Adam Smith Told You So…

By: Linda Beso
Staff Writer

There was a great article today in the Financial Times by P.J. O’Rourke titled “Adam Smith’s Last Laugh”

I urge everyone to read it. It discusses the fact that nothing in this current recession is new. Adam Smith expected and described this exact course of events hundreds of years ago, and explained the exact way to deal with it.

What was Adam Smith’s prescription for saving the day?

Do nothing.

In a capitalist system, when things become overpriced (think BUBBLE), the market reacts to drive prices back down.

We are seeing this today. House prices got too high, now they’re dropping faster than you can say the words “misconceived stimulus package”.

This drop in home prices is painful for homeowners. Tough luck. You shouldn’t have bought a house you can’t afford. It’s not the government’s job, according to Adam Smith, to help you out of that mess.

“But”…you say…”people will lose their homes, and we just can’t let that happen!!”

Of course we can. The people that lose their homes will just have to…*gasp*….rent.

Throughout history we’ve seen crises upon crisis just as bad or worse than this one. Think Tulip Mania. In each case, the only thing to be done was to let it work itself out and NOT let the government muck it up. Or as O’Rourke quotes Adam Smith as saying “I have never known much good done by those who affect to trade for the public good. “.

We couldn’t have said it better ourselves…

Comment on this story below.

February 11, 2009 | Filed Under Economics, Government Intervention, Recession, Stimulus | Leave a Comment 

President Obama, Recession, And The Horror of Government Stimulus

By: Scott Nelson
Staff Writer

Recessions are a good thing.

I’ll say that again; Recessions are a good thing.

President Obama wants to end the recession quickly. But American President’s don’t get to make that decision, that’s the whole point to a recession. And you wouldn’t want them to if they could.

You see, a recession tells you what you’re doing well, and it tells you what you’re doing poorly. It shakes out corruption and inefficiency, gets rid of poor segments of the economy and strengthens good segments.

It forces you to change your behavior when you don’t want to, and even when you kick and scream against it (as President Obama is doing right now).

It’s why America is Great, and it’s why Communism historically fails. The Communists didn’t have the benefit of recessions to tell them what they were doing well and what they were doing poorly, so poor segments of the economy continued to grow until the weight of their mismanagement and inefficiency caused the entire system to collapse. Did you think Communism failed because Reagan told Gorbachev to “Tear down that Wall?”; no.

That’s the fundamental difference between a Capitalist system like ours and a Command system like Communism. Recessions, and Government intervention (like the kind proposed by President Obama).

Believe me, you don’t want President Obama to meddle with the economy. It will sort itself out on its own, far better than he could ever hope to do himself. Think Post Office, think DMV, think any other government program you’ve ever run across. They’re simply not equipped to act rationally or competently in the economic sphere.

That’s the secret. Ask an economist. They’ll tell you that Government intervention will kick us out of a recession quicker than if you did nothing and let it sort itself out on its own. BUT, the problem is that in the long run, Government intervention leaves us less well off in terms of FUTURE growth than if you had left it alone and let it sort itself out.

Even a Keynesian will agree with that statement.

Think of a scale from one to ten, with one being bad and ten being good. If you leave the recession alone, our economy will be at an 8 five to ten years from now. If you intervene (aka President Obama’s stimulus plan), you’ll kick start the economy today, but five to ten years from now we’ll be at a 4.

That’s why Government leaders like President Obama want to intervene. It looks good TODAY, and they don’t care what happens 5-10 years from now because they’ll be out of office then.

American’s need to wake up. If you think your problems will all be magically solved by any one person, even if that one person is as charismatic and talented as President Obama; then you seriously misunderstand the world in which you live.

Work hard and save, pay down your credit cards, go back to school if necessary. You may have to become a 3-car family instead of a 5-car family. But believe me, recessions are nothing new, they’re nothing to get scared about, and they won’t stop occurring.

But then, we wouldn’t want them to…

Comment on this story below.

February 10, 2009 | Filed Under Barack Obama, Economics, Government Intervention, Recession, Stimulus | Leave a Comment