Demolition Derby Time

We do not use the term “monetary central planning” lightly. It has distinct connotations such as heavy-handed, dominating and compelling.

When it comes to economics, of course, heavy-handed command and control is what socialist states do, whether it’s the pure communist variety, such as Xi Jinping’s new edict that the People’s Bank of China shall heed strictly to the CCP’s direction, or the more muffled version, which pertains in the US and elsewhere in the Keynesian west.

In that respect, a WSJ headline purportedly explaining today’s swoon in stock prices was deeply instructive. To wit, on a free market operating with honest money, an announcement that manufacturing activity was stronger than anticipated would be cause stock prices to rise, not fall.

But there is no free market on Wall Street and the state’s money emitted by the Fed is the very opposite of “honest”.

So, yes, good news was yet again bad news because it told speculators that the state’s central banking branch would continue to push interest rates higher in order to throttle-back the main street economy.

Stocks fell after wavering earlier, following manufacturing data for February that came in slightly higher than expected.

Needless to say, there is a problem when the heart of capitalism—money and capital markets—is dominated by the state and the foibles of the apparatchiks who run it. What you get is not productive investment and mobilization of capital to its highest and best uses, but rampant speculation and the dissipation of society’s savings pool in waste and malinvestment.

Since the year 2000, for instance, the Fed’s balance sheet, the stock market and total debt outstanding have risen by 14.0X, 4.5X and 3.2X, respectively. By contrast, real private net investment is actually 10% below its turn of the century level.

If we were an observer from Mars, we’d be included to say that someone is trying to take the capital out of capitalism. After all, how in the world can anyone except a strong, growing economy after two straight decades of somnolent net investment?.