A recently released medical study has detailed the widespread overtreatment of childhood fevers. Doctors at Johns Hopkins Children’s Center found that up to 70 percent of parents treat their children for minor fevers of less than 100.4 F degrees. They also found that 53 percent of parents give fever reducing drugs, such as ibuprofen, too frequently; parents even wake their children up in the middle of the night to overdose them.
Of course, most fevers should not be treated at all. Fevers are simply a symptom of the body fighting off an illness. The fever is a sign that the body is working well; treating the fever does not treat the illness. In most cases, treating the fever slows down, rather than enhances, the body’s ability to heal itself. Unfortunately, health illiteracy is widespread in this country; and the urge to treat even trivial fevers is widespread.
As our physical bodies have a built in capacity to heal themselves, so do our economic markets. In the same way that treating a non-life threatening fever will slow down the capacity of our body to heal itself, “treating” the economy will slow down the market’s ability to heal itself.
This Monday, Timothy Geithner, President of the Federal Reserve Bank of New York, spoke before the Economic Club of New York. In his speech, Geithner called for broad and new Fed authority over the financial system. The current crisis, he said, “is going to require significant changes to the way we regulate and supervise financial institutions.”
Geithner’s claim that the Fed needs more power over the financial system makes about as much sense as saying that McNeil (the manufacturer of both Tylenol and Motrin) should increase the safe dosage labels on its products in order to accommodate indiscriminate consumers.
Mish Shedlock, writing in his excellent blog Mish’s Global Economic Trend Analysis, has been a very knowledgeable observer of the economic distortions caused by the Fed. This is Mish’s “Fed Uncertainty Principle, Corollary Number Two”:
The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.
Where Mish predicts that the Fed will attempt “a big power grab,” I would add, “and they will enjoy widespread public support for doing so.” Why do I predict widespread public support? The general public is simply using a different lens than Mish. Einstein wrote: “Whether you can observe a thing or not depends on the theory which you use. It is the theory which decides what can be observed.”
We live in an economic environment where the stock market is falling, the dollar is falling, food prices and energy prices are rising, and unemployment is rising. At the same time, we are told we live in a capitalist free-market economy. Sadly then, the bulk of the population blames free-markets for their hardships. No wonder, they are told incessantly by the media and the politicians that their misery is evidence that free-markets are not working—they are told that their misery is evidence that government needs to take a stronger hand.
The truth is that our current economic troubles provide evidence that free-markets are working. Think of it this way. If you drink excessive alcohol and then throw up, isn’t that evidence that your body is working? If your mind is focused on angry, unforgiving thoughts, would you be surprised if you experienced sharp stomach pains or chest pains? Aren’t those pains signals that you need to examine your how you are living your life? If the Fed distorts interest rates and thus creates artificial bubbles, what does the corrective aftermath signal? Is it evidence that markets are working? Of course, the answer is yes—the bursting of our economic bubbles is evidence that markets are working. And just as overtreating a fever creates delays the return of health, overtreating an economy delays the return of prosperity.
That the public should be confused is indicative of something larger than just economic illiteracy. As with parents overdosing their children with Motrin and Tylenol, it is evidence that the public wishes for magical solutions to their discomforts. Rather than increase their own understanding of basic principles of health or the basic principles of economics, they ask “why don’t they do something about it?” In the case of health issues, the drug manufactures will be only too happy to exploit ignorance and sell another pill. In the case of economic problems, the Fed or the politicians are only too happy to exploit ignorance and provide solutions that will increase their powers.