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Economic Confusion

With the government meddling more than ever before in our economic system… taking equity positions in banks, propping up auto manufacturers, etc… it’s no wonder the stock market is gyrating wildly. Stock prices are determined when investors put their money where their mouths are, essentially “voting” on what they believe the value of a company is.

Since it’s their job, most investors put considerable thought into their decisions… often looking for just a slight edge where they see an advantage in value. When the government gets involved, there’s too much uncertainty as to what might happen. There is no solid plan that investors can count on when assessing the playing field… the “rules” keep changing and many do not feel confident they can “win the game” in such an environment, so they are just sitting it out for now.

The very last thing an economic recovery needs is a large group of reluctant investors.

Similarly, a huge number of everyday citizens see only confusion coming out of Washington. In the past, that might not have been so worrisome as they debated whether to change the maximum speed limit or whatever… but with the federal government intervening deeply into core businesses, they are NOT confident our economic problems will be resolved. Indeed, most of us have learned over the years that the government is MORE likely to do things exactly the WRONG way.

Take a look at the track record of a couple of government “businesses”:

  • Postal service
  • Amtrak

Do these organizations demonstrate that government can do things right?

How about a couple of recent examples?

  • Fannie Mae (FNMA)
  • Freddie Mac (FHLMC)

Oh! Wait a minute!! Are these the ones that were manipulating the real estate mortgage market and CAUSED most of this economic mess in the first place????

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