Sunshine Patriots

"These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph."
-Thomas Paine, 1778

I hold a special disgust for those supposed free market patriots that have turned their backs on the free market in favor of government bailouts and stimulus packages. The market crucible has revealed them for what they are: water carriers for the corporate-government complex. I use the term Sunshine Patriot because the free market is synonymous with freedom, and those that protect freedom from tyranny are what we, in America, call patriots. So these so-called free market defenders are nothing more than sunshine patriots, they cave to government tyranny when freedom is most in need of defending. I cannot really say that they are inconsistent. They have consistently promoted the interests of big business and government largess. When they thought the free market supported their employers and their investments, they preached the virtues of the free market. Now that the market has revealed the unsoundness of their investments, they are crying for Big Brother's help.

"If any man builds on this foundation using gold, silver, costly stones, wood, hay or straw, his work will be shown for what it is, because the Day will bring it to light. It will be revealed with fire, and the fire will test the quality of each man's work."
-1 Corinthians 3:12-13

The free market is in the process of consuming the wood, hay, and straw that we have built our economy on in order to expose the foundation that has remained unshaken. This is a necessary and beneficial process that must be completed before we can begin to build our economy again.

Let me break this down for you again, so that no one can claim that I didn't make my voice heard.

We are in this mess because have leveraged our current consumption against our future productivity. We have spent everything we had saved. When we ran out of savings, we borrowed from others in order to spend. When the nation ran out of savings, we borrowed from the Chinese and spent. When the Chinese ran out of savings, we printed money and spent. Had the free market been functioning properly, we would have been forced to stop consuming and borrowing against our future productivity when the national savings dwindled and interest rates sky-rocketed. But interest rates never sky-rocketed because our banks were able to create more savings out of thin air by lending out $9 for every $1 they kept in the vault. Once the banks were leveraged as far as they could be, they started selling their mortgages to Fannie Mae and Freddie Mac in order to lend even more.

Housing prices sky-rocketed on rampant speculation made possible through credit expansion. Americans ran up credit card debt, and went on installment plans to buy washer/dryer combos and granite countertops. Businesses expanded to keep up with the ever increasing demand.

Like a dry California forest in the hot summer sun, our economy was ready to burst into flames from the tiniest of sparks. Then it happened. Our debt finally caught up with us. Those that had leveraged their future on the hopes that their home values or their salaries would increase were stuck with interest payments they couldn't afford.

Market reality is sweeping across this nation like a wildfire, consuming the paper fortunes that Americans had amassed around them.

The market wildfire is consuming the waste, the unproductive industries, and the false activities.

Housing prices have inflated at a much faster pace than income to the point that affordable housing has all but disappeared. Unsold overpriced homes cover the country. The market is forcing down these prices so that Americans can once again afford to own a home.

Consumers have maxed out their credit cards and exhausted their savings buying washer/dryers on installment plans. The market is forcing companies that produce products that depend on long-term financing out of business. Only the companies that produce the best products at the best values stand a chance of staying in business because Americans can no longer afford to leverage their current consumption against their future productivity. The market is working by preventing America from producing or importing any more products that we can't afford.

Banks have committed fraud by loaning money they don't really have. Investment bankers have amassed paper fortunes by pushing around stocks and bonds and using credit to run up prices, only to find their fortunes consumed in the market fire. Lawyers charge hundreds of dollars per hour to help businesses navigate through miles of government red tape. Accountants are paid premiums to find tax shelters and make sure companies are abiding by the latest bureaucratic requirements. These are all wasteful, false, and fraudulent activities that add no value to our economy but consume billions of dollars worth of productivity. The market is already in the process of exposing and consuming the waste.

How long have we complained about unaffordable housing? How long have we complained about irresponsible borrowing, bankruptcies, and America's overconsumption compared to the rest of the world? How long have we complained that America has become a nation of lawyers, accountants, and bankers that add no real value to the global economy, and all of the productive manufacturing jobs have fled the country?

The market is answering our complaints.

Should we be afraid? Yes. But not of the market. We should be afraid that the U.S. Government has so overleveraged itself that it finds itself in an inflation trap: it can't allow the dollar to strengthen and the economy to deflate, because it won't be able to pay of the debt of today using the less valuable dollars of tomorrow, and it will default on its debt, which will create a tsuname which will obliterate the world's economy; but it can't devalue the dollar any further through inflation, because it risks the hyperinflation which would result. We should also be afraid that the U.S. economy has become one massive false activity, pushing global currencies and equities around and calling it productivity and profit. Ultimately, the free market demands that every person must produce if they expect to consume; if the U.S. economy continues to make a living in the largely fraudulent financial sector, the market may very well expose the entire economy as one massive false activity and liquidate it entirely.

How can we avoid such a terrible fate? Let the market do it's work. Inventory surpluses must be liquidated. Housing prices must come down. Washer & dryers must be sold at a discount. Labor prices must drop. The American auto industry, which stopped making money on cars and started making money on financing some time ago, can no longer exist in its present form. We must pay off our debt, and increase our savings. Our productive resources must be reallocated into the industries that are producing valuable products and services that the world desires and can afford. Will our standard of living decrease? Of course! As it should! Or previous standard of living was based on borrowing against our future. That kind of living can't be prolonged indefinitely. Jobs will be lost in some sectors, but they will be replaced by new ones in profitable industries. Wages will certainly fall, but so will the cost of living. America is the wealthiest nation in the world, not just in dollar terms, but in terms of intelligence and natural resources. We can put those resources to use, but their prices must drop until the market can afford to use them. The market will make room in the other industries, primarily those that sell necessities and certain luxuries that don't depend entirely on long-term financing to make money. The waste, the fraud, the false activities, and the products we can't afford will be liquidated.

The alternative is tyranny and misery.

We can raise unemployment compensation and the minimum wage, but that will only result in higher unemployment rates, reducing productivity and consumption, cutting off a massive swathe of the population from the workforce, and draining the rest of the economy. We can tax & spend a trillion dollars improving infrastructure, but this will only drain capital and jobs from those industries that are viable and profitable. We can print the money, but that will only steal value from the nations savings, this is just more shuffling of capital and resources towards wasteful unproductive enterprises. We can borrow the money, but that will again only siphon present capital from the private sector and future capital from the taxpayers.

We cannot borrow our way out of this, we are already overleveraged. We cannot steal from profitable industries to keep the wasteful industries afloat, that will only prolong the recession and most likely turn it into a depression. We cannot consume our way out of this. We have already produced and consumed all the H3's and double ovens we can afford.

The only way out of this is to allow the market to reallocate our productive resources into the profitable and productive industries that the nation still desires and can afford to consume.