George Soros is one of the wealthiest and most intelligent men that I know of. Not only is he a billionaire investor, he also is a prolific author. He has out a new book which at the moment is only available electronically on the internet. In a few weeks it will be available in paper form. It is called “The New Paradigm for Financial Markets: The Credit Crash of 2008 and What It Means"
If you go to You Tube there is a very brief video with him telling a little about the book: http://youtube.com/watch?v=CxO5BggW2mg
The conventional wisdom in the year 2008 is that governments make terrible decisions regarding how to spend money. Centralized control of the decision making process has been proven ineffective in the USSR, Cuba, and the other communist/socialist economies.
But what only a few visionary people have begun to see is that markets which are completely free and unregulated also make terrible decisions regarding how to spend money. Over the last 50 years or so, those of us in the west who have done some study in economics, have fallen under the spell of a false assumption. It is normal to believe that markets seek equilibrium. That they will overshoot a little on either side, but eventually will find the best way to allocate resources.
That markets seek equilibrium is unproven. In fact, history shows us that just the opposite is true.
Markets which are completely unregulated go from boom to bust. This was shown true in the 1800’s, the 1930’s, and now after decades of belief in the sanctity of the market we are beginning to see that the boom-bust cycle of unregulated markets is inevitable. And in general, the people who are hurt the most in these busts are the people least able to get by. The poorest people.
So we have learned that excessive government regulation is destructive. And now we are learning that insufficient government regulation is just as destructive.
The question becomes, how do we regulate markets without destroying their innovativeness and dynamism? Certainly there is no question that the regulators have to be squeaky clean. Any hint of corruption, bribery, or under the table dealings will ruin it all.
One thing is certain: The U.S. Government, and the Federal Reserve in particular, have relied almost exclusively on regulating the growth of the money supply by controlling the interest rates given on loans to big banks. This monetarist approach is fundamentally based upon this now proven incorrect assumption that unregulated markets will seek equilibrium rather than going from boom to bust.
Most of the trouble that the economy is facing right now is attributable to years of this Reagan economic theory that says if you reduce taxes and reduce the scope of the Federal Government, everyone will prosper. We now see that the middle and working classes in fact do not prosper from this idea. The wealthy folks do, but not the common working man.
Much of the country’s economic base (manufacturing) has now gone overseas to escape laws regarding child labor, minimum wages, on the job safety, and the laws of the 1970’s which tried to keep the air breathable and the water drinkable.
The government should have imposed import duties on all products made overseas which applied tariffs to compensate for these Mexican, then Chinese companies which polluted horribly and did not treat their workers like human beings. But because everyone was enthralled with the idea of deregulation of the markets, the U.S. Federal Government didn’t do this.
Throughout the history of mankind there has been this same type of conflict between the wealthy property owners and the serfs or slaves. In the 1930’s this conflict came out into the open. What we are seeing right now is really no different.
A majority of the Americans who have followed the “rules” by getting a decent education and working really hard are in trouble now. The market value of their house is lower than the amount they owe on their mortgage. They have very little (or zero) savings, and their high interest rate debts like credit cards and car loans are almost choking them.
One or two months being out of work and most folks would be in real trouble.
I bring to the table an interesting perspective. For 30 years I was successful in business. I fully believed in the market economy and how lazy and stupid almost all government workers were. In college and graduate school I took a lot of economics and accounting.
My first real job was working as a Pension Consultant, auditing pension plan trust funds. I did this for 5 years, working for everything from one to three person professional corporations to multi-thousand unionized companies. I learned a lot and am really grateful for this opportunity.
Then for almost 26 years I worked my way up the ladder in a manufacturing company. Assistant plant manager, then Operations Manager, Plant Manager, and for the final 15 years of my career the General Manager of the European Division of a multi-national food processing (manufacturing) company.
Over this long career I fought plenty of battles with unreasonable, power-mad regulatory jerks regarding work place safety, environmental rules, food safety, corporate taxation, etc. I was 100% plugged into the business view of the best way to run an economy.
A strange thing happened when I moved to Europe though. I found myself living and working in a culture where people believed in their government. Yes, the taxes were higher than in America, but the services provided by the government were excellent.
When the governmental food safety inspector came in, unlike in America he did not want to make General by shutting us down. He genuinely wanted to work with us to help us make incremental improvements. He did not have the adversarial attitude that OSHA and the FDA had in America.
It was generally accepted by all citizens that any society which had a large number of people who did not have access to the health care system was a brutal society. I found that although most people admired parts of the American society, they strongly looked down on big parts of the American system. From the perspective of being in the U.S.A. we see this as anti-Americanism. And we see that it is continuing to grow.
From the perspective of people living in more civilized societies (like Canada, Australia, England, Germany, France, Holland, etc.) the American society has just plain blown it. The U.S.A. has thrown away so many great opportunities to make this country even better. And now the foreigners are genuinely sad to see America on the decline. And it is a fairly rapid decline at that.
So what is the solution? It is not just one item. It is complex and it will be hard work. But a decent first step would be to vote out all the corrupt elected official bums.
Democrats can be just as corrupt as Republicans, so one needs to be careful. An essential first step is to make certain that EVERYONE living in America has health care. Universal health care. Citizens, visitors, everyone.
The next step is to stop relying on unregulated markets to solve the country’s problems.
Free trade agreements are fine. As long as they have provisions incorporated into them which impose import duties to bring the price of these foreign made goods up to what they would be if the foreign companies obeyed the same rules for child labor, workplace safety, healthcare and pensions, and environmental protection that American companies have to.
Then laws need to be enacted which make sure that ALL workers in America earn a decent wage which includes health care for the worker and their families, and a government guaranteed retirement program which will allow them to retire in dignity with financial security.
During the last 25 years there has been inadequate progress in women’s rights, racial discrimination, fuel economy in the transportation sector, and protection and improvement of the environment.
The government needs to focus its attention on these issues. And quickly. Or Americans will begin seeing more and more parallels between the rise and fall of the Roman Empire and the rise and fall of the United States of America.
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In the well respected German newspaper Der Spiegel today they made the following observation: "The credit-financed consumer boom of recent years is coming to a painful end. Today's American Way of Life has no chance of surviving the coming years undamaged. "
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This article is sober, it is well reasoned, and it bears reading by all well educated people: LINK: http://www.spiegel.de/international/business/0,1518,547317,00.html
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Article entitled: A Wall Streeter Becomes A Fan Of Regulation
LINK: http://tinyurl.com/6k2lon
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