Fierce Republican: The Missing Headline

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A blogumn by Brian Pelfrey

I am perusing the newspaper archives from all over the universe going back to the days of the Galactic Empire for a headline that says: “Black Market in Recession–Illegal Lenders Near Collapse, Underworld Economists Say.” I am about to give up the search (well…there’s always The Onion).

But seriously, what is the missing ingredient that allows illegal financial systems to thrive without fear of global implosion?

It would be instructive to ask ourselves: Why is the underground economy an illegal economy? Answer: Because the government says it is. And why is that? Because its secrecy keeps the government from regulating, controlling, and taxing it; keeps politicians from appointing their friends to lucrative positions on related regulatory agencies; and avoids the tawdry spectacle of having to lobby Congress in self-defense. Does that mean that the underground economy is morally good? No, because it is also notorious for attracting violent criminals and danger.

Which is why the role of Government in the economy should be the same as its role elsewhere; to prevent people from hurting each other through violence, theft and fraud. This brings us to the housing market, which was disrupted by bad loans, which originated with poor risk-assessment by lenders, which was created by government pressure to give home loans to voting blocks such as “the underprivileged” and other constituencies. Would this give us the massive disaster that we see now? Not necessarily.

But the collapse in banking became worldwide when lenders tried to create nuclear fission using other people’s money as fuel. The so-called “derivative products” that created so much make-believe wealth on paper were commission-creating, stock-inflating, profit-reporting engines for banks and corporations. What could be more fraudulent than the sale and resale–indeed, the perpetual auctioneering–of fictional assets? Why did the government not enforce restrictions against fraud? Probably because this fairy tale money brought in record tax receipts and gave politicians a brief moment to bask in the light of a booming economy for which they gladly took credit.

So now our intrepid and courageous electioneers are angrily sloganeering against the Free Market. Having kicked away the three legs of the Capitalist stool–freedom from corporate taxes, absence of regulation, and enforcement of laws against fraud–thus ensuring the non-existence of the Free Market, they have (correctly) blamed “Wall Street greed” while (conveniently) avoiding the subject of their own culpability.