A Battle Between Gentlemen (Its a long one)

So this blog finally grew a little bit and took on known reader number two. Very exciting that expansion is happening so quickly. Now enough with the emo stuff lets get down to politics. 

After having a discussion with a friend tonight several things were brought to light... including the age old question of whether or not planes would crash if don't have gravity. In all seriousness however, some good discussion got me thinking and writing again. The topic turned to how the government (both the current and past administration) had, because of their tampering with the free market, created the current vortex that this economy was in. While the discussion loomed very close to stepping over into the philosophical side, there was agreement of how things handled in the current Keynesian economic fashion were simply dead wrong. For all those out there, Keynesian principles were applied during the great depression as a way of validating FDR's New Deal government spending.  A simplistic view of this economic theory is that government spending makes up for the lack of consumer spending in order to stave off the cycle of job loss and further reductions in consumer spending. The problem here is that the current system isn't broken because of a lack of consumer spending, rather the opposite. The government is trying to pump money into a system that is fundamentally flawed. The reason we are in the situation we are in is not because people cut back on spending. Rather its that people were spending to much! Americans' average savings rate was NEGATIVE. Ask anyone that runs a business, a little debt is not that bad but you cannot continue to operate year in and year out on debt alone. Yet, despite this common knowledge, that's what we as a country were doing, both inside the beltway and on main st. 

Enter the first disagreement that mean and my friend had. I wanted to blame American culture for putting us into this mess. If you have ever been outside the US, people from other countries view us as gluttons. We eat to much, we buy to much and we spend to much. We drive our economy through this. Turn on the TV for five minutes and you will see 10 commercials that show you why you need product X and how you are not as good (or according to my span email box as big) as my neighbor. Thus we have the problem with people taking on to much debt in the form of cars, homes and other consumer items they couldn't afford. This mind you, is all in the name of the "American Dream." This is that dream that everyone is entitled to no matter what. Maybe that's the problem, Americans' look at the "American Dream" as an entitlement. Let me be the bad guy and say this. ITS NOT. You are entitled to no more then what you work for (maybe some health care and we'll get to that and the resulting angry comments from both sides of that argument later). You are not entitled to own a home or a car. If this depression 2 doesn't show you that, then not much will. This cycle of feeling the need to purchase and consume needs to stop. There are realistic financial measures and metrics that one is supposed to follow and let me tell you, having a negative savings rate is not one of them. A credit card is not income. Now to be fair, there are those people that get in debt for a lot of reason (someone gets sick or hurt). That happens; sometimes luck just hits you the wrong way. In those circumstances yes, I can understand both how you got there and why you need some help. I also can understand that realistically not all jobs pay a living wage. However, its not individuals in these circumstances that I am harping on, I am mad at people who take out student loans and buy a depreciable asset (i.e. a car). Wake up America, its time to change the way we live. Its time to start living in our means and to stop demanding 20% annual return. Your investments are not income. Your income is income (unless you have 10 mil + in the bank). 

Now that I have cleared my argument out and tried to pull a Lewis Black (thanks halfnelly for the reference). The other side of the argument my friend was making was that it is government to blame for stifling the free market. As he cannot defend his argument (I am writing this) I am not going to attempt to debate him on it as it wouldn't be fair. Rather I am going to do my best to explain it (hopefully he reads this and can comment on any mistakes I made) and let the reader think about it. That is the point of all of this by the way. I didn't start this blog to find a solution or to cure cancer, rather just to get people thinking and talking because that's how progress is made. Alright, back to the argument at hand. What was proposed was that the government had set back the free market. Rather then continuing to support the ideal that this country was in many ways founded upon. In many ways this argument has been applied before. It has been said that FDR's New Deal (the regulation and government spending) actually held back the American economy and not only prolonged but worsened the depression. I am unfortunately not as well read on this argument as I should be and I openly admit that. However, my friend's argument is not without some form of theoretical precedent. While this theory more accurately targets the current situation, based on the idea of the New Deal happening as a result of the crash it doesn't target the events leading up to the crash. This prior period my friend believes could have been avoided if the free market was allowed to accurately judge the credit worthiness of those being loaned to; in effect, if the Fed had not lowered interest rates after the tech. bubble burst, money would not have been as cheaply and easily loaned to individuals who had no place taking out loans. As a result of the Fed trying to start and stop the economy we now find ourselves in this current situation. The reason for this is that the economy would right it self (maybe taking larger dips and having higher peek) but eventually would find its own equilibrium instead of having the Fed try and create one. 

There are the two arguments; one blames the American attitude and the other the governmental influence. I have written far too much for one blog post and I hope that I have done my friends argument justice. Now it’s your turn... write something.