Sunday, September 26, 2010

Unintended Consequences (Reprinted)

Here is a reprint from April 10th, 2008 that I added a few paragraphs to that still hits home.

In 1939 we had “Appeasement” to keep from fighting a war with Germany. It kind of worked for a couple of years; we still had a war, but if we had nipped it in the bud, it would have been small. World wars tend to be large.

Congress gave a subsidy for growing corn to make ethanol, and the price of beef went up. Turning food into fuel is pure lunacy (IMHO). The funny part is the subsidies more than make up for the unprofitably of the venture. God bless Congress for their infinite wisdom, their group stupidity will kill us (if their kindness doesn’t). I would like to see the gas stations give you the quart of ethanol instead of mixing it in your gas. You’d be able to fill your tank and get tanked. The DUI would be an unintended consequence.



The Fed dropped the interest rate when the stock market took a dive in 2001 and the real estate market took off. The solution to one problem created a new problem; of course everyone knows that real estate has hit “bottom.” The Fed bailed out Bear Stearns and God knows where that is going yet. Ben’s 30 billion dollar loan will buy a lot of “Blue Sky” (assets with intangible value). B of A is about to throw away the sucked out dry carcass of Countrywide. I guess they get to keep CW’s loan servicing department. This outcome however, was far from unintended.

Congress a few years back passed a law that allowed farmers to depreciate heavy farm equipment over five years. Every business in the US bought a Hummer as a 50K write off! A great business expense when gas was $1.50.

Three paragraphs following, added September 26, 2010

Congress enacted a fine on airlines that could cost them a couple of million if they left a plane waiting the the tarmac for 3 hours. The net result,The airlines eliminate the possibility of a fine by canceling the flight. It's very upsetting to fly into Chicago and find out your flight to DC has been canceled--I remember it well!

Obamacare prevents insurers from putting caps on medical payments for children. The net effect, insurers will stop offering coverage for kids.

A few years back the Georgia legislature passed a bill against abusive loans by banks. The net result, you couldn't find a bank to borrow money from to buy a home, in the state of Georgia. That got fixed rather fast.

We need to accept the idea that the solution to one problem creates a new problem. If that wasn’t the case, we would have solved all of humanity’s problems hundreds of years ago. Once you realize this, you begin to understand politics. The problems are real, but the solutions are only trade offs. The whole mess will sort itself out with or without any intervention. Intervention will not change the final outcome.

It reminds me of the saying “give a man a fish and you feed him for a day, Teach a man to fish and you feed him for a lifetime. The unintended consequence here is you have a couple of guys in a boat drinking beer all day. The additional unintended consequence is a mad wife with a frying pan waiting for her drunk husband to crawl home. Ouch!

Copyright 2010 All rights reserved

11 comments:

Anonymous said...

Today's solution becomes tomorrows problem. That is the modus operandi of the government.

Government shouldn't be solving our "problems". That is up to we the people. But because Americans have howled, whined and complained to the government and gotten "help" it has become a habit and pattern. Now Americans think that the government is their daddy and should take care of them or any problems that erupt. Politicians are more than happy to do whatever they can to help so that they can get your vote. They are not there for the ultimate good of the country.

It isn't our government that is the problem, it is this misguided mindset of the people. They created a Frankenstein.

Americans have the government they deserve. They made it. It is their low responsibility, laziness, and self sufficiency that has caused it. Behind that is lack character (morals and values) and of the proper education.

You'd think by now Americans would realize that looking to leaders and politicians for answers and an improved society is an unworkable action.

The Age of Irresponsibility.

Drew said...

Build a man a fire and you've kept him warm for a few hours. Set a man on fire and you've kept him warm for the rest of his life.

rob in ns said...

LOl

That is the best analogy that describes current fiscal policy I have ever heard.

Cheers Drew you made my day.....

rob in NS

Ohio Loan Officer said...

I always say they need to stop legislating and start educating.

Jim in San Marcos said...

Hi Drew

The "keep him warm for the rest of his life," was very touching. You didn't help write this health care bill that just became law, did you???

Thanks for the laugh.

Jim in San Marcos said...

Hi Age of Irresponsibility

Your right in your thinking, at some point in the future we will have to face up to the mess we have created. And that time might not be too far down the road.

Anonymous said...

Hey all we've gotten is unintended consequences and that is what we will continue to get as long as we allow government to intervene in our personal lives, economy, markets and so on. We have so many unintended consequences that have built up over the last 100 years that we are just a giant, cumbersome, lumbering, over-complicated, effete, non-viable lummox-- who has fallen flat on our face and will soon die and have our carcass picked over by global vultures. We've let our forefathers down terribly. Man would they be incensed to see how we let the flame of liberty, independence and self-sufficiency go out. The American Revolution was in vain.

Anonymous said...

perfect example,,, here we are in a depression or great correction,,, unemployment is at its highest since the great depression,,, what does obama and congress do?,,, pass a healthcare bill making it even MORE expensive for employers to hire people!?!?!?,,, ya gotta wonder if congress if actually for or against america,,, i guess the plan is to wipe out the middle class,,, the conspiracy of a one world government with a power elite and the rest of us as slaves is starting to not seem so far fetched,,,, is it a plan in action or is it just the result of man's stupidity?

Anonymous said...

and bernanke the powerless charlatan doesn't know what to do and is completely ignorant of the basics of economics. QE1 did nothing and QE2 will do nothing. QE did nothing for japan for its last 20 years. QE does not have a multiplier effect either. it is a false datum. bernanke knows it too because he wrote about it 12 years ago. he's doing it because he doesn't know what else to do and has to keep up the pretense that he understands what is going on (yet how can someone have understanding who has allowed the econ to wind up where it is on his watch? a direct contradiction). the guy above is right about the destruction of the middle class. we'll be in a deflationary/unemployment spiral for some time. make the most of it folks.

Anonymous said...

Everyone gets the brunt of governments unintended consequences, as many of these posters here seem to know.

Eventually, after QE2, QE3, QE4, or QE5, and the bond vigilantes causing interest rates to rise-- the dollar will be worthless. Goldbugs shouldn't be so smug either as they aren't safe--the government can confiscate gold and devalue it. FDR already did so. He is one of Obama's heroes (altho Obama won't be around for that).

In the Great Depression the dollar was backed by gold and the bond market was strong (if you had dollars you could sit back and wait it all out). That is not the case today.

Gold? USD? Real estate? None of them may be a safe haven when the inflation gets heavy. There just may not be any place to run.

Gulp!

Anonymous said...

Our leaders, politicians, and captains of industry have made a mess of things especially over the last 4-5 decades. This irresponsible and ignorant behavior will now culminate in a major economic collapse here in the USA. We will be in a hole for decades. Who knows how long it will take for us to climb back out of the hole, if we ever can climb out. Could it be that the American Empire will only have lasted for 300 years and then becomes a shadow of itself?