Wednesday, February 25, 2009

Roots of Freedom and Economic Growth

A few days ago, I wrote a blog entry about ACORN, and I mentioned property rights and the rule of law. I was talking about how these things are fundamental to our freedoms, and we are at risk of losing our freedom if Obama gets many of his policies enacted. If, for instance, the government is allowed to force mortgage companies to accept changes to interest rates or, worse, the total amount of the loan in their mortgage contracts, then we lose freedom. More importantly, we lose faith in our ability to enter into a contract and know that the contract will be enforced in court. If you are a home builder, or a mortgage lender, and you're worried that the government can "declare" an emergency and change the terms of your mortgage contracts, you'll probably raise interest rates for all. Why? Well, that extra profit from the 92% of folks who pay their mortgages will cover the loses in the 8% that you are forced to renegotiate. This leads to higher prices for EVERYONE! This is so fundamentally logical (and true) that the fact that the Obama administration is talking about doing these things is scaring the crap out of the markets.

I watched the video below from the Cato Institute tonight (I promise I didn't watch it before I wrote my original blog post! I have an economics degree, so we studied this -- yes, even 30 years ago). This is one of the best 6 minutes you'll spend to learn where the fundamental support for our economy lies. Property rights, sound money, and the rule of law. Please crack a beer and watch.

I'm a big fan of The Cato Institute, and kudos to them for this video, and others.