The Unintended Consequences of Intended Consequences

John Ransom
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Posted: Apr 10, 2013 12:01 AM
The Unintended Consequences of Intended Consequences

As the worldwide federalization of everything from Cypriot banks accounts to morning after pills continues to sweep across the globe, I’m reminded of a conversation I had with a former general officer.

In 2007, as we talked about what went wrong in Iraq, he told me: “We had a plan to invade Iraq. They didn’t use it. It was almost as if they purposefully screwed it up.”

His actual language was stronger, but so it went.

I’ve pondered that conversation since then, because the crises that are coming from both the Left and the Right all over the world seem purposeful to me.  They didn’t start with the Iraq War or end with the housing bubble. And they continue today in almost everything that government does from France to our own federal halls of “justice”.

Whether its handguns or healthcare or housing, everything needs immediate, dire and direct action from the government say government activists- activists who are disguised as policy experts. It’s as if the world only existed because these government policy experts intervened in the Big Bang, creation and the evolution thereto.

Three years into the experiment in national healthcare, before the program is even implemented, Obamacare is already in crisis. Costs are going up, not down. Not everyone will be covered. Private insurance is on its way to extinction. But hey, you’ll still get to pick you own doctor.

Oh, wait: actually no, you won’t. He quit the medical field.

“Six in 10 physicians say that it is likely that many physicians will retire earlier than planned in the next one to three years,” says Deloitte’s 2013 survey of physicians. “This perception is fairly uniform among all physicians, irrespective of age, gender, or medical specialty. “   

It’s almost as if the experts purposefully messed up nationalized healthcare- wink, wink, wonk.

The same is true with monetary policy. We have records amount of liquidity. What we don’t have is monetary velocity. According to the Federal Reserve, the velocity of money is making all-time lows just at time when confidence in our political betters in going lower too.

Coincidence?

Injecting more liquidity won’t make dollars travel through are economy at a more rapid rate. It won’t replace confidence in a political system that can’t get the right result.       

We have an economic system that produces record corporate profits, record stock market returns, record oil prices, but can’t produce jobs or wages.

There is something fundamentally wrong with such a system.

And make no mistake: The experts have the system that they created, in all its intended, unintended consequences.

“The more the Fed acts, the less the White House and Congress will take responsibility for removing the roadblocks for real economic growth,” says Representative Kevin Brady (R-TX).

What the world needs now is a good, judicious measure of normality from government. They need to pick up the trash, repair the streets, police the neighborhoods and put out fires- not start them.

And go back to normal monetary and fiscal policies, so the rest of us can go back to work. 

“Lurching from artificial crisis to artificial crisis is very damaging,” says Brady ”I think that if the Fed were to look Obama and Congress in the eye and say, ‘You know, we’ve done enough, in fact, we’ve done too much. It’s your turn,’ I actually think the market frankly would welcome that.  

So do others.

Jim Paulsen, chief investment strategist at Wells Capital Management told Yahoo Finance that he thinks that the Federal Reserve is impotent: "They're becoming increasingly irrelevant over the last couple of years, the economy is flushed with liquidity, rates are already at record-setting lows. I don’t think they’re improving fundamentals by adding liquidity to the system.”

Perhaps what the economy needs is more confidence and a tad less intervention.

“Where there is something they could have an impact with, I believe,” says Paulson “is if they would start to normalize monetary policy a little bit to try to build confidence. I think that’s what they could still do.”

And Washington could normalize fiscal policy too.

But don’t hold your breath.

Because it seems to me that they purposefully screwed it up.  

100 Days to Go