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Useless PoliticiansA great deal of people believe that for some strange reason laws (as currently understood) are necessary. Well… they are not. What needs to become crystal clear is that laws promulgated by “political authority” are not only unnecessary but a hindrance. That’s right. They stop the natural progress of free markets while providing nothing in return. The best that laws can ever aspire to achieve is the re-shuffling of goods and services from one owner to the next one. This would be a “zero sum game” (as in get-even) in the best of cases but most of the time it is not. This is so because the costs associated with the process of shifting a property from Tina to Imram requires the intervention of governments to keep it “fair” and within “due diligence” boundaries.

One such recent example is the impending promulgation of the law allowing foreigners (expats) to purchase luxury real estate in Indonesia. Although currently foreigners are allowed to purchase some real estate in said country, the process is convoluted to say the least. Anything dealing with land properties is forbidden to them.

Due to this process, convoluted methods has been created to avoid such laws. Such methods involve “leases” and “retention of titles by residents” and so on. Examples include the Convertible Lease Agreement of keeping your property title in the hands of a Nominee or a Friend. Or the subtleties between the definitions of “legal owner” and “rightful owner”. And what is the end result of all this shuffling? Inefficiency. Gross inefficiency. Capitals that could be used to purchase and develop properties in Indonesia stay away from it. Consequence? The Indonesian real estate market suffers and with it the Indonesian people. Consequence? The Indonesian economy slows down and Indonesian people suffer some more.

But don’t you worry because the Indonesian government is here to help. More specifically, the Coordinating Economic Minister Sofyan Djalil is ready to unleash regulation which will allow expats to buy luxury properties in Indonesia in September. If you are interested in this topic, please go to The Jakarta Post – Indonesia and search for the article “Govt to wrap regulation on foreign property ownership in September: Minister”.

See?

Government action.

They have recognized a problem and are fixing it. Of course, it will take time because you know… yeah… that reason… you know…

According to the minister “We will discuss the technicalities. We will set up a coordination meeting to discuss this new regulation. Hopefully, in the next two to three months, all will be clear”

Of course! Now everything is clear. It takes only three months to set-up a “coordination” meeting. Which leads to the question, why? How is it possible that for a few people to meet it takes three months to accomplish? And remember that this is a “coordination” meeting, which means that they will do absolutely nothing. They will only coordinate which means that more bureaucrats will be involved at the actual task level.

And why would the Indonesians want this marvelous law? Because according to the sage minister, it will have a “positive effect on the economy”. No shit! Really? WOW!!! Such an epiphany must be shared with the world. Quick! Go to the United Nations and make the announcement so that the entire human race may benefit.

Look, this is all political horse manure and it is not even difficult to understand.

As we expressed many times, free capitals flow where the profits are the highest, which means where the needs are the highest. In so doing capitals actually rise the standards of living of all people they interact with. Of course this process is not perfect and here and there undesirable consequences will be had, but again, most of those consequences occur because laws are deeply flawed. Think about it. In a true free market people can only interact with each other’s properties through contracts. No contract means automatic compensation is due. If there is a negative consequence, the most likely scenario is that somebody interacted with somebody else’s property without a contract. For example, let’s assume that Raharhja bought land which is crisscrossed by a river. He dams the river. His neighbor downstream (Bumi) is a farmer and his crops are now dying. What this means is that Raharhaja is automatically liable for all the damages he caused when interacting without a contract with Bumi’s property. Period.

You see? Automated compensation. Automated justice.

But what do we have in the “real world”? We have endless discussions and laws and regulations about “property rights” and “government property rights” and “eminent domain” and “water rights” and so on. Result? Nothing ever gets fixed. Result for Bumi? He will have to sue Raharhja in court, assuming a law that allows him to do so exists. What are his chances of success? Slim to none, even if he could afford to pay for a lawyer.

This new would-be law in Indonesia is yet another band aid that was slapped on to the Indonesian “body of laws”; the band aid being simply a patch to decrease the damage produced by such “body of laws” in the first place.

The process is simple:

  1. Governments create laws
  2. Laws interfere with the free market
  3. The economy underperforms or tanks
  4. Governments “fix” previous laws
  5. The economy improves… but…
  6. The new law creates other unintended consequences which will force the economy to underperform in some other manner down the road.

Presto! Government in action! Politicians acting “for the greater good”. Sounds good to you? Excellent, because right now you are in an all-you-can-eat political bullshit restaurant. Just one thing, watch what you eat because at some point you will get indigestion…and die. So, another bite anyone?

Note: please see the Glossary if you are unfamiliar with certain words.

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