Gold News

"Do Something!"

The recurring whine of the Western World...

IT IS FAST becoming the whining refrain of most financiali market commentators, says Daily Reckoning contributor Eric Fry.

"Do something!" 

In fact, "Do something!" is fast-becoming the recurring whine of almost all socio-economic expression in the Western World.

From the rioters in Greece, to the Occupiers on Wall Street, to the long-term unemployed of America's big cities, to the underwater homeowners of America's small towns to the heavily indebted college grads nationwide; the desperate citizens of the Western World are turning to their governments and shouting, "Do something!"

Reacting to these pleas, the governments are attempting to do something, even though doing something is what brought us to this lamentable situation in the first place. In general, governments are attempting to overturn the eternal relationship between risk and reward. They are attempting to salve every economic wound, especially those that are self-inflicted.

A little bit of government-sponsored triage might be okay, perhaps even helpful. Unemployment insurance, for example, might fall into that category. But when the government begins mobilizing monetary M*A*S*H units to rescue the bankers and/or governments who blew themselves apart by holding campfires in a munitions depot, the rescue effort has gone too far…way too far.

Traditionally, capitalist societies regarded failure as an unfortunate, but normal, part of the economic process. Therefore, capitalistic societies would routinely ignore most victims of the capitalistic process, even innocent, collateral victims. The process was Darwinian, but very effective in sustaining long-term economic growth. So the modern idea of funneling taxpayer Dollars to entities or individuals whose incompetence deserved failure would have been unthinkable…even anathema!

But today, the ancient idea of allowing capitalism to determine winners and losers, rather than the government, is equally unthinkable…and anathema!

As a consequence, every taxpayer in the West is in the failure-subsidy business, and every failing institution and struggling individual is in the begging business. Ironically, therefore, both self-determination and self-reliance have perished by the same sword.

The governments of the West have come to see themselves as a financial Army Corps of Engineers — overpowering the course of nature with brute force. They respond to short-term crises with powerful, overly engineered "solutions," without ever really considering the long-term harm these solutions may produce. Sure, the river doesn't flood when you transform every oxbow into a concrete storm drain. But diverting nutrient-rich silt away from farmland and into the sea is not exactly progress.

Nevertheless, governments throughout the West continue building their storm drains. They continue to divert essential nutrients away from the private sector and pour them into a bottomless sea of bankrupt governments and failing too-big-to-fail enterprises. In other words, the governments of the West continue to "do more," when "less" would work just fine.

The biggest problem with doing more is that it invites all citizens to do less.

Both the rich and poor learn to reach for a handout. The politically connected elite beseech the government's assistance as furtively as the dispossessed ranks of the unemployed. Just ask Goldman's Lloyd Blankfein or JP Morgan's Jamie Dimon or GM's Rick Wagoner or any of the other CEOs who trekked to Washington during the 2008 crisis to beg for a handout from Uncle Sam.

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Eric J.Fry has been a specialist in international equities since the early 1980s. A professional portfolio manager for more than 10 years, he wrote the first comprehensive guide to American Depositary Receipts, International Investing with ADRs. Today he reports on Wall Street from California for the renowned Daily Reckoning email service.

See full archive of Eric Fry articles

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