.  This leads to less people (again, the market) willing to “deal” with GM and Chrysler.  The buyer has spoken and has deemed much of what these two have to offer as not worthy of their investment.  When GM and Chrysler lose a buyer, they go elsewhere, forcing the autos to reevaluate the options they’re giving to their consumer/buyer.  This is the natural fear a business faces when dealing in a proper market.  To reiterate, if this fear does not exist, why would the autos decide to change its ways now? Why give them more resources to squander on behalf of the American people?

    In violation of our Constitution and at the heart of this matter, is a private corporation known as the Federal Reserve.  This entity came in power back in 1913.  It has become an unseen and unquestioned branch of our government, until recently (HR 1207).  After mandating how important it was to shore up the many failing businesses, The Fed has given countless funding  with little result.  They are currently asking the Congress and Senate for the power to be able to go to any company they deem “unfit” and restructure them according to their own guidelines.  While this may seem necessary now (ala AIG), I urge everyone to really absorb the ramifications of this endeavor.  More government intervention further skewing the market, is far from what we need.  Bailing out prevents necessary market correction, which leads to increased money supply causing inflation and diminishing purchasing power.  We will not see this in taxes, as they refrain from directly raising taxes, but we will see it throughout the rest of the market in the form of rising prices as the overall value of our dollar is diminished.  By taking the buying power away from the consumer we stray even further from true economic stimulation.  In short, money = freedom.  Less value on your dollar = less freedom.

    'Disclosure: No positions'

    Stocks: GM, AIG
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