Friday, June 27, 2008

You Win Some You Lose Some

There they go mucking it up again

History repeats itself in various ways as human foibles. When control of something is centralized by definition it does not represent the will of the people as only if all people choose together freely do outcomes represent intent.

The Fed controlling the money supply and government officials talking up and down the dollar, and even worse, taking concrete steps toward some centralized decision as to what the dollar 'should' be compared to other currencies or what the interest rate 'should' be to, what, control inflation or increase growth, is just one of many examples of centralized decision-making that helps some and hurts other.

When the dollar is talked up it hurts US exporters, when it is talked down it hurts US consumers. When it is left alone to find its value, there is no government picking of winners and losers. Same thing with the Fed. Increasing the interest rate hurts those that have bought fixed interest rate securities (lots of whom are old people living on those same securities) and helps the higher income people who are less effected. It also decreases the amount of investment in the economy, which hurts everyone.

Likewise if the Fed cuts interest rates it helps the investor class, but also hurts the economy as a whole because investments come too cheap and are made in places where they should not be. This later then causes unemployment and wasted resources.

The best thing to do then is just for the centralized 'experts' to leave well enough alone, and to stop hurting some and helping others. Or better yet, just get government out of the money business altogether.