Free Market Capitalism Vs Crony Capitalism
By: Tom Chatham
Stock market gurus and central bankers are always eager to tell anyone who will listen that they have all the answers and know how to create prosperity. In their eyes, prosperity is something that can be created out of thin air with the proper knowledge which they are privy to. This miracle of economics could also be called something for nothing. The greed of men makes this prospect particularly enticing. All honest people know there is no such thing as something for nothing. Everything in life has a price and that price will be paid at some point by some means or someone. It is this greed that has caused society to want the easy path to prosperity. Why work hard all your life and end up with very little when you can have everything the easy way. This is something the money printers and speculators have learned to capitalize on to get rich themselves the easy way. These people have found a way to use society’s tendencies against them. It is known as crony capitalism.
Free market capitalism involves the production of goods or services that are sold to society at a price the market is willing to pay. Society is the free market and will dictate the rate it is willing to pay based on supply and demand fundamentals. Supply is based on the availability of natural resources needed to produce the goods society wants. Prosperity in a free market can only occur as fast as natural resources can be developed therefore natural resources act as a governor to prevent society from living beyond its means. This acts to prevent inflation and debt from rising too fast. These forces allow society to prosper at a slow steady pace that is sustainable as long as the natural resources are available in sufficient quantities and can be extracted to meet supply. This means excess production can be stored for future use by workers because the excess production is held in hard assets.
Crony capitalism is the ability to pull forward prosperity and utilize the potential value of future production now by means of speculation and money printing. It causes the market to signal a false prosperity caused by the misallocation of resources and false signals indicating increases in available natural resources. Those that are behind the speculation and money printing enable a system that provides them the use of future prosperity today at the detriment of society tomorrow. The false prosperity brought into the market is no longer based on developed natural resources but debt secured by future prosperity that will never occur. As currently available natural resources are used by those utilizing crony capitalism fundamentals, the producers in society that save current production, in the form of paper assets manufactured by the money printers, will one day seek to cash in their saved production for hard assets consisting of natural resources. When the day arrives that no natural resources are available for the conversion of paper assets, the system will cease to function. At that point all paper assets will be destroyed by supply and demand fundamentals that society injects and free markets will seek to rebalance all previous misallocation. This will happen by destruction of paper assets that were never backed by hard assets. The destruction of paper assets will be proportional to the amount of natural resources that do not exist in the markets. This means that those that hold paper assets at this time will lose all of their stored production. Crony capitalism is a way for money printers and speculators to utilize the excess production of workers now while depriving them of their saved production later. To put it simply, crony capitalism is the organized theft of society’s excess production in a way that most do not and will not understand which is why it is so effective.
Governments that engage in money printing and deficit spending are only able to do so because large portions of society save their excess production in paper assets. This allows the government to utilize natural resources that should be allocated to these savers. When paper assets begin to collapse due to lack of hard assets those that are able to convert some of their paper will find prices inflating at an ever increasing rate and they will lose a certain percentage of their saved production as a result. Those that are too late in converting their saved production will lose much or all of it. This is what is meant when people talk of investors heading for the exits.
There is increased talk by some that capitalism has failed but this is misdirection by those that know the truth. Free market capitalism has not been practiced in many years and those that thrive on crony capitalism must blame the ultimate destruction of paper assets on free market capitalism to hide a falsehood sold to the masses that will lose everything they have worked for. The only places you can find true free market capitalism today is in small communities scattered across the nation where barter and precious metals are utilized.
Any savings instruments that are not backed by hard assets are merely promises waiting to be broken. In the near future there will be many broken promises and hopefully society will survive to remember a hard lesson. The worst thing that could happen is that society is manipulated to believe in another system based on lies and promises. Free market capitalism must once again be ingrained into society to prevent future crisis. Unfortunately, many people do not learn from their mistakes until enough pain is incurred and a failure of fiat currency will inflict a massive amount of pain that society will remember for a very long time.
A smart man learns from his mistakes. A genius learns from other peoples mistakes.