The self cleaning glass walls of regulation are difficult to see because they are imposed by legislators that have no practical experience or innovative visions for or within the industries they regulate. Entrepreneurs and business executives that allow innovation to drive their businesses are driving down unpaved roads like Christopher Columbus sailed unchartered waters. If the Queen of Spain regulated that ships must have 10 crew members per mast without a practical understanding of what is required on a voyage to a destination that no one has been before or even knows exist, then that would have defined the limits of Christopher Columbus’ explorations. The unintended consequence of such regulation would be that Christopher Columbus and his crew would have starved to death on the Santa Marie, which had three masts, but only enough storage capacity to hold food for 25 people. Like the Queen of Spain our government has no practical nautical experience, and thus has no rights or constitutional authority to regulate the innovative capacity of the American spirit.

Over the last two decades the majority of our economic growth has been the result of “partial” deregulation which has created one economic boom – bust cycle after another. The deregulating aspects of the Telecommunications Act of 1996 spawned growth in the telecommunications industry (Identifying Information Services as an unregulated market), while selective federal and state energy deregulation ignited growth within the energy industry, and deregulation coupled (enabling financial holding companies) with regulatory modulation (lowering lending standards) in the financial industry brought forth growth in the financial services industry.  While those opposed to American capitalism will suggest that deregulation caused the current financial crisis they couldn’t be farther from the truth as deregulation created the opportunity for innovation to drive economic growth while the “partial” component of “partial deregulation” brought about unintended consequences.

As beneficiaries of partial deregulation, the telecommunications, energy, and financial industry markets all shared the same boom – bust life cycle.  Deregulation allowed innovation, which drove economic growth, as new products and services were brought to market (Broadband Access, Retail Electricity Competition, and Variable Loan products).  This growth created millions of jobs and added trillions of dollars to the US economy.  In the midst of this growth, professional fund managers and individuals invested billions of dollars into these industries unaware of the unintended consequences of “partial” deregulation.

As the markets grew and continued innovation hit the regulatory glass ceiling of legacy, and newly minted legislation, the productive abilities of American Innovation were encumbered.  These industries were torn between the competing pressures of growth driven investors and the regulatory constraints imposed by Washington legislators.  As desperation, driven by the realization of the regulatory constraint on  growth by innovation set in, the safe executives settled into stagnate business models as consolidation solidified the mature state of the market, while aggressive executives searched for continued growth by abandoning regulatory capped innovation and teetered with the grey science of financial engineering to give the appearance of growth.  The life cycle of these industries went from innovation, to growth, to desperation, to fraud, and finally to relative failure.

Since the boom and bust of these industries were sequential, the contraction of the telecommunications industry was subsidized by the growth of the energy industry whose contraction was subsidized by growth in the financial services industry.  In 2006 when the financial services industry bumped its head against the regulatory glass ceiling there was no further deregulatory measures implemented to create economic growth and subsidize the contraction in the financial services market.  As a result, we are in an economic storm, driving towards the eye where it is seemingly quiet as government intervention creates market distortions and federal spending programs create a false sense of productivity.  As we pass through the eye of the storm and enter the dirty side we will face a destructive bout of hyperinflation accompanied with high unemployment and asset value deflation.

Given the fact that markets are self healing the solution to our economic crisis is to effectuate massive deregulation and allow American innovation and ingenuity to create growth, while the rule of law and American capitalism sort out the current market crisis.

My message is simple “Deregulate everything, protect individual property rights, and use fraud, theft, and antitrust laws to prosecute malicious intent that leads to injury of a person, damage to property, or prohibits competition”.  This will allow the economy to grow through the introduction of new products and services while maintaining the necessary tools to protect consumers from predatory business practices.