A Sandcastle Economy

What caused the 2008 economic collapse?  The government would have you believe that it was due to a runaway free market, and the only cure is to increase regulations and add more restrictions.  In fact, this is false.  In the years leading up to the 2008 collapse, America never had a true free market economy.  In fact, our government-backed monetary system and artificial inflation rates caused bad investments and led to many private an public firms losing money.

Building sandcastles has always been a hobby of mine since I was younger.  To build a really good sandcastle, you need to pick a flat location far enough from the water to remain safe, secure your square base using 2x4's, and use only wet sand brought up by shovel from the shore's edge.  You usually dig a moat around the castle to prevent the unauthorized access of dragons.  This also catches any errant water that might be the result of an unnaturally large wave.  The finishing tough is using small pails and hand tools to carve the towers and turrets.  Seems simple enough, right?

Well, let's suppose under a pure free market economy, you were commissioned to build a sandcastle.  You'd follow the prior steps and have a sandcastle that would last quite a while (or until an enthusiastic puppy came along).

But now, imagine a so-called "sandcastle expert" (i.e. the government) told you that building by the water was just fine.  In fact, instead of paying $10 for the flat part of the beach further inland, you'd only have to pay $4 to build closer to the water.

What if this expert didn't offer the land to you, but instead instructed you to build there?  You'd have no choice due to government regulation.  Even though this might be riskier and hinder how big your castle could be, you'd be relegated to this spot.

Now, you start to build your castle, but instead of wood 2x4's to form the frame for the base, you are forced to use Styrofoam?

"But Styrofoam isn't as sturdy," you protest.

"Trees are endangered," the sandcastle expert replies.  "We can't have trees wasted on frivolous endeavors like sandcastles.  We need them to make paper.  We need paper to print thousands and thousands of pages of laws, rules, and regulations.  We use the sap from the trees to create our red tape."

So you use Styrofoam, because you are forced to.

Next, you build your base using the wet sand.  It is imperative to only use quality, wet sand, because it holds better than loose sand.  However, since you are forced to build close to the ocean, you have to use the sand precariously close to your castle (pretend it's a really small beach). This causes instability in the ground surrounding your castle, much like borrowing money against falsely inflated assets causes instability within an economy.

You go to dig your moat, but find that you can only dig 3/4 of the way around because you are too close to the water.  Now, your castle doesn't have as much value because not only is it vulnerable to incoming threats, but using styrofoam vs. wood devalued it as well.

You go to get some pails and hand tools to put the finishing touches on the castle, but have to wait 20 minutes because suddenly, they have become community property, and you must wait for a slower builder three beaches down to finish. 

When the government tries to control anything, it ends in
collapse.

Fine, you go inside, get a sandwich, and come back out 20 minutes later.  You normally pay 5 cents per hour to rent the tools, but today you are forced to pay 10 cents.  The increase, you're told, is because the builder five beaches down spent all his money when the ice cream truck came by.  Now it's the wealthier builders' job to support him.

You work on the castle for three hours, spending 30 cents when you only planned on spending 15 cents.  However, you finish your castle and are pleased.

An hour later, disaster strikes!  A jetskiier came too close to shore causing three foot wave that crashes into your castle.  With no moat to catch the water, the wall of your castle is damaged.  There is no more wet sand to rebuild, so the sandcastle expert comes over and starts frantically throwing dry sand on it in an attempt to patch it up.  This dry sand, while plentiful, is not as good as the wet sand, and even with five times as much sand, the wall is barely getting patched up.

The government does this when it creates money artificially.  The money the government prints is only a temporary solution.  The dry sand can not sustain your sandcastle, as the additional investment of this newly created money can not sustain the economy.

In the end, you are out the $4 you spent for the land and the 30 cents it cost to rent the equipment for three hours.  Your castle has been reduced to a mound of rubble and all of the wet sand and dry sand is mixed together in a lump that's worth almost nothing.

Whose fault was this?  You, the builder, whose hands were tied, or the so-called "sandcastle expert" who basically set the stage for the disaster?

Until our country decreases regulations and limits government involvement, we're going to keep building sandcastles and watching them come crashing down.

Free Market Sandcastle