There is something seriously wrong when a communist government is lecturing us on our monetary policy, and they are right. Then again, it seems the communist government of China understand capitalism and it’s benefits more than our President.

BEIJING — China’s top banking regulator issued a sharp critique of U.S. financial management only hours before President Barack Obama commenced his first visit to the Asian giant, highlighting economic and trade tensions that threaten to overshadow the trip.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said that a weak U.S. dollar and low U.S. interest rates had led to “massive speculation” that was inflating asset bubbles around the world. It has created “unavoidable risks for the recovery of the global economy, especially emerging economies,”

via China’s Blunt Talk for Obama – WSJ.com.

Appparently, GE doesn’t believe in growing business by supplying goods and services that the consumer wants. Instead it believes in coersively taking money from the consumer via governments to grow their business. I guess it doesn’t hurt to have helped elect the President with your TV networks. It also doesn’t hurt to fake concern for the favorite causes of the left with “Green weeks” and “Service weeks”. I’m pretty sure on the road to fascism, this is a rest stop.

General Electric Pursues Pot of Government Stimulus Gold

BY ELIZABETH WILLIAMSON AND PAUL GLADER

The financial crisis hasn’t been kind to General Electric Co. Its stock has lost almost half its value, the government has stepped in to prop up its enormous financial arm, and sales have slumped in core industrial businesses.

But Chief Executive Jeffrey Immelt now has his eye on a huge new pool of potential revenue: Uncle Sam’s stimulus dollars. Mr. Immelt, a registered Republican, quips about the shift in thinking in the nation’s corner offices: “We’re all Democrats now.”

GE has high hopes for the strategy. It says that over the next three years or so it could bring in …

via General Electric Pursues Pot of Government Stimulus Gold – WSJ.com.

Popular Science just released it’s Best Of What’s New 2009 list with 100 innovations. With a small glimse of the the winners, you will see the ingenuity of the human mind. There is no crisis (ie Health Care) that cannot be solved by unleashing human innovation, which is best driven by the self interested entreprenuer. While innovation is possible with government intervention, the innovation is in spite of the intervention not the result of it. If government encouraged innovation, the Soviet Union would have been the most innovative nation on earth.

Take some time to look at some of the innovations, and then tell me the unleashed innovation of the free human mind can’t solve the government created health care “crisis”.

The standards by which we judge the year’s greatest innovations are simple. The objects don’t necessarily need to be beautiful (although some, like the all-glass TKTS building in Times Square, certainly are). They don’t have to be eco-friendly (although the packaging made of biodegradable fungus certainly is). They don’t even have to be difficult to build (with all due respect to the telescope designed to find Earth-like planets).

They just have to push past what we thought was possible just twelve months ago. And the following 100 innovations have all blown us away, beginning with the headliner, our product of the year: something so simple yet so smart, with the ability to improve countless lives.

via Best Of What’s New 2009 | Popular Science.

Here’s a great post with examples of how the free market is already solving health care issues. Now if we can just get the government out of health care completely, we’d be set.

So while Congress now debates how to control rising healthcare costs and expand access to medical care through government intervention and a public option, the private marketplace has already started many healthcare reforms on its own—providing affordable access at more than 1,000 retail clinics in pharmacies, truck stops, and workplaces around the country; lowering drug costs with prescriptions for $4 or less anywhere in the country; introducing innovative prepaid medical and concierge plans that restore the direct patient-doctor relationship; and covering eight million employees with HSAs.

When it comes to lowering costs and improving quality and service, government enterprises have a miserable track record, and competitive markets have a proven, excellent record. If we want to make healthcare affordable and accessible, we should encourage greater competition and more market-based solutions like the examples above; and less government intervention, not more. Unfortunately, the politicians in Washington have it backwards.

Check ou the full article at Congress to Healthcare Market: Drop Dead — The American, A Magazine of Ideas.

If you read my first post you know capitalism and the free market have nothing to do with greed. Greed is a derogatory term used to undermine self interest. Everyone pursues their own self interest, even the bleeding heart liberal who shouts compassion from the roof tops. True compassion comes from the person who earns and then voluntarily gives up part of their earnings to help another. Compassion is not sacrificing your fellow man for your belief in your own, false altruism. Milton doesn’t argue the word greed, but he pretty much shuts Phil Donahue down.

By way of Mises.org, here is another great examples of the free market delivering a plethora of choices for consumers. Take note of the mention of the government forced recycling programs and why they started them.

Also, image what it would be like if the beverage industry was heavily regulated like health care. Think you’d have all these options. Inversely, if government would get out of health care, you’d see a plethora of options in that industry as well.

As I have said many times, the free market allocates resources based on their highest and best use. It is fine tuned by millions of decisions and transactions of individuals. This is why the market is so efficient, and meets the needs of society. On the other hand, government allocates resources based on politics. It has nothing to do with real needs, other than the need of a politician to get re-elected. The Wall Street Journal has  an article on how the Democrats are trying to please all their members with pay offs in order to get their votes. So how is paying off all members with pork for their state supposed to lower cost?

LAFAYETTE, La. — Democratic Sen. Mary Landrieu says she generally backs President Barack Obama’s health-care overhaul efforts. But she’d like to see a few items in the bill before voting for it, including bigger federal Medicaid payments for her home state of Louisiana, extended health coverage for her pet cause of foster children, and help for teaching hospitals in her state.

While pushing more spending in those areas, Ms. Landrieu also wants the plan to cut the overall amount the nation spends on health care.

via Democrats Pose Health Bill Hurdle – WSJ.com.

In an op-ed in today’s Wall Street Journal, Dr. Pardes, president and CEO of NewYork-Presbyterian Hospital, talks about the coming doctor shortage.

It is important to note that the shortage the country will soon face isn’t just of primary-care physicians. It is true that there aren’t enough primary-care doctors and nurse practitioners. But it is also true that we need more cardiologists, neurologists, general surgeons, pediatric subspecialists, urologists and other highly trained specialists.

Nonetheless, the few ideas to address the coming doctor shortages that were briefly considered in Washington treated the problem merely as a shortfall of primary-care doctors. One idea is to shift unused federal training funds to hospitals that need more positions, but only if those funds are used for primary care. Another is to move primary-care physician training out of hospitals and into federally qualified health centers. A third idea is to take training dollars away from doctors and instead use it to train nurses and other professionals.

None of these ideas would actually increase the number of doctors. At most the first two ideas would increase the number of primary-care doctors at the expense of the number of specialists.

But that’s not likely to happen either. The fundamental reason why medical students are not entering primary care on their own is that they can’t afford it. Medical-school tuition can cost a student as much as $50,000 a year. Some doctors start out owing hundreds of thousands of dollars before they are even able to open a practice. Going to medical school is a little like taking out a mortgage, only without getting a house in return.

Once doctors do start treating patients, they are squeezed between what they earn from government programs and insurance companies on one side and escalating malpractice insurance rates on the other. Meanwhile, specialists can often charge more and pay less in other costs than primary-care doctors. The reality is that many physicians cannot afford to go into primary care.

To address the shortage of doctors and the incentives that compel young doctors to eschew primary care, Congress needs to think about how to increase doctor pay, institute malpractice reform, and provide subsidies to reduce the amount of debt doctors have to take on. Residency caps should also be raised so teaching hospitals can train more doctors. Without these actions new doctors would be foolish to enter primary care, and thankfully our medical schools do not recruit foolish people.

via Herbert Pardes: The Coming Shortage of Doctors – WSJ.com.

Unfortunately, the doctor seems to suffer from what most commentators and policy wonks suffer from. They believe that you can cure an illness by increasing the causes of the illness. It would be like telling an alcoholic to drink a different alcohol to cure his liver disease. The government creates the shortage by manipulating the free market. When the government implements price controls via program reimbursement rates, you end up effecting supply negatively.  The doctor also doesn’t seem to realize that part of the reason education is so expensive is there is a massive amount of government money chasing after education services. The more dollars chasing a good or service, the higher the price rises.

The doctors has many bad assumptions here that undermine his stated goal. He says that the cost of education is extremely high. He compares it to taking out a mortgage without getting a house. This is in my opinion economically silly. Tuition is in investment like any other investment. Actually, if you pick the right major, it can be a very high yielding investment. With the high cost of medical school, one would expect a high return on that investment. In the free market that would be the case. As I’ve already said, tuition has climbed year after year because of all the government money in education. Remove government, and you will lower cost. On top of that, the doctor says government programs squeeze doctors with government reimbursement rates. This alters the return on investment analysis as well. If your investment continues to grow larger because of government, and your return is “squeezed” by government, of course you are going to begin to see shortages. This is what government always does.

Unfortunately, he then argues the government should do more. He says Congress should be looking at ways to raise doctor pay. Are you serious? Government is the reason your pay is decreasing. Get the government out of health care, and you will begin to see salaries increase.  In the free market, if there is a shortage in supply, prices increase. Seeing the increase in price (or pay in this case), competitors enter the market (in this case doctors).

Also, as price is driven up, entrepreneurs will look for alternate solutions to doctors. An real world example of this are the clinics at many local pharmacies.

Government on the other hand will just hold prices against the will of the market. As Austrian economists will tell you, “You can control price or supply, but you can’t control both.” Because government is controlling price, they will drive down supply. This will ultimately lead in the opposite outcome that the doctor claims to want. Even if the government funnels money in to subsidize doctors, they are taking that money from another area of the economy. While they may be able to falsely increase the supply of doctors, they’d end up producing a shortage in another area. This is why we defeated the Soviet Union. Central planning never works. Government always gets it wrong. The free market does this on its own by the decisions of millions of people. While I appreciate the doctors concern, I wish he’d drop his assumption that government can fix this. They have never been able to fix a problem in the economy without creating multiple new and worse problems.

Finally, I finished Robert P. Murphy’s “The Politically Incorrect Guide to Capitalism“.  It’s a small book, but I read too many books at once. The book was great for those average Joes, like me, who love the free market and want to defend it but don’t have the time to get a Ph.D in economics.

Robert explains why capitalism works best, why the government doesn’t, and why most government regulations have the opposite effect it claims to have.

The last section provides the reader with a 12 step program to help them break their government addiction. They are as follows:

1. Admit that government “solutions” are a problem.
2. Have faith that human beings can interact peacefully, and that economic blessings are available to all.
3. Surrender to the fact that certain social ills cannot be eradicated by force or political “will”.
4. Ask yourself, “Do I want to advocate self-sufficiency and voluntary means, or do I want to look to politicians every time I don’t like something?”
5. Survey the past record of governments when it comes to economic “planning” or other alleged improvements.
6. Learn to look for hidden costs of government intervention, rather than the superficial benefits.
7. Understand the role of market prices (read my root causes of health care crisis blog), and why tampering with them interferes with the job they have to perform.
8. Study history. Examine whether governments that violated private property rights stayed out of their citizens’ other affairs.
9. Before condemning a market outcome as unjust, first understand why it occur (read my blog on mortgage crisis).
10. Study other “spontaneous” social institutions, such as language and science, where no one is “in charge” and yet the outcome is quite orderly.
11. When politicians propose a new program, remember how much they said it would cost at the outset. Compare that number to the actual amount spent.
12. Go through the newspaper and discover how government meddling causes or exacerbates the conflict in virtually every story.

As you can see, if you follow Robert’s 12 step program, you will undoubtedly come to the conclusion that the free market handles our societal ills much better than government. These 12 steps are great, but you should read the book first. That way you’ll no why these 12 steps are right. It’s a quick read. Pick one up, and be prepared to defend free market capitalism.

Also, check out Robert’s blog Free Advice for more good info. This economist can even be funny sometimes.

**** Before the FTC cracks down on me. I just finished reading the book, and I paid for the book myself. Robert was nice enough to answer a couple questions I had. That doesn’t count as paid advertising does it? Guess it depends if Big O likes my blog.

In a very long article in the Wall Street Journal today, they are highlighting a supposed genius economist who is developing a new paradigm of thinking of how the markets work and in particular the use of leverage by banks. Unfortunately, in the entire article, the writer and apparently the economist never mentions monetary policy, negative interest rates, or incentives and their effects on behavior. These supposed geniuses start off with the assumption that the market is irrational and just decides to go haywire out of the blue. They completely ignore incentives and how the change in incentives changes behavior. The new paradigm was reached a while ago. Someone tell this genius to grab some books and read up on Austrian economics.

Mr. Geanakoplos is among a small band of academics offering new thinking about those cycles. A varied group ranging from finance specialists to abstract theorists, they are moving to economic center stage after years on the margins. The goal: Fix the models that encapsulate economists’ understanding of the world and serve as policy-making tools at the world’s biggest central banks. It is a task that could require a thorough overhaul of the way those models work.

via Crisis Compels Economists To Reach for New Paradigm – WSJ.com.