Protecting only one participant in the credit marketplace does not secure a bright future for the marketplace. It will only invite more opaque subversion.
Yesterday, Barack Obama spoke at UNC in Chapel Hill, NC where he highlighted the importance of higher education and referred to the new Consumer Financial Protection Bureau’s (CFPB) role in protecting consumers from deceptive, abusive and predatory loan products in the financial marketplace, with budding students cheering him on.
We can do better
Barack’s work in softening the blow of a $15.6 trillion in spending spree raked up by the legislation managed by previous administrations exacerbated by a spiraling down of the economy should be commended. But many of the new initiatives he signed off on that attempt to artificially correct, optimize, or prevent specific economic outcomes (we refer to as downstream optimizations) appease the public. They have them believe those measures will solve our economic malaise, have a short political shelf life, and are prone to partisan repeal as quickly as a CEO changing the logo of his company shortly after taking office. If only to mark a partisan territory in history.
Separation of politics and state
But politics has no place in the development of an economic master plan, just because the right economic master plan is designed to build and serve the dynamic meritocracy of all of our ideals and beliefs. Partisan division occurs because short of the aforementioned economic master plan, everyone thinks their unique implementation and interpretation supported by quick scoring downstream corrections will magically erase years of blatant macroeconomic ignorance.
Downstream economic optimizations like The American Jobs Act, Startup America, and the Consumer Financial Protection Bureau’s initiatives are comfortably floating in midair of public (open microphone: election) karma, blissfully ignoring that detached from a viable economic master plan those corrections will simply spawn a more fragmented and more opaque composition of new economic fallacies, circumvention, and fraud.
Marketplace over unilateral protection
So beyond being the wrong economic medicine, applied independently and unilaterally, consumer protection is also in violation of free-market principles. Because in the protection of marketplaces that adhere to free-market principles our forefathers envisioned for us, both demand and supply should enjoy similar and balanced measures that maintain the evolution of a self-regulating dynamic meritocracy. Meaning, one ought not to stimulate or regulate one side of the economic marketplace, but apply transparency so the fallacies on either side can swiftly be dealt with by the marketplace itself.
The role of government is to enforce the compliance to free-market principles in every aspect of the trade. To ensure that those who lend money are just as protected as those who borrow. That the success of those “marriages” is just as transparent as to their failures, to all marketplace participants (buy and sell). The only meaningful form of consumer protection is the one offered by a free-market.
The American Dream
The pursuit of the American Dream will never materialize if we keep violating the founding vision and economic principles our most beloved forefathers bestowed upon us. We need to stop deploying a plethora of unilateral regulations favored by flip-flopping party lines meant to achieve a desired artificially – yet temporal – political-economic outcome, that then quickly upon implementation or change of government control requires a new host of perpetual corrections. We need to look for answers upstream.
The American Dream can only be achieved if we deploy a level playing field, in which the merit of those who establish viable marketplace marriages thrives, and those who abuse the marketplace by virtue of transparency get ignored. It may surprise you that the majority of our financial systems today violate free-market principles (a topic I substantiate on my blogs further), and thus the reason why our economy buckles under the obesity of finance eleven times the size of production.
A real meritocracy, for once
The American Dream starts with a new responsibility the President has to take on. And that is to ensure bilateral compliance of our economic and financial systems to free-market principles that can then, with the great resources we have at our disposal, act as the petri-dish for a bright new meritocracy, in which all of us have not a dream but the ability to thrive.
Say no thanks to consumer protection if you demand better. We need to help our President develop a new economic master plan and compass, and short of a viable product by his traditional economists, we as entrepreneurs – used to thinking upstream – grabbed the bull by the horns and are building one.