Do You Believe in Free Markets?

Do you understand the question?

I don’t think most of the younger generations do. At the same time, most would probably answer ‘yes’ because it sounds right.

In the late 1700’s Adam Smith, considered the father of modern economics, described the ‘invisible hand’ of the free market driving the supply side of an economy.

Let’s take a moment to refresh what a free market is and means.

Free markets characterize a capitalistic, economic system in which prices are determined by unrestricted competition between privately owned businesses.

Government’s role in such a system is to ensure that monopolies don’t materialize – which can happen in this type of system – which is why the U.S. has the Sherman Anti-Trust law and others. If one company evolves into a monopoly it can exploit the price of their product because it has little or no competition.

Free markets mean product sales are dictated and controlled by consumers – customers who have alternative products to buy.

Free markets are good for business and good for the people. Capitalism, especially free capitalist markets, is a successful system of unregulated markets because people vote for the businesses to succeed or fail with their dollars. It’s the soul of supply and demand.

Competition drives the incentive “to build a better mousetrap.” Companies want consumers to differentiate their products from others by being better. That in turn drives the way companies attempt to make a better and/or higher quality product. In today’s world, that translates to technological advances. A great example of this consumer-driven, technology-based system is the Apple iPhone. An older one would be when Henry Ford took advantage of the demand for automobiles by creating the assembly line. Free markets operate with private capital.

Just to ensure you’re aware, there’s a hair-splitting in the economist world differentiating between free market systems and capitalistic systems, but it’s not worth the words to describe.

So, what’s the opposite of a free market system?

It’s called a ‘command economy.’ It’s an economy controlled by the government. We also know it as socialism.

Under that economic system the government owns the production of goods and services. It therefore controls not only the supply of goods and services, it controls the price of same. Bottom line: the government knows better than consumers – and private company/capitalistic incentives.

Which brings me to the real reason for this blog: to put the Green New Deal in perspective of the market system it employs.

There have been proponents of socialism for a long time in our society – way before Bernie Sanders and AOC. But they have been considered ‘fringe’ and only a small minority gave their thoughts a second one.

In recent times I think a giant step toward socialism here began in 2008-09 with the ‘too big to fail’ bailouts of the nation’s largest banks and financial institutions. It was called “an emergency,” of course, and the brunt of socialism was downplayed by the bailouts being sold to the masses as ‘loans.’

Fact is, the government had no business sticking its nose into the prospect of company failures. In a free market, you pull a boner as a company and there are consequences. The government did not allow the free market to operate.

That giant step led to additional steps by the government. The Obama administration blatantly described its goal as ‘redistribution of the wealth.’ It supposedly accomplished that by the government spending $10T it didn’t have. But few, including President Obama, called it socialism. You know the story of boiling the frog. That’s what was/is happening to us.

President Trump was/is the anti-Christ of boiling frogs.

The Biden administration and the Democratic Congress got the train back on the tracks, so to speak.

First it kept the economy shut down. In doing so it kept millions of people dependent on the government. It was a public health “emergency.”

In addition to keeping the spending trend, it was decided that the United States needed a ‘transition:’ from fossil fuel to solar and wind generated electricity and electric vehicles. You and I weren’t asked how we felt about it because most of us would have said “no, not under the current circumstances.”

The first executive orders (January 2021) dictating the transition were to shut down pipelines, remove federal lands from exploration and drilling for oil- and shale operations for more natural gas. Added to that was the reinstatement and expansion of costly regulations to “save the environment.” Those unilateral actions immediately sent the price of oil skyrocketing from $40 to $100 a barrel. The price of gas and electricity followed. The government took control of the fossil fuel market and the basic cost of everything – all by EOs, not the Congress.

By raising the price of fossil fuels, the Biden administration pushed for people to transition to electric cars/vehicles.

This package of actions is what a ‘command market’ looks like.

The White House was/is on a mission. It tried to get Congress to buy in, but it didn’t act in support of this new command market until August 2022 – and that was accomplished on a strictly partisan vote.

That legislation, called the Inflation Reduction Act, sends hundreds of billions to tax credits for electric cars and hundreds of billions more to research and expand solar and wind generated electricity. Oh, it also sends an additional $87B to the IRS to collect the additional tax revenue parts of the bill.

Folks, this is not what a “free market” looks like.

Supply and demand is now in the hands of the federal government – not consumers.

It’s called socialism – with its autocratic mandates.

All this was accomplished by the least popular president ever while 85% of the population thinking we headed in the wrong direction.

But the transition to socialism and command markets continues.

Us dummies (aka, boiling frogs) in the proletariat are too stupid to find it for ourselves, so we’re being forced to utopia. We’ll be ever so grateful for the legacy of the elites and oligarchs when we arrive at Shangri-La – and we won’t have to make decisions or choices for ourselves or families anymore.

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Have a great and prosperous week.

Hug somebody.

SPIDER Bites

Trivia question of the week: What is the name of the biggest technology company in South Korea?

NASA’s unmanned Artemis I moonshot was scrubbed twice last week. Its next potential window is October.

Gasoline prices are rising again after a month or so of decreases. To make a point “The True Cost of Washington” campaign in Florida covered the cost difference between the January 2021 price of $2.26 and the current price of over $3.60+/gallon for 1 hour at a Tampa gas station last week. Everyone hopes we don’t get one or more hurricanes over the next several months affecting the refineries in LA, TX and MS exacerbating the supply of gas even more. Meanwhile, OPEC considers cutting its production of oil. Isn’t this fun?

As most western world leaders have their countries in an energy crisis and suffering high inflation, the Chinese yuan is making inroads to become the replacement for the dollar as the world currency. Our inflation coupled with a national debt now significantly exceeding our GDP is making the yuan a more secure currency. If (when) that happens, the US will pay through the nose for foreign made products.

With current inflation, the major grocery retailers, including Walmart, are reporting consumers are trading down – noting increases sales of canned tuna and chicken vs. deli meats – and increases in the sale of canned beans, smaller pack sizes and private brand products.

President Biden’s EO recently forgave $10 to $20,000 of individual student loans, dependent on a couple of things. Expect that EO to be legally challenged around the issue of whether the executive branch can unilaterally do that. Options for SCOTUS in determining the legislative authority to implement the scheme include the ‘nondelegation doctrine’ – a principle in administrative law that Congress cannot delegate its legislative powers – in this case funding – to other entities. Regardless, it’s a most unpopular package for the average folk.

Spain has mandated thermostats be set at 80 degrees in offices and buildings to conserve its loss of electrical generating capacity. Like so many other countries, including the US, western Europe has cut of their respective noses to save their faces over Russia. Oh, Spain is also encouraging not wearing neckties to keep cooler.

You will recall CA issued an order that only non-fossil fueled vehicles can be sold starting in 2035. Meanwhile, with high summer heat this weekend, CA has advised electricity consumers not to use major appliances or charge their electric cars between the hours of 4-9PM. You must buy an electric car, but you can’t charge it. That should slow things down.

Speaking of the socialistic state, the CA legislature passed the “Fast Food Accountability and Standards Recovery Act” raising the minimum wage for fast food workers from $15 to $22/hour.

President Biden spoke to the nation Thursday evening, advising us MAGA Republicans are a major threat to democracy. This is the position of the head of the country. You understand – no politics is involved, and he emphasized unity. He called all MAGA Republicans ‘semi-fascists’ – whatever that is. We also understand it’s about stopping a Trump conspiracy plotting another insurrection.