Wednesday, 14 November 2012

Life Would Just Be So Boring Without Central Banks, Fractional Reserve Banking and Big Government

Ok, so we all know now that excessive debt (public and private) and centrally set artificially low interest rates facilitated by central banks, fractional reserve banking and big governments bailing out "too big to fail" banks create booms and busts and an unsustainable economy. But just consider what reality could be like, without the current system, under a true free-market economy:
  • The stock market would become much more stable making the market substantially less attractive for full-time day traders and speculators.
  • It would be almost impossible to get a $100,000 (or $200,000, whatever it is these days) job on Wall Street straight out of university even if one could analyse a company's balance sheet.
  • The bull markets with the justly earned bumper salaries and bonus multiples that could set you up for life during a few years of hard work would be long gone.
  • One would actually have to save substantially more and for longer in order to buy that apartment.
  • There would be hardly any politics to write about and the elections would become mostly irrelevant.
  • Lobbying would seize to be an industry.
  • Crony capitalism would be an impossibility, meaning your company could be exposed to substantially higher competition which could negatively affect your future earnings.
  • Imperialistic governments could no longer afford to go to wars and international politics would stop being on the top of the agenda.
  • IMF, OECD and other bureaucratic and politically infused institutions constantly calling for more integration would be shut down and not have the funding anymore to create their academic reports which one can read instead of counting sheep at bed time.
  • Politicians could no longer promise us heaven on earth for nothing and other dreams we all so desperately need.
  • The exciting prospect of having to fight against higher taxes would no longer be a prospect.
  • We would no longer be able to simply print money to get the things we want.
  • Inflation would be reduced, meaning you would not have to rush out to spend it before it becomes less worth or chase higher yields.
  • You could make money simply by putting your cash in your savings account.
  • Millions of jobs in the public sector would disappear and all the great central planning plans we now have the luxury to read about every day would simply not be created anymore.
  • Thousands (?) of people who did not quite make it into NASA would not be able to play around with complex mathematics and stochastic processes anymore at the social science lab at the Fed.
  • You probably would not qualify for all those credit cards anymore.
  • Banking would become a dull business again.
  • A substantially larger percentage of the high achievers at university would work in the real economy, helping create new products, developing medicine that saves lives, instead of creating the fancy financial products we love to spend time on dissecting as they could make us a fortune (at the expense of somebody else).
  • All of us bloggers would have substantially less to write about and political and financial journalists and TV reporters would see a dramatic scoops to report.
  • Clueless economic journalists would no longer be able to talk about how much more the government should spend to create those much needed jobs.
  • Average salaries would be substantially lower in the western world to be able to compete with lower producing countries.
  • We would no longer be excited about what Benny "the Printer" Bernanke, Mario "The Euro Is Irreversible" Draghi and Mervin "I Hedge My Predictions with Fan Charts" King have to say, in an ever so subtle and hard-to-interpret way, about what the future may or may not look like.
Is such a boring state of affairs really what we want?

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