[ExI] Article From March on SubPrime

[Lee Corbin]

Stathis writes

> The government and central bank are players in the market like
> everyone else, with the difference being that that they tend to be
> more influential and they do not to act exclusively to maximise their
> own profits.

Yeah, why should they? You do agree, I hope, that profit
is a good thing, and is closely related to wealth creation.
Governments indeed rarely create wealth. If the government
*were* making a profit, it might be better. (I say might, 
because the more money they spend, then the more
social damage and misalignment of human incentive
they are able to achieve.)

> What reason do you have to be so certain that their
> participation can only make things worse?

Well, frivolously, let me wise-crack "Because everything
thing they participate is made worse."  If there *were*
a way to totally privatize the military, or diplomacy with
other nations, or enforcement of the laws, it would be
a vastly improvement in efficiency. Sadly, though, at
least for this non-extreme libertarian, some things must
be left to them and their misguided incentives.

> For example, if the government decided to slap a tax
> on tulips because it considered the price of tulip bulbs
> was rising irrationally, would that necessarily
> be worse than allowing a bubble to form then burst?

I would say, yes, quite probably worse. Human beings
are human beings, after all, and this much power to
selectively decide when and what was a bubble would
have some very quick effects:

1.  An immediate boost to campaign contributions
     (no one wants to repeat Bill Gates' mistake,
     who thought back in the early nineties that he
     didn't need to pay protection money to the
     two major parties
2.  Certain unpopular industries, like the oil industry,
     might soon find that their stock price was declared
     to be rising too quickly, and they could suffer for
     lack of investment funds. (Of course, in reality,
     the oil executives are not stupid, and they would
     buy off the regulators, as is usually the case.
     The *human beings* who do the regulating have
     to remember what kinds of lucrative jobs await
     them after their stint with the bureaucracy, too.)
3.  This new source of revenue, taxing companies 
     whose stock price rises unexpectedly (and causes
     a lot of investment), would be seen as a wonderful
     source of new government revenue. And you know
     what happens after that. We Americans ruefully recall,
     at least of those of us who are self-educated, (don't
     think for a minute that this is ever mentioned in the
     government-run schools) that the income tax started
     out at one-percent.

Lee