It’s no secret that our economy is all flustered. It does seem to be a mystery to those in power as to why. I say this not because I think they don’t know, but rather don’t see the answer as suitable for public consumption. The answer is obviously that they gave us too much money and now we have to give it back. In this post I cover how exactly we got this money, but it seems fitting to also discuss why I think it didn’t work to create long-term wealth and property.
In a normally functioning economy, with a stable currency, and as little manipulation as possible, markets demand restraint and wisdom to be entered. Easy money is myth, and there are no sure things. Obviously for the past 30 years and maybe longer our government has taken a policy, that in fact there was easy money to be had in real estate and housing investment, through both a policy of subsidy and easy credit. This manipulation of a certain market was the ultimate scam. Unlike other government programs which seem to target a very limited portion of the population, this policy seemed to make everyone happy and therefore no one complained, until now.
Traditionally, business including banks invest in the best bet. When they know a government policy will affect a market, the money like water follows to that path. The unintended consequence of this particular policy diverted money from other areas of production… This is not to say that new homes did not increase US manufacturing capacity, but much of this manufacturing capacity was not stateside, as most of our homes, although built from U.S. based goods and services, are furnished with foreign goods. Nothing against foreign goods, but when they are purchased directly related to a market manipulation it does call policy to question.
Now that economic recovery is being once again planned, I see a backlash in real estate investment and a push for higher order goods and services being the focal point. I am concerned that like the housing bubble which took money from other areas of manufacturing, a new bubble could be created due to market manipulation. Could our best intentions of restarting our economy through investment in small business, venture capital firms, new energy etc. cause the same ill effects 30 years down the road? Would it be so bad to remove manipulation? We might just get a more diversified, less hectic bubble economy. I know of 307 million regulators who I don’t think would do such a bad job deciding what’s best, if they could only see the picture clearly. The problem is that I also see 307 million people who see a government who could protect there interest, and very likely at the long term cost of everyone.
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Josh Gore is a product designer, wannabe inventor, and once upon a time film maker. He spends the majority of his time breaking and fixing things that move on four wheels and pollute the environment, although recently has re-ignited his passion for human powered 2 wheel rock crawlers.
Josh- where are these new areas of government manipulation since the backlash of real estate investment? You say higher order goods and services, but what goods and services are you speaking of? I’m asking as someone who does not follow markets very closely. Where do you foresee a new bubble down the road if not in housing?
Currently other than internal infrastructure and the propping up of the financial markets, it seems not a lot of money has been allocated or policy enacted. I do know that economists of all schools call for money to be spent in specific areas which we are guaranteed will not have negative impacts. These are the promises which I fear.
I like most people would love to see some sort of hydrogen or enhanced electrical distribution energy plan, but I have to realize that just because I want it, doesn’t mean it won’t have unintended consequences which we have to end up repairing 10-50 years down the road. It should be with this mindset that any money is spent, and I think ultimately it would lead to less money spent, and more regulation removed, especially in terms of energy.
I look at our current market and don’t see a free one, so instead of government mobilization through tax and spend policies, I suggest a weaning of reliance on government for consumer protection.
We have to look no further than the many prototype 3 wheel vehicles testing at 100mpg. They are 3 wheel vehicles because of DOT standards, which they avoid by not having that 4th wheel. Small business can’t afford the costs of entering a market and ultimately the value of there product to the consumer suffers. If I want a less safe 100mpg vehicle I should be able to buy such a vehicle.
Time for a bike ride, sorry to cut my response short.