BUSH'S POLICIES: VIOLATING ADAM SMITH'S 'LAWS OF JUSTICE'?

When I wrote about our “sting economy” I was referring to the tendency of unregulated market players trying to game the system. In the process they undermine the integrity of our market system by pushing bad products for the wrong reasons. Adam Smith would have been the first to argue that these dynamics violated the “laws of justice” he believed were necessary for markets to function effectively – and for society’s benefit.

What's been the result of poor planning and unrestrained markets? Economic recession, record debt, and a stimulus package that does nothing to promote sustained growth. This provides a bleak snapshot of where we’re heading. But a better gauge might be this, The Bank-Implode-O-Meter.

Here we find lots of interesting information– like banks writing down over $100 billion from their books, Canadian banks threatening to ignore the Bank of Canada’s rate cuts, and news on failing financial institutions throughout North America. If this doesn’t create doubts about the economy and the Bush administration’s ability to manage these challenges, especially with its deficit driven “Budget Clown Show,” then The Mortgage Lender-Implode-O-Meter should help. Among many interesting bits of information, it lists 225 lending institutions that have gone under since 2006. Relatedly – and I’m not sure how this shakes out just yet – experienced investors are now buying up collateralized debt obligations (CDOs) at 15-30 cents on the dollar.

With billion dollar write-downs, recession, record debt, sagging consumer confidence, banks ignoring rate cuts, and the president’s budget referred to as a “clown show” there’s little doubt that something is amiss in Kansas. President Bush has been able to escape political accountability for geo-strategic and military incompetence. The question now is whether he will be able to leave town - and the economic mess on the table - without suffering the consequences of his "tax cuts work ... let's deregulate" babble.

If history is any guide, my bet is that he will. Unfortunately, we may not. In future posts I am going to discuss this with reference to Adam Smith's "laws of justice."

- Mark