Tuesday, June 14, 2011

Overflowing Streams

Streams are overflowing in the Wasatch.

While most of the flooding is natural. Some of the flooding problems are manmade.

Foolishly, hikers like to drag tree trunks across streams to create "bridges" at the places where the trail crosss the stream. In the early Spring, when there is little water in the creek, placing the trunk on top of the stream bed lets people cross without getting their feet wet.

The hikers who build these "bridges" fail to realize that their little bridge will end up damming the creek at high water.

In Neff Canyon, hikers had effectively built a solid dam across the creek at a ford. This dam diverted the creek down the trail and created a horrible mess.

So, I took it upon myself to fix the problem.

My first thought was to try and build up the trail so that it would be higher than the dammed creek. This would be hard because a lot of water was flowing down the trail and would wash away anything I tossed on the trail.

So, I decided to get my own feet wet and walked out in the creek. I discovered that by moving just two rocks, the creek would return to its original path.

Basically, the best way to fix a problem is to remove the impediment that caused the problem.

Personally, I wish our government would take this approach to financial regulation.

Before adding any complex new regulations, they should start by examing the existing regulations. If the problems are caused by existing regulation, the government should start by removing the failed regulation.

For example, short selling is an anti-market tool created by regulators of decades past. These regulators felt that they could govern unruly stocks by selling phantom shares on the market that they would buy back later.

The attempt at regulating stock by selling phantom shares faile. We now know that selling increases overall volatility and dramatically decreases liquidity in economic down cycles.

Regulators are currently spinning in circles trying to create new regulations to handle the problems caused by short selling.

Adding new regulations is foolish.

If we simply looked at short selling we would realize that it is a failed regulatory mechanism created by past generations of regulators. If we removed the regulations that allow short selling we would remove all of the problems caused when this inherently anti-market tool runs amok.

There are many other regulations that appear to be doing more harm than good. Before we rush to create new regulations to fix all of the problems of failed regulations, we should consider the possibility of removing the failed regulations.

Insurance is another case in point. Insurance was created to regulate health care expenses. Insurance, by nature, is a public private partnership. With insurance every single medical transaction is a legal claim.

Insurance is anti-market. It was created by progressives with the expressed goal of progessing the state. Insurance takes trillions of dollars away from the middle class and gives it to a corrupt ruling class.

Insurance has done more to harm the American middle class than any tax or act of the Federal Reserve ... but Republicans so staunchly protect this failed regulatory regime that they won't even let people talk about alternatives.

Because of the inherent inefficiencies of insurance, we are caught in a cycle where each year we get less care for greater costs. Insurance has failed to deliver on its promise for decades causing people to seek new regulations.

Before we add complex new regulations to regulate a failed regulatory tool, we should consider removing this corrupt contrivance and find ways to return to self-funded care.

In conclusion: If you are hiking along a trail and are tempted to pull a log across the creek. Don't do it. You will end up making a dam that floods the creek.

If you are having to fix a creek that is flowing over its bank, it might be easier to remove the impediments restricting its flow than in building a levee.

Finally if you are a regulator; you should consider removing the impediments created by past regulators before adding new layers of regulation.

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