Economic problems today -- their causes and solutions

We live in what has been termed “The Great Recession”. In the last decade we have experienced a significant fall in the value of all currencies, a significant increase in the price of all commodities, the housing crisis, the financial crisis, the problem of governmental debt, and in general economic stagnation. At the same time we are facing the problems of environmentalism, Islamic totalitarianism, and the problems with the welfare-state, especially regarding health care and education. The dominant explanation of these phenomena has been to blame the free market, and the solutions has been increased regulations, increased taxes, government bailouts, and in general more government interference.

Andrew Bernstein and John Tamny will discuss the actual causes of these economic and political problems, and present the solutions that would resolve these problems and once again produce growth and prosperity. There will be ample time for the two panelists to answer questions from the audience.

Andrew Bernstein is author of the newly published Capitalist Solutions, and also of The Capitalist Manifesto: The Historic, Economic and Philosophic Case for Laissez-Faire; of Objectivism in One Lesson: An Introduction to the Philosophy of Ayn Rand; and, most recently, of Capitalism Unbound. He lectures regularly at universities across the US, and has spoken frequently at Objectivist conferences in both the United States and abroad.

John Tamny is editor of Forbes Opinions and RealClearMarkets.com, plus a senior economic advisor to H.C. Wainwright Economics and Toreador Research & Trading. He regularly appears on CNBC and Fox Business.

What Caused our Economic Problems?

So many of you might just look at our economy, and go, "it's all soandso's fault!" I would ask you to wait a moment before you blame your choice of group and consider a few points.

This entire deal started with the banks. Banks were making loans they should not have. I will refer you to this:

http://blog.beliefnet.com/reformedchicksblabbing/2009/02/a-school-bus-driver-wants-bail.html

How did a bus driver get an $800,000 loan? This may be an extreme example, but it gives me a point to start from. This woman should never have gotten this loan; if the bank had even bothered to do ten seconds of math they'd realize she would not be able to afford it. Many of the banks who are failing right now did this same thing, and other banks got caught up in it because this caused house values to fall rapidly.

This was the starting point for our problems, people who got loans when they should not have qualified for them. From there, they inevitably started foreclosing, and suddenly the media became involved. The media started reporting the horrible housing market, caused by these ridiculous loans(that part was of course left out), and suddenly consumer confidence dropped. When consumer confidence drops, spending drops and saving increases, which drops sales for everybody. When spending drops, companies are forced to do layoffs. This begins a crazy cycle of layoffs and further reduced spending.

So what is the government's solution? Lets give money to the institutions who failed! (now this, I fault Bush for... the bailout plan he signed was not what true republicans would've liked, and the voting record reflects this) Not just the banks, mind you, the UAW-run car companies have also failed. The workers earn something like 40% more than their Japanese-owned competitors who also reside in the states, yet they make about the same quality of cars. No wonder they're having financial problems. The Japanese companies(again, these are factories that reside in the states, with US employees) are finally feeling the effects of this recession, but notice it took them a -lot- longer to fall into it.

Just think about these things, and ask yourself, why are we giving money to these businesses who have proven they cannot manage money correctly? If, say, GM went bankrupt... know what would happen? They would then have the ability to renegotiate contracts with their UAW employees, bringing their pay back down to a competitive level. Or, they could do like the Japanese companies do, and start over without any unions at all. GM going bankrupt does not mean GM would disappear, it would mean they would have a chance to lower their costs and start fresh.

Anyway, these are my current thoughts on the economy. If you think I've overstated something or have my facts wrong, please reply and I will take a look at it. I am by no means set in my ways in any of my opinions, it's perfectly possible I have been misinformed.