It is sometimes said that the cure is worse than the disease; however, sometimes the cure IS the disease.

I was working in a benefits office of a large university and there was a lady who got a customer service award.  The story was told that employees would call the benefits office frantic that the doctor told them they didn’t have coverage.  She would scramble about and get them a confirmation of coverage, contact the carriers…fix everything.  That is great customer service.  The VP of Benefits turned to me and said, “The problem is that she was the one that forgot to enroll them in the first place because she is three weeks behind.  If she’d do her job, there would be no need for her great customer service responsiveness.”

Protection and Security:

The government is spending trillions on our security.  They are fighting ongoing wars in Iraq and Afghanistan; they are wiretapping us domestically; they are tracking us on our cell phones, monitoring us on Facebook; groping us as we go through airport security; censoring/blocking website they deem inappropriate, etc., etc.

Let me simply point out who it is we need protection from (hint:  it is not terrorists):

If we look at human history, the story is rarely of the government protecting its people from some external threat.  History teaches us that the threat of tyranny comes most often from the government itself. The framers of the Constitution had this concept specifically in mind when they created our government:  Limited government (see the 10th amendment) to protect us from the government.  We have the right to bear arms so the government cannot disarm us in case we would like to overthrow the government (yes, that is what the founding fathers had in mind).

I previously mentioned that if the financial sector’s main purpose is to assess and hedge risk and they themselves are the largest risk, then the only sensible solution is to pack up and go home.  Similarly, if the government’s aim is to protect us then they would be best served by doing almost nothing….since history shows over and over that the government itself is the largest threat to our freedom.

Saving the economy, Inflation, and the Fed:

We are told the Fed needs autonomy and power to intervene in the economy to save the economy.  As President Bush said, “I’ve abandoned free-market principles to save the free market system.”

That is a great story (and a bizarre quote).

I will ask why the economy needs saving in the first place? The Fed created easy money that fueled an asset (housing) bubble.  The government spends unfunded trillions on war that creates a budget crisis.

The government creates the economic conditions from which we need to be saved.  Indeed, they are the largest player in the economy and thus the one most able to create imbalances which cause crisis.  Very few other players have the market power to create a deep business cycle.  Very few other players could ever be considered rule makers or market movers.

Consider inflation.  Inflation is not caused by a rise in prices; it is not caused by increasing wages.  Those are symptoms, not causes.  It is caused originally by some expansion of the money supply (indeed there could be no inflation without an increase in the money supply).  The government/Fed controls the money supply.

When the government tells us it is fighting inflation, it is mainly fighting itself, since they are the party that must take the initial steps.  The government gets to create and spend money now when it is worth more and when it leaks out into the general economy as inflation we spend the money later when it is worth less.  Inflation is a tax on savings.  The tax goes to the government to spend now when the money is still worth more.

Similar to the situation with protecting us, the government is the primary cause of economic crisis and inflation, from which it then proposes to save us.


I actually think politicians are generally well intentioned (though not always); they have their beliefs and they fight for them on a political stage (which means lots of messy compromises).  Problem is, even if you have your beliefs, you are often wrong.  Strength of belief does not equal likelihood of correctness. See the Dunning-Kruger effect.

There is simply a powerful incentive to DO SOMETHING when there is a crisis, even if you are attempting to save yourself from yourself.

My question is:  Do the politicians realize any of this? I hope they are simply poor students of history, or willfully ignorant and are just trying to help.  If they realize it (even some of them), then my view of mankind is dimmed.

What do you think?

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3 Responses to “Only the government can save us now……. from the government.”
  1. Josh says:

    That scribbling noise you hear in the background is just the government adding you to “The List”

  2. Russ says:

    I mostly agree with this. During the “housing crisis” I was often thinking the same thing, all the props they were putting up to “save the economy” were mostly just delaying the inevitable. I felt that the best thing would be for the housing market to tank, then it would level out at a level that was natural, not artificial. But of course then there is the problem of things getting worse before they could get better, and many mostly innocent people’s lives being messed with.

    The place where I don’t agree is when it comes to big business, specifically the financial and insurance sectors. There are businesses that are basically legally screwing people over left and right. Left unregulated I don’t see how these industries can get better. The big/rich will keep getting bigger/richer, and the small/middle class will keep getting smaller and less middle class. I agree that the government itself has helped to create these conditions, but how would keeping their hands off help them get better? I suppose over time things would get so bad there would be a backlash, and maybe over time things would self regulate. But these are regular people’s lives at stake. I’m not saying the govt owes these people (especially many educated people who should know better than to be where they are), but there are people who depend on these sectors for their well being, and they are getting royally screwed. But in many cases there is no where to turn and the holes keep getting deeper. I think that government intervention, if don’t properly, and that’s a big if, could reign things in. But once again, I suppose as is the point of your post, doing so would be the government saving itself from a problem it has created.

  3. kellio says:

    Russ: I will agree with your point. I was speaking mostly of the need for security/protection as that is where the case is the strongest, since government is almost always the biggest threat to freedom….while from an economic perspective the case is a bit muddier, though certainly still there.

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