BSODmyself

Recently, I was given a work-related assignment to examine the causes and effects of every U.S. recession that occurred after the 1960-61 recession. I turned in my preliminary report this afternoon (ironically before I was told my presence would not be needed for at least the next couple of weeks, due to recent economic slowdowns). As I gained a better understanding of the concepts associated with recessions, I asked myself what would be the best policies and changes for making the natural process of economic ups and downs more bearable and shorter lived. From this question came the following Six Step Plan:

1. Clean house. The same people are presiding over portions of every economic downturn. Are there so few people that understand economic policy that the same people need to be called in every time? I am not only talking about politicians and government appointees, but also regulators and investigators who worked in companies just months before that they are now tasked to investigate and hold accountable. Hopefully, the elites will realize their time has come and go quietly (hopefully, but not likely).
2. End the Federal Reserve. It has been said that the Federal Reserve is about as federal as Federal Express. Most people think the Fed is a government entity that is working on the behalf of American citizens, when in fact, it is an association of private banking interests, many of which are based in foreign countries. The Fed has absolutely no incentive to act on behalf of American citizens’ interests. Instead it loans money to the US government (at interest even) to pay for expensive industry bailouts, creates stock market and credit bubbles and fiddles with monetary policy to achieve whatever end it desires.
3. Increase transparency. There is a clear need for more transparency, not more regulation. We’ve seen how successful existing regulations were in the recent Maddoff scam. Make sure information on what’s going on is available to the vast majority of individuals in the market. We’ll do the job of punishing wrong-doers.
4. Understand incentives in policy proposals before passing policy. Financial institutions and investors will respond to incentives with which they are presented. For example, allowing S&Ls (particularly those already on the rocks and with nothing left to lose) to go into risky and speculative investments will yield fairly predictable results. Failure to understand incentives typically adds to the level of moral hazard, a situation in which those who take risks are shielded from being affected by the results of failure in those risky ventures.
5. Change foreign policy strategies. A lot of recessions have been worsened or lengthened by the U.S. siding with players in different military and political conflicts around the world. We should adhere to the wisdom of the Founding Fathers and strive to be on good terms and trade with all nations. Which brings us to the final recommendation…
6. Create incentives for alternative energies. When American pols and their policies stop attempting to exert their wills over the Middle East and other oil producing regions, we will move a long way toward seeing burdens associated with inflation and higher prices impairing the functioning of American citizens and businesses. We need something clean, renewable, inexpensive, efficient and locally obtainable. Don’t throw money at the problem and expect change to happen, especially with auto industry lobbyists scurrying about. Let as many innovators as possible work to find a real, lasting solution to energy dependence. That would be quite a bit more patriotic than past efforts at acquiring energy security in places such as Iraq and Afghanistan have been.

One final takeaway occurred to me during my research. A great deal of fiscal, economic and monetary policy deals with control. Some days it seems like some sort of strange Adam Smith-invisible hand bondage fetish game is being played on a global scale. There are the select few who sit high in their financial palaces and power centers and hold the (wrong) idea that, in all of their glory and wisdom, they know what is best for the masses. Not even the wisest individual (or group of individuals) can truly know or control something as massive as the collective will of every soul on the planet, and one day the elites will understand this. Unfortunately, though, by that time it may be too late for us (and definitely too late for them).

Comments, critiques, corrections, suggestions and new ideas are welcome (as usual).

This entry was posted on Tuesday, January 6th, 2009 at 11:54 pm and is filed under Politics, Rants.You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.