The next two bubbles
April 1, 2009 – 11:34 pm by JohnBased on the Obama regime’s policies, both implemented and proposed, I think there is good reason to expect the American economy to experience unsustainable bubbles in the automotive industry and the “green” technology fields. There is ample reason to believe neither one is justified in receiving as much investment or enthusiasm as Obama and his cronies are giving them, and the direct subsidies they are primed to receive from the government, combined with nearly everyone’s conviction that saving the automotive industry and investing in energy independence and “green” bullshit are fundamental to a thriving economy in the 21st century, will blow these bubbles up as much as our feeble economy can stand to. I don’t know how much that will be, but Obama and his cronies seem determined to inflate, spend, and micromanage us into another false boom.
Our Savior announced that the Imperial Federal Government will guarantee the service warranties on new GM and Chrysler cars, if GM or Chrysler can’t! Can you believe that! That reminds me of what it did with mortgages bought by Fannie Mae and Freddie Mac! It seems too easy to predict that the exact same thing will happen with automobiles in the next few years, but it sure looks similar. This isn’t nearly the same as guaranteeing the payment of the car loan itself, they way the government explicitly guaranteed payment of Fannie/Freddie mortgages in case of homeowner default, but don’t call me crazy for believing more, not less, State involvement in the automotive industry is in our future.
The point behind Obama’s guarantee that the government (the taxpayers and all Federal Reserve note holders) will pay for GM and Chrysler service warranties is that he doesn’t want car owners to suffer if the auto companies are financially unable to honor the warranties, and he doesn’t want Americans to be afraid to buy cars from bankrupt or potentially-bankrupt companies.
Two of Obama’s completely ignorant but oft-trumpeted aims are: to increase consumer spending to get that Keynesian-Krugmanian circular economy turning again; and to increase our energy independence by decreasing our energy usage and energy expenses. To foretell the ways in which our economy will be perturbed and wealth will be destroyed, all you have to do is look at the stated goals and look at the ways in which the State will attempt to achieve them, and then apply the invariant lesson of history that it will fail utterly. In fact, it is a high-probability venture to predict that the exact opposite will be achieved.
“Follow the money” is the common mantra you hear when attempting to discern why a bill was passed, why a policy was implemented, why someone supported this or opposed that, who is at the center of a scheme or a conspiracy and who expected to benefit. This also applies to sectors of the economy that the State is going to screw up: follow the money. Where government money goes, wealth is destroyed. (It’s also destroyed where money was diverted from, making it easy for a libertarian to throw a dart at a board and hit something the State screwed up.)
When the State tries to lower the cost of basic schooling by providing it to everyone and paying for it with taxes, it ends up costing more to society (and the poorest get the worst of it) because coercion, bureaucracy, and monopoly don’t work. When the State tries to make college more accessible to everyone, by directly loaning millions of students billions of dollars, it raises the costs of college because demand skyrockets and the college-education industry exists mostly outside of the free market, meaning there are few checks on price increases. When the United States government tries to increase home-ownership by the various means it has used in the last 60 years, it actually makes home prices increase like we observed in the recent bubble and then even after home prices fall, people can’t really afford the homes the government tried to make affordable to them. (Additionally, the State–banking complex has so monopolized this process that very few people actually own their homes; the banks own the homes, so again individuals’ home-ownership is reduced by State involvement.)
Likewise, the government’s subsidizing of the automotive industry will almost certainly make cars less affordable because their prices won’t decrease by enough and/or their quality will suffer thanks to government decision-making and protection from competitors (not that this is a change from the status quo). The government’s subsidizing of green technologies will almost certainly increase our total expenditure on energy because it will be politics, not the pursuit of profits and the pricing mechanism of a free market, that will determine what technologies succeed and get implemented. When money is just magically there for research or development of this or that energy technology, it won’t matter if more money gets spent than is saved by the technology, and it won’t matter if more energy is spent in producing a product than is gotten out of it (corn-based ethanol might be an example of this)—what will matter is that the companies and their products are politically favored and subsidized by those who wield the violent, deadly force of the police power of government.
I just don’t see any way around it. The criminal economic ignorance of Barack Obama and every single one of his advisors convinces them that American car companies must be saved at all costs, that Americans must buy their cars, that we must innovate new ways to produce our own energy more efficiently ASAP, and that government funding and decision-making are the only way to accomplish this. Follow the money: money is going there, and so is coercive, bureaucratic, political decision-making, so we will get less for more money. Perhaps the passage of time and the commission of further blunders by the Obama regime will enable me to make more concrete predictions and criticisms, but right now it looks like the government’s meddling in these two industries will increase perceived demand for them, attract an undue amount of investment to them, and make them vulnerable to a bust once the unrelenting forces of the market make the economic realities obvious.
One major problem with this is that Obama and his successors might increase the State’s grip on these (and other) industries so much that there won’t be any private companies or private decision-making left to burst the bubble—the complete socialism will remove all question of economic calculation—the Imperial Federal Government will so thoroughly control automobile manufacturing and energy production that it will keep throwing good money after bad and making one bad decision after another, and investors, executives, managers, and consumers will have no recourse, no ability to burst those bubbles any time soon. Collapse becomes the only option after bubbles aren’t allowed to burst and economic reality—which can never be suspended and never stops acting—is ignored, denied, or covered up.
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