Your Choice: A Year or A Decade

The chickens are coming home to roost. The bad choices and all the living beyond our means are about to settle in a new reality–one where the market holds us all accountable for those bad choices.

From the people who bought homes far beyond their means to the folks who thought it was ok to keep refinancing over and over again to get every dime of the housing price bubble into their pocket. From the people who saw credit cards as if they were cash to the credit card companies who think its ok to charge ridiculous interest rates and to mislead borrowers.

Alas, both Presidential candidates are on board with ideas that will lead to a DECADE of pain instead of a year or so. If we let all these poorly run companies fail, sure it would be painful–but the pain will pass quickly. By propping up a FAILED system of intervention and Big Government, we will elongate our pain just as FDR did when his supposed New Deal drastically lengthened the Great Depression.

Make no mistake: Depression is caused by GOVERNMENT meddling in the economy. Recessions are part of a normal business cycle and represent market corrections to bad choices. The point is that private companies cannot make enough bad decisions at the same time to cause a Depression. Only through GOVERNMENT regulation can enough companies be FORCED to go down the same wrong path at the same time.

The answer is simple: Tell your elected officials to STAY OUT OF IT and let the market correct itself. Thankfully, the market doesn’t really care about your politics–it cares about value and substance. If a company becomes a useless empty shell with no real value (i.e., Fannie Mae and Freddie Mac) through government intervention, the market knows better than to go there.

As I’ve said before and I’ll say again, if you play in the market you’ve agreed to the risk of investing. Don’t whine when your 401k goes down in value because you failed to research the companies you chose for investment. The information is out there: read it. And if its not there, act like an adult and accept the consequences of choosing an investment that went downhill.