Friday, July 27, 2007

No Such Thing as Easy Money

Government should just leave the money alone

There has been a housing bubble (all over the world actually), kids in the USA are saddled with big student debt, and the poor have been suckered into buying homes they cant afford due to the government intervening in the credit markets. Like all false manipulations they come to end and the end-result is worse than it would have been if just let alone in the first place.

Student loan programs do nothing but give easy money to students (schools actually) which just means that the tuition prices increase with the easy money making an upward spiral in tuition prices and student debt. If the government didnt have programs to subsidize student money then the prices wouldnt be through the roof and people wouldnt graduate wage slaves.

If the government didnt have programs to support mortgage lenders then the lenders would be more prudent in who they lend to and then again there wouldnt be cheap money chasing after limited housing stock chasing up the prices, and the housing would be more affordable to those who need it.

If the central bank wasnt increasing the money supply there wouldnt be more dollars chasing after limited goods and prices would be more stable and there wouldnt be financial bubbles. As basic necessities become increasingly commodified due to human ingenuity, the bubbled money chases more speculative or more patient capital goods, e.g., the rich get richer through government intervention.

You see, all of these government interventions have their supporters who make money upon the interventions. When the fed ticks up the interest rates people trade on the margins. The banks make fees selling on these ticks. It's the great scam of Wall Street (not all of Wall Street is a scam but fed manipulations are).

As the late great Kurt Vonnegut said, "and so it goes."

Note: Apologies to regular readers of Workers about continuing the rant about financial market manipulation but like Deirdre McCloskey said, "the more I think about the more I think the Austrian School has it right."