Wile E. Coyote Economics, by Christopher Bounds

It is amazing to me how the intertwined world of politics and economics work. They lack of economic insight by the Congress and Bush Administration, evidenced by both the Federal and State Governments…further by the Federal Reserve…printing money until the world runs out trees, illustrates that bad centralized (or near-socialist) economic policy leads to political failure. The Republicans managed to lose power of the Congress not by being out witted or scandalized by an intelligent, aggressive opponent, rather, by losing power de facto to the only group there to take it. Now as the next election comes about, the democrat frontrunners probably would have been a shoe in if it wasn’t for them making the old political mistake of talking too much.

As when you play the board game Monopoly, America has been buying properties, but then reaching back into the bank for more money to replenish it’s coffers. Only in reality the player pays interest, but in Government, when the interest comes due, they print more money to pay it. Next year the Federal Government will need to pay well over $1 billion per day in interest alone, before even touching the $8 trillion of debt. How do they afford that? They print money. What does that mean to us? Just as in Monopoly, when so much “fake” money is floating around the board, landing on Boardwalk with a Hotel does not have a big impact on a player if they can reach into the bank for new money to pay their rent. Eventually so much money is around the table; players will offer thousands of dollars to by hundred dollar properties. Why? Because who cares, if you can borrow the cash from the bank, overpay for a property and still make money because the other players borrow from the bank to pay their rent, you are better off, than having your opponent doing the same against you. And what if you mess up, and almost go bankrupt? The Monopoly Man…the Chairman of the Federal Reserve or the President…will come and either buy your hundred dollar property for the thousands you paid for it or they will lend you even more money to pay your debts.
The same as when a person lives above their head by paying for everything with a credit card, when the card is maxed out, they get another one, and then another and another. Eventually your financial state will be so strain with debt, and your credit options exhausted, a day of reckoning will come. Although history shows it does not happen in one day, usually over several years. So what is a sign of the reckoning? Just as in the Monopoly game, eventually players will use cash to overpay for the properties. Sound familiar…the Tech boom, the housing boom, higher oil & gas prices, metals, grains, meats, stocks, electricity, soda, chewing gum, etc. Why? Are we driving our cars 10 times as much as we did in the late 1990’s? No. Is their 90% less gas than in the late 1990’s? No. Well, why is the price up so much if the demand is not up and the supply not down? Because when centralization (government) interferes in a market, the pricing mechanisms change. As in Monopoly, the game changes when the bank hands out new money to everyone. Oil was seriously underpriced during the 1990’s given the upcoming growth of China & India. The market chose to use its funds to finance the tech boom, forgetting the fundamentals, of less “promised performance” investment opportunities. Had the government then not printed money like water coming out of a hose, who knows, the market may not have seen the cheap opportunity in oil & other sectors. But, likely it would have, as it finally did around 2002, coincidentally at the trough of the market bust, when most of the weak players also went bust and only skilled “real money” players were there to make new investments. Alan Greenspan of the Federal Reserve, who had the sole power to arbitrarily print new money, unfortunately has not had his actions demonstrate belief in the Monopoly or credit card analogies of the impact money & credit has on the economy. The Fed may have an argument that their chart and data reading abilities are sufficient, but the fundamentals and history do not support them.
Had the democrats done nothing, said nothing, and only changed in not supporting the finances of the Republicans & the Federal Reserve. He or She would easily have won…or more likely accepted…the Presidency do to the default of the other party. But instead, the democrats went the other way in promoting even worse, off the wall, centralized schemes, to “better” the nation and win support. Hillary Clinton’s Baby Bonds and Universal or Socialized Health Care, depending on the terminology you choose, and the dictated tax policies of Obama & Edwards will prove to be problem making mistakes for the trio. The ups & down of the rollercoaster markets are just the people preparing the economy and sharp eyed politicians for what is to come if the Greenspan-Bush policies are continued, and now to a greater extent, if the absolute economic disaster that is to come through further centralization of industry by government is realized.

The Russians, the Chinese, & the people of India, have proven to the world that centralization does not work well. After all, is democratic-capitalism coming back to those nations because socialism worked well for them? You can go back further in time, the communists & imperialists, feudalism, the Romans, the power of Catholic Church and now the embrace of Islam, why did these institutions fail? The arching opinion of history illustrates is that the failure was caused by too much power in the hands of a few, centralization. Sure in times centralized power is good, but only in through the structure of freedom. Not when the mass public is dependent on its government or its monopoly industry. The one who accepts the Presidency will do it easily if they reject the ways of the last 70 years and demand a fundamental restructuring of government activity. Otherwise they will end up like Bush, Clinton, & Greenspan to name a few, in having continued economic & political disasters happening because of (in) action. Just remember that like when Wile E. Coyote runs off a cliff, he doesn’t fall immediately, usually floating in mid air awaiting a response. Right now America is the Coyote flying into the sky on a rocket with enough fuel to last maybe at most another 5 years, as if we are back in 1925. If changes aren’t made, we know the outcome 1929 produced, the similarities to that time are scary, but then again, a real crash, more than a 10% pull back won’t mean it’s over, as the Great Depression was largely caused by the actions and inactions of the Federal Reserve & the Government.