Fiat Capitalism : Our Grand Experiment
Fiat Capitalism, unrelated to the Fiat automotive company, is the grand experiment we in the US are now undergoing. You could call it socialism, fascism, or something else. I may not be the first to use the phrase “Fiat Capitalism”, so my apologies to those who may have coined the phrase before me. I define “Fiat Capitalism” as any and all interventions by our federal or state governments into economics, i.e. imposing laws, edicts, fiats, or ‘moral suasion’, that interfere with free-market economics between individuals and/or businesses and/or businesses with individuals.
In my view, fiat capitalism is an oxymoron. You can’t have capitalism, i.e. free market capitalism, when the government changes the rules of economics for businesses and/or individuals. To be clear, government should protect individual rights by protecting people from force or fraud, enforcing contracts, but should not be involved in setting ANY economic policy, nor religious policy for that matter. Not only should church and state be completely separate, but also economics and state. “Fiat Capitalism” can’t really exist for long. What we are now seeing in the US will lead to a more complete, more consistent social system, i.e. socialism, fascism, or worse unless we all decide we own our lives and accept responsibility for our lives and decide the government must get out of economics and religion and restrict itself to protecting individual rights, stopping force or fraud by individuals , businesses, terrorists or foreign governments. I’ll do my best to explain.
For 100 years at least in my opinion, our government, regardless of which party Republicans or Democrats had a majority in government, has been slowly, and now more quickly under Obama, pushing the government into more and more control of economics as well as civil liberties. This intervention into economics and personal liberties by our government is growing day-by-day. I find this scary as well as a disaster for my economic future as well as my personal freedom. I’m sure I’ll miss some intervention into our lives, but I will mention as many of the latest ones as I can in the rest of this article.
I’d like to start with the Federal Reserve. This entity has existed since 1914. I believe it was and is a total mistake. The Federal Reserve has dictated short -term interest rates for almost 100 years. Fed policies are now being questioned by many economists, especially about Fed policy since 2000. Has the Fed helped or hurt our economy in the short-term or even long-term? It certainly affects our economy over time, I can’t argue against that. What I do question, “Is this necessary? Has it really worked? What are the individual right consequences?”. My answers are , “No, No, Bad.” Now the Fed is using new unconventional measures called ‘quantitative easing’ after having already lowered short-term interest rates for borrowing overnight from the Fed to essentially zero. Out of short-term options, the USA Fed has decided to go outward and beyond any previous Fed. Sounds like Star Trek to me, but not with the same hopeful outcome. Quantitative easing is the politically correct term these days for ‘printing money’, except they don’t really print new 10’s, 20’s, 100’s, etc. The Fed just gives themselves new reserves, then they use those reserves to buy whatever they wish. Right now they have been buying longer term Treasury bonds, i.e. monitizing the new and/or old debt floated by the Treasury to cover our Federal budget deficits. The hope by the Fed is to keep long term Treasury bond rates low, while the Fed also buys FHA mortgage backed securities obligations so mortgage rates for home owners, whether new buyers or just people hoping to refinance, will also stay low to help the US home market. This is TOTAL market manipulation. The Fed does this while complaining about the private sector lendors almost at every level. You may actually be helped by one of the Fed’s programs in the short-term, but at what cost? Most people don’t think this far. This is government intervention to the 3rd degree in economics, which means your individual rights are being violated. The government wants you to believe that, net-net, you win by government intervention into economics via the Fed and its current programs. I disagree on every level. You MAY win in this or that particular government program, but you lose individual rights and, likely, you LOSE net-net even just considering economics. Whether you win or lose now based on government intervention into the economy, you lose individual rights and you, or your descendents, will have to deal with the gigantic deficits our state and federal governments are now ensuring in the future for us or beyond besides the loss of individual freedoms. Government intervention into economics not only abrogates individual rights short-term and long-term, but it insures worse overall outcomes for everyone compared to free-market economics where the government restricts itself to maintaining individual rights, enforcing contracts, and protecting everyone , individuals and business alike, from force or fraud whether from domestic or external perpetrators. Its obvious our government entities haven’t done a good job of protecting us from fraud, not only from individuals and their financial institutions, but also from those that have done ‘naked shorting’ of stocks, i.e. selling shares of stock that haven’t been borrowed and won’t be borrowed, basically faking new stock. Instead of focusing on the things the government should be doing, our government is expanding its intervention into economics and hence negating individual rights at an ever expanding pace and sphere of control.
Our legislative and executive branches are busy loaning money to banks, auto companies, insurance companies, home owners, and probably others I don’t know about at the moment. These loans have restrictions as you might expect beyond normal loan terms from private enterprise. I don’t agree with many of these restrictions, but I can understand why many people think they are reasonable. That’s a discussion for another day perhaps. What is very new and scary to me are the changes in the restrictions or ‘rules’ the government is making almost daily, some retroactive. This is fiat rule with many bad consequences, but that also is a discussion for another day. What is NOW happening is the government suggesting it will make some of these rules apply to banks and/or other businesses that did NOT accept TARP money. Isn’t it bad enough the government is telling banks/businesses what compensation they can pay, what excursions are ‘frivolous’ , etc. for those that have taken (some were forced to ‘take’) government money, but now our government is starting to float ‘guidelines’ that will apply to other banks/businesses.
Our government is also doing something else that is just as bad or worse. The government is now ignoring contract law. The Chrysler ‘deal’ was completely done by the government from what I know. Bond holders who had a first lien on all company assets have been told they will get only about 10 cents on the dollar while other junior lenders get considerably more than that and the unions even more as a percentage of the newly restructured company. The government, according to the lawyer representing the senior bond lenders, has used outright intimidation, e.g. “We’ll use the press corp to obliterate your reputation”, to force these stake holders to accept the government’s deal. What’s even worse is that the government labelling of these people as speculators at best (really they are institutions that manage your money and mine) has lead others to issue death threats to these people representing bond lenders. Not only are the senior lenders contract rights being ignored, but their individual rights and freedom are now at the whim of government and thugs acting on what they perceive as the “OK” from our government.
This grand experiment is getting out of hand. Contract law is being ignored, individual rights turned into a whim of the government instead of inalienable, and control of / responsibility for our lives no longer ours. The social agenda of our current administration, fully backed by control of both houses of congress, adored and promoted relentlessly by most of the media while denegrating or worse any opposition point of view will lead to a nation of ‘one for all and all for none’. I hope Americans wake up and stop this slippery slide down a very dangerous slope.