I define my coined term, “Economic Tyranny” as:
The forced determination of an entity’s funds controlling its supply and demand.
Are we being blinded by a strong market run fueled by the monetization of massive debt spending? The public market is just a financial intermediary, a derivative of a sort of the underlying actual commerce of the company. That is, the market is ownership of a company’s stock or bond perceived payoff and not the company itself.
The stock market does not distinguish false supply from printed dollars. The bond market works similarly on treasury spreads reflecting default, spread, and duration risks doubly manipulated by the subsidization of lower rates and bailout spending tightening default spreads.
The market does not recognize the cost of economic liberty. For instance, ways to increase profitability of a health insurer would be to constrain coverage benefits to the elderly and force coverage to younger people. The stock value would be enhanced, but the true free market value would be far less. There is another value not represented in the market: The value of a company if it were operated in a “principled entrepreneurial” environment – that is, what the payoff would be operating in 100% compliance of rules and without reliance on government incentives on its supply and demand would be divergent to its stock value.
According to Charles Koch, owner of the largest privately held U.S. company:
“Once again, massive government interventions – including bailouts, takeovers and makework programs – are being offered as the “solution” to our economic problems. Once again, leaders are suggesting we can solve the problem by creating even more government agencies while piling on even more regulations. Once again, the government – rather than the market – is picking who wins or loses. It is markets, not government, that can provide the strongest engine for growth, lifting us out of these troubling times. If we are foolish enough to ignore some of the most painful lessons of history, then we will almost certainly make the same mistakes on a devastating scale.” http://www.kochind.com/files/PerspectiveJan09Discovery.pdf
How Mr. Koch built the largest closely held company was by the development (He hold an advanced MIT engineering degree) of “Market Based Management (Reg. TM),” a management approach stressing principled entrepreneurship.
Now some pundits (such as Ned Reilly) have called for a 14,000 Dow in 1.5 years (by January 2011). Of course the monetization of debt will force the markets up, but the market is running up at the cost of economic tyranny that I believe will end in the forced conversion of the USD by the end of 2011 (forecast using Taylor’s laws). I believe this forced conversion will be a response to a system of economic turmoil that surrenders the sovereignty of the dollar. I further believe that it is a good thing to surrender the sovereignty of our currency seeing that it can no longer be under the tyrannical control of government and the Fed that is now a partner of treasury.
As I wrote previously, it is “Time to form a new political party, “Republitarians.” Otherwise there is no constraint to the growth of government, the burden of over-reaching regulations, the re-creation of ‘the new society,’ government’s intrusive hand replacing the Smith’s invisible hand, the penalization of success, the bailout of union worker oligopolies, and supply-sided tariffs.”
What we are creating is economic tyranny – a governmental Leviathan growing and feeding from the trough of the national debt on a path of spending, nationalizing, taxing, and regulating.
Peter J. de Marigny / DITMo Capital / AMERICADE
