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What if it were apples?

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Here's an excerpt from an article by Lew Rockwell where he explains how these various bailout plans look to people with an understanding of economics. He uses apples. Tulips would have worked, too. Wink

"You have to understand how ridiculous this whole debate looks to anyone who understands the price system. Let's change the example from houses to apples to see how silly it is to suggest that falling prices can be made to rise. Let's say that the Fed created an apple hysteria that drove the price from $3 per pound to $10. Stores loaded up and even used them as collateral for expansion. Suddenly the price collapsed to $5 and finally to $2.

Now government takes notice. What can government do to deal with the problem? It can try to boost the price of apples by forcing stores to raise their prices. But what about consumers? They won't buy at $10. So the apples sit and rot. Maybe government should buy them all or force consumers to buy them. Also perhaps stores will just not buy any more at all. Government could force them to. But it can't force them to stay in business. People can always walk away. So perhaps government can just buy the stores, all in the interest of keeping the price of apples up. But it will have to buy the apple-leveraged stores at a much higher price than the market would offer, so this is a bad economic deal on the face of it.

The tangles can get ever more complicated and billions and trillions can be spent. You can put everyone in a prison camp and force people at the point of a gun to buy and sell apples at $10. But in the end, the problem is still the same: the price of apples wants to fall. Nothing government does changes that one fact. To attempt to change it is like trying to change gravity. Of course, the government’s central bank can raise all prices through inflation to the point that apples do in fact cost $10, but this is purely cosmetic. In fact, in real terms, the price of apples is still $2. It is a pointless and destructive activity to try changing this. You only cause massive damage in the attempt."

(full article) http://www.lewrockwell.com/rockwell/near-death-of-state.html

Credit should be given to those House members (in both parties) who voted against it, in the first round.

Entry #166

Comments

1.
Rick GComment by Rick G - October 1, 2008, 10:04 am
Why aren't they holding public hearings on what is perhaps the most important issue in our lifetimes? There are over 200 economists who have signed on against it. They should be part of the debate and part of the solution. They know a hell of a lot more about it than our congressmen.
2.
konaneComment by konane - October 1, 2008, 10:52 am
Many of our congress persons are lawyers who know 700 billion ways of covering their behinds while they leaving the rest of us holding the bag. That's how we got in this predicament the first place.
3.
ThinkComment by Think - October 1, 2008, 12:00 pm
There was an old woman who lived in an apple.....

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