Is Turbulence Additive?

When my fist clenches, crack it open
Before I use it and lose my cool
When I smile, tell me some bad news
Before I laugh and look like a fool

-The Who

I remember my father telling me that when over-the-road truck drivers arrive at their destinations, they don't have to help unload their cargo. For me, this was quite a revelation. I knew at that moment that driving a truck was going to be my destiny. I was six years old.

As I grew up, I became aware of many other careers and where they could take me. Instead of driving through small towns across the country, I could sit comfortably in an office in, say, New York or San Francisco. I could certainly make more money, but I could also have more free time to spend with friends and family.

All of these are personal choices, and to be truthful, today I feel as if I could change careers at any time. This freedom to try and succeed is one of the factors that makes America great. Of the 200,000+ in my industry that have recently lost their jobs, this freedom of labor is critical.

Last week during an interview on CNBC, Treasury Secretary Timothy Geithner expressed the desire to "end this cycle of boom/bust, major financial crises every five years or so." But doesn't getting rid of the boom/bust cycle mean less opportunity and less freedom in the future?

The roller coaster ride that is the economy exists worldwide under all kinds of government policies and has for years. The nirvana of steady, consistent growth is a false condition that economists and politicians have sought throughout centuries. But let's think about the consequences of this new economy, were it a possibility.

First, there could be no risk-taking. How could we allow some to profit from their endeavors while others remain stagnant? This would not be fair to those who take risks that don't pan out. And what of those who try and fail? It will surely be the responsibility of the government (i.e., taxpayers or successful risk-takers) to provide them all the "necessities" of life, otherwise nirvana would not have been achieved. Surely, the boom/bust cycle on an individual scale is equally undesirable.

Second, overall economic activity would decline, though gradually, over time. Instead of averaging 3.3 percent as it did over the last 50 years, GDP growth after inflation would average some small negative number.

The reason for this is clear. If an individual does not get to enjoy the rewards of his or her labor or risk-taking, then he or she will consistently decrease such activity over time. On a mass scale, the economy would deteriorate.

It is my opinion that those who do not recognize this pattern of behavior are mistaken. They believe the risk-takers and diligent workers are hard-wired as such and don't perform such activity for their own good. They believe individuals strive for the common good. This is a very dangerous and naive assumption.

Instead of attempting to rid ourselves of the roller coaster that is the free economy, why not attempt to minimize the dips either in depth or duration?

Key Developments

April's retail sales figures had economists in the garden on their knees pointing binoculars at the ground in search of those elusive "green shoots." Instead, the rocky surface revealed a 0.4 percent decline versus expectations for a flat month. Without considering the auto sector, sales fell 0.5 percent versus expectations of positive 0.2 percent growth.

Microsoft Corp. came to market with its first benchmark bond issuance, selling $3.75 billion 5-, 10- and 30-year corporate notes. The bonds came to market at spreads of 95, 105 and 105 basis points respectively. Microsoft and Wal-Mart Stores Inc. were among companies selling $32.6 billion of debt this week, although bond issuance without government backing totaled $29.4 billion, down 15 percent from $34.7 billion the week before.

Inflationary data for April was a yawner as it mostly came in as expected. The bottom line is that there are few signs of the hyperinflation one might expect given all the stimulus in the economy. When activity does begin to pick up, there will be plenty of incentive for the government to rein in current stimulus in order to fend off high inflation, but that remains in our distant future.