by Steve Finefrock – [scriptwriter]

Only twice that I recall has my father asked my opinion on a serious matter, both in recent days, one a family concern, the other a national concern: Why are we in this mess? My answer was puny, hesitant, dubious – it caught me off-guard. Time has passed, and the answer is clear, if not so simple, for it is before us every day, how this financial mess has arisen. “There’s nothing new under the sun” asserts wise forebears.

One of the wisest was Milton Friedman, once accosted by a gotcha question by an ‘intrepid’ reporter – aren’t they always intrepid and gotcha-minded! – with the query, Can you sum up your life’s work and viewpoint in a paragraph or two. Milton immediately gave the answer in a single sentence, shocking the reporter, who thought he’d sandbagged the Nobel laureate. Reporters love to toss a startling question at a Great Person: it makes the reporter shine when the Great Person falters.

Not Milton: All my work is intended to prove There Is No Free Lunch. Or in more streetish vernacular, There Ain’t No Such Thing As A Free Lunch, its acronym of TANSTAAFL a first economic lesson I learned in the 70s, from a liberal political science professor of all places. Not many liberals appreciate this lesson, if it interferes with new Grand And Glorious Social Schemes. Certainly not Paul Krugman and Barack Obama The One [BOTO] and the legions who are slurping the Kool-Aid of new political dominance.

We got here because so many, on the left [mostly] and sadly on the right [to some degree] thought there would be endless leveraging, endless buying, endless taxing, endless spending and of course endless social scheming by the social engineers. Barney Frank contributed with his insistence, along with fellers beside him in Congress, that easy mortgages be encouraged for poor risks – most such risks were ‘overrepresented’ by blacks and other minorities, so the fix was in, courtesy of Fannie Mae. Politics overriding good sense, since that good sense would ‘discriminate’ against a victim class.

So, low mortgage rates, easy credit, falsified credit ratings of mortgage applicants, manipulated evaluation of mortgage bundling before being sold to distant mortgage conglomerates – it all added up to a bubble, identified a decade ago by Alan Greenspan’s declaration that there was a rising “irrational exuberance” in the stock market during the dot-com run up.

Then came the real estate scheming – with signs that rang the Déjà Vu Bell in any intelligent mental belfry. Who spoke up? Who noted that irrational exuberance might lead to some problems? Who studied history of such bubbles, going back to the famous 16th century Dutch Tulip market, and so many repeats of economic history in the centuries since?

Everyone knew, no one shouted “stop the tulips” – for it seemed so easy, so pleasant, so never-ending, everlasting like that infinite candy by Willy Wonka. Tons of commentary noted rising credit load on consumers, that our savings rate had gone from 12% in 1982 to zero a decade later. The psychology of mob behavior was known, and not taken into account. Not Me, said the investors who were not investing for a return-on-investment, but a quick-buck turnaround in the market, started in mid-90s ‘day trader’ maniacs with laptops at home, supported by a leveraged brokerage account.

Clicks of mouses traded thousands of shares, multiplied by thousands of mouses, all around the world, profiting a cent or two per share, but done quickly and putting a ‘profit’ into the account in milliseconds. The fast-as-light machinery brought stock trading to the ordinary folks, even more so than the erroneous report of ordinary folks trading stocks in the late 20s [well less than 5% of Americans were in the market then; today it’s over half with some stock or bond investment].

Then, the Free Lunch had to be paid for – stocks withered, as real estate bubbles destroyed property values. And everyone was SHOCKED, SHOCKED that economic laws were being invoked. Along the way, the ‘wealth effect’ made folks think that equity justified more credit card bingeing – and sales in retail boomed, imports bounced, fuel consumption for all those cargo containers riding across the Pacific waves pushed on already tight petro prices. The Federal Reserve kept the money supply booming, in part to help overseas – much as was done to help Europe’s recovery after WW-One, keeping money cheap to help our allies’ war-ravaged economy, but also pumping the bubble here.

Déjà Vu, anyone!

Milton Friedman shocked the reporter who thought the Great Man would stumble – but Friedman’s millions of words on paper and in speeches and interviews all strove, desperately and valiantly, to teach TANSTAAFL to the millions. Maybe the result was a mere few thousands – who took it to heart, and soul, and in daily assumptions. If something seems too good to be true, then it probably is too good to be true.

Into this mix is a basic definition of politics: The process by which we decide WHO GETS WHAT, WHO PAYS and WHO DECIDES both those activities. If I get free stuff via the government, I am less careful than if spending my own money. Friedman also explained the four ways, the only four ways, to spend money: Spend Your Money on Yourself; Spend Your Money on Someone Else; Spend Someone Else’s Money on Yourself; Spend Someone Else’s Money on Someone Else.

The first spending scenario makes you really, really, really careful to get the best mix of low price and sufficient quantity, since it’s your money, and you’re the one who has to live with the purchase. The last scheme is the burrocrat: spending tax dollars on strangers, albeit with a noble purpose perhaps, but still nowhere near as careful as that same burrocrat – or politician – is with his own ducats.

Sarah Palin had a brief moment of humor, speaking of politicians’ addiction to ‘opium’ – the phonetic for O-P-M: Other Peoples’ Money. She grasped it, if the media ridiculed her for it, that too many folks – market personnel, political schemers, bankers, burrocrats, insurance conglomerates, etc., etc., etc. -–are addicted to O-P-M. Including BOTO, and Barney Frank, and Nancy Pelosi. And sadly this past decade, quite a few Republicans as well, seeking re-election with OPM, playing the game in ignorance of TANSTAAFL, as the tax money seemed endless, as a way to get re-elected with earmarks and pork by the truckload.

We’re here for the same reasons those Dutch tulip speculators got burned: too much easy stuff, too much OPM, not enough belief and operational accordance with TANSTAAFL. We chose ‘leaders’ to make policy who loved choosing who pays – never themselves – and who benefits – always their own clan – and making sure they are the ones who decide both policy choices.

Politicians have joked in Washington, D.C., for decades that the tax committee members’ philosophy is, Don’t Tax Me, Don’t Tax Thee, Tax That Feller Behind That There Tree. Now, the feller behind the tree is withdrawing his capital, as the system has stung him, and is determined, courtesy of BOTO, to tax him more and more, while taxing ‘me’ less and less. Already the top 5% of taxpayers bear the majority of taxes. How much more must that guy behind that tree cough up to the IRS, before he quits the game? Will BOTO limit the tax load of that ‘nickel’ of taxpayers to ‘only’ 65%? Or ‘only’ 75% of all taxes paid?

It seems like OPM, disregarding TANSTAAFL, so much fun, spending other folks’ money. Now, the money is drying up, those with a few loose bucks are withdrawing from the scheme, knowing it is their money that is OPM, and tired of BOTO’s band of brothers insisting on even greater addictions. Now, Milton Friedman is dead, and the latest winner of the Nobel Prize for Economics is lefty Paul Krugman – he is yet to grasp Milton’s singular lifelong lesson. There ain’t no TANSTAAFL in his philosophy, or in BOTO’s.

The critical feature of any monetary or tax system is trust, faith, belief that the system won’t rip off the citizen. If doubt creeps into folks’ minds, they do a ‘run’ on the bank – these days with a mouse click rather than physically standing in line [known as ‘meatspace’ versus virtual space]. If they find their money is safe, they suddenly don’t worry any more. But if the system keeps scamming them, and players from Barney Frank to AIG and the Big Three auto dudes play the same ole game, doubt will grow like kudzu, smothering the system, making it cumbersome to restart the engine.

At present, the strength of the economy is quite good – Paul Krugman noted it recently in writing, and a month ago also on PBS, ratifying McCain’s scorned note that the economy’s foundation was solid. Not that Krugman, or his BOTO legions, will admit that McCain was right – you’ll see ‘em run naked over glass before admitting Mac was right on anything.

But it’s true nonetheless. Too much OPM, too little cognizance of TANSTAAFL, far too many pointing to the guy behind the tree – yet, it all has not seriously damaged our economic system. The question is: Has a lesson been learned?

Nope. This has happened about every 80 years in our history, and sometimes more frequently – my home state of Oklahoma entered the union in 1907, amidst what was feared that year would be the worst, and thus the Great Depression. A frat brother, J.P. Morgan acted as a one-man Federal Reserve and saved the nation with an infusion of liquidity, showing the way for the real Fed when it was created a decade later.

For my dad, the answer is not complete above, but it hints at what went wrong: old verities were ignored, and ridiculed, dismissed and tossed aside. Mostly by liberals – 90% of the blame falls on them – but also by too many conservatives, who are supposed to be the ‘governor’ of this political machine, the restraining device which keeps the machinery from spinning out of control.

Too many liberals ignoring TANSTAAFL and loving OPM, and too few governors doing their job. This we will survive – at great cost, but less than feared. The cost will be our lost memory – as Merlin wearily observed in “Excalibur”:

“For it is the doom of men that they forget.”


copyright 2008 Steve Finefrock

Finefrock is founder of Hollywood Forum, a speaker-bureau and panel-discussion vehicle to “Bring the Potomac to the Palisades” on issues that overlap politics and culture with the Hollywood film-TV influence on such national concerns. His scripts have addressed politics [including a TV series pilot/bible package about state political combat, called “A State of the Union”], hazardous materials [from twelve years in emergency management, including six years managing FEMA’s Superfund curriculum for hazmat], terrorism, equestrian reincarnation, serial murderer killing journalists in the nation’s capitol, and fantasy about time-wasters. Finefrock is proprietor of PhoneBooth: The Smallest Space in Hollywood…

One Response to “T.A.N.S.T.A.A.F.L. – CUBED!”

  1. Doug Fechter Says:

    Nice column. I’m a long-time disciple of Milton Friedman and you captured his teachings well. It seems to me like common sense, but many people won’t accept something that doesn’t lead to their desired outcomes. They confuse ‘ends’ and ‘means.’

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