Monday, September 12, 2011

Failure is the option

Writing after a long time indeed, got stuck in some daily chores and also reduced travel in the last couple of months gave me less time to think. Anyways here it goes now; also I did put up this article at Business Insider yesterday.

The high unemployment rate that has engulfed the major economies of the world is not just serious but also bewildering and these moments of pain and awe among the population is when governments try to intefere and curb the freedom of the society, the case in point being the new excess stimulus plan of Obama. After all wasn't capitalism supposed to allocate the resources efficiently then why is that we have 16% unemployment in US (U6), over 30% youth unemployment in Spain, Greece, Italy. I mean the problem of this world is fall output and so isn't it ironic that with so much unemployment around we are taking about this problem. A garbage reason that I always listen on television by many analysts and CEO's is that of lot of policy uncertainty which is leading to this bemusing irony. Well this may be playing a very small part in e scheme of things as I find it hard to believe that policy makers of a few decades back were far idealistic, efficient and superior than what the are now. The real reason for this catharsis is that the world we are living in is no longer free markets or the economic order is no longer capitalist but "crony capitalist"

Recessions, fall in stock prices and asset prices in general and failure of big and mighty are features of capitalism wherein it reorganises resources and efficiently allocates it to new sectors, people and industries which then take it forward thus creating jobs and continuing the boom. Unfortunately now even a 10-15% stock market fall is followed up by printing of money by the Central Bank of US, companies like GE and GM are saved under the garb of avoid huge job losses and of course the banks and the financial institutions (the less said of those the better) these institutions that add very little value in this society but for continuing the ponzi currency scheme. What's worse is that with every time they being saved under the farce too big to fail these banks have raked in too much of the economic resources.

What's required is not another failed government induced spending plan but instead the government getting out of the way of this economic reset, let the markets crash if ey have to and the companies and banks go bankrupt... There will be brief period of chaos followed by a new reinvigorated order as new capable people take over those deflated resources and as the capital froth from those assets move to new places thus creating opportunities from our young entrepreneurs and providing jobs to millions. Socialism and today's crony capitalism suffer from the same problem "misallocation of resources" the only difference is that while socialism gives less to the competent, crony capitalism gives almost everything to the incompetent but not letting them fail.

In the next article (sometime this month only) probably we shall talk about how this increase in government debt ends up doing no good but preserving the existing world order of ponzi banks and its monetary system.

No comments: