Shughart on Bailouts

Yes, more -- and more and more -- government intrusion, as bail-outs (i.e., money-printing) lead to the very nationalization its proponents hope to avoid -- http://online.wsj.com/article_email/SB120813349...>

And with the inevitable onset of a hyperinflationary depression -- http://www.netcastdaily.com/broadcast/fsn2008-0... -- look for the government to reward itself with the creation of a continental superstate -- http://www.eagleforum.org/column/2008/apr08/08-...>

For what it is worth: HTML Primer #4: Linking Pages

This is made worse with the fact that through banking regulations such as those present in Basel II we are stimulating the creation of fewer and fewer large banks that is going to be more tempting or more needed to bail out.

The trick which allows for as little costly bailouts as possible and that allows the market to move swiftly is keeping our eggs in as many baskets as possible…even if we have to recur to a progressive tax on the size of the banks of the type “the bigger you are…the harder you fall… the more it will hurt…the more you have to set aside in a special bailout fund” tax.

From The Club for Growth's webpage today: S&P Warns of Possible Downgrade of US Debt [bail-out related thoughts]

indeed.

But here's the real question:

Why don't the economists who are actually in charge of such matters ever adhere to such warnings? Do they really believe that they know something beyond this warning that can render it moot?

LowcountryJoe:

Thanks, let me give it a try with the first link I posted above:

WSJ says inflate problems away.

(There are sites I frequent that make this MUCH easier, including bold and italics.)

OK, it worked. So here are the other two links:

The coming hyperinflationary depression.

The coming North American Union.

My SmartPhone does not do the cut and paste thing so well. It'll do it but there's serious drawbacks. Hyperlinks work out so much better for me when I have spare time to peruse the Cafe during the day.

The thing is, it's you free market fundamentalists that make these bailouts possible. You fail to realize that business men are, by and large, not ideological capitalists. Businessmen are, by and large, socialists bent on using the coercive power of the state to garner more profit.

Yet you lionize them as heroes. You have created a situation in which small businesses (including employees who suffer horrible market regulation) get no bailouts, but big business "heroes" do.

Screw big businessmen, and screw you for sticking up for them, too.

The thing is, it's you free market fundamentalists that make these bailouts possible. You fail to realize that business men are, by and large, not ideological capitalists. Businessmen are, by and large, socialists bent on using the coercive power of the state to garner more profit.

Yet you lionize them as heroes. You have created a situation in which small businesses (including employees who suffer horrible market regulation) get no bailouts, but big business "heroes" do.

Screw big businessmen, and screw you for sticking up for them, too.

Jeff,

What are you talking about?


Who lionizes businessmen around here?


Can you cite some examples?

Jeff,

The 'free market fundametalist', a term which I take to mean anyone who understands and promotes the fundamentals of a free market, ought to be under no misconceptions regarding the intentions of businessmen. In fact, I suspect that almost every regular patron of Cafe Hayek has fully absorbed Adam Smith's understanding of businessmen, as men who contribute to the general welfare less by intent, but more as a byproduct of pursuing their selfish interests.

I think that, perhaps, you are mistaking an understable awe and appreciation of big business and its output for a hero worship of the businessmen themselves.

The term 'capitalist' is peculiar. Nobody would think to call someone a 'socialist' who was not a supporter of socialism, yet we frequently call people 'capitalists' despite the fact they do not support capitalism, and are oftentimes opposed to capitalism. A truly Orwellian twist.

Regards,

Lee

"Nobody would think to call someone a 'socialist' who was not a supporter of socialism"

Socialism = non-Libertarianism

Gil, socialism can be interpreted as the idea that the government can do good things by coercing people. So, yes, individualists like libertarians believe that people are best-off when you keep them save from violence, but otherwise leavve people free.

Congratulations Jeff, with this post you remind us of what the looney left is really all about. Stupidity, ignorance, and hate. But that's ok Jeff you don't need to hang around we already have a resident left looney that finds it impossible to read and comprehend what people are saying.

Posted by: Jeff | Apr 15, 2008 9:47:08 PM

muirpidity, such as displayed by muirduck (aka muirgeo) and which was the impetus for creating the term "muirpidity", as Jeff just showed us by posting above, is not unique.

Yet you lionize them as heroes...and screw you for sticking up for them, too.

Jeff,

Just because you posted it twice does not make your statements on "free market fundamentalists" any less of an outright misread/mischaracterization.

Read this blog entry found at the Cafe from just last May. There's probably a handful of blog entries with a similar message to tell.

Before you read it, though, perhaps you should remove your head from the dark place in which you last had it stuffed.

Don Boudreaux “Bailouts encourage more risk-taking”

Since bailouts will probably always hang around it would then seem to be important to look closer at the… risk-taking for what? part.

Not having a hangover (a bank-crisis) might just be the result of not have gone to the party and in that sense we need to stop focusing solely on the hangovers and begin measuring the results of the whole cycle, party and hangover, boom and bust!

For instance the South Korean growth boom that went into a bank crisis in 1997-1998 seems to have been a much more productive cycle for South Korea than what the current boom-bust seems to have been for the United States.

Jeff's post is clearly terrible, but I think buried in there is an interesting point. How much do free-market advocates help businesses in these bailout situations? Do we allow them to play both sides of the argument? They use us to gain greater freedom for risk taking and then switch to the other side when the risks turn south.

I can't think of a single person I might apply the words "free market fundamentalist" to who would support a government bail-out. Generally a "free market" at its most fundamental level is defined by "no government interference". In other words, government does not get involved, whether for good or ill intentions.

Some of the risks inherent in bail outs is spending lots of money to prop up an ailing industry, encouraging excessive risk taking by industries who think they can rely on "free" government insurance, and creating barriers for entry for smaller companies that are not "too big to fail".

Say a car company released a year of cars that all had alternators made in China that worked fine, but that exploded violently after 5 years and no one knew. So 5 years down the road, cars start blowing up, lawsuits start flying, and no one wants the car brand, or any of the other models the company makes. Well, the company employs thousands of people, and being such a large blue chip company, millions of people had tied their retirement savings to them. Does the government bail the company out? If so, bear in mind that the car manufacturer is probably doomed. The reputation of "death machine" is too strong to allow the company to continue, so at best the government can bail them out only to have them die a few years down the road, short a miracle. Is that worth it?

The issue of excessive risk and barriers to entry are related. Anytime the government sets a precedent of getting some company out of trouble, similar companies will start to rely on it. Riskier tactics will start to evolve since where as before the company might lose its shirt, it now relys on the fact the government will save it if it goes too far. At some point the government will either be stuck bailing them out, or leaving them to die. While they should be left to die, they will have a fairly strong arguement for a bail out on the basis that some other company was, and so they deserve to be as well.

On the other hand, smaller companies that are pretty far from "too big to fail" will not be able to rely on the government to cover their excessively risky behavior. They are at an unatural disadvantage compared to the bigger companies simply on the basis of "what size will the government protect?"

Deryl G: They don't. In a "free market" businesses are free to fail just as much as they are free to succeed. That means no special tax benefits, no laws protecting an industry from competition, no sweet heart deals, nothing. Essentially a "company" exists only as the sum of its employee's rights and obligations, not a being of its own under the law.

Hammer,

I'm not sure where the problem is, but I feel like we might be "talking" past each other here.

I'm totally on board if a complete free-market. I'm also not meaning to lay any blame on others that feel this way, although I think maybe my last post made it seem as if I did.

Think about a child who goes to which ever parent he knows will give him what he wants. Business uses free-market advocates to get freedom for risk taking and uses ant-market people to get bailouts.

Are we just being used?

Deryl,




Of course you're being used.

And you can't post this:

"How much do free-market advocates help businesses in these bailout situations? Do we allow them to play both sides of the argument? They use us to gain greater freedom for risk taking and then switch to the other side when the risks turn south."

and not make people wonder about where your head is.

If a person tells you he is for free markets and then supports any restriction of any nature (and a bail-out is clearly a restriction of the free market) then that person has lied to you and you should know it instantly and act accrodingly.

The word free, like the word unique, is not quantifiable. It is, or it is not. I can not be more free than you, if I make that statement then you should know instantly that neither of us are free because I quantified it. We are merely privileged to a different degree, not free.

Now I admit that I am an absolutist about some things, the state of man and the meanings of words are two of those things.

I despise dipolomacy and fraud when discussing the state of man. My freedom is simply too important for me to accept anything less than dead on accuracy in description, I suggest yours should be as well.

I suggest to you, Deryl, that more than anything else in the world, vague and lazy comprehension of words and their meanings result in vague and lazy thinking, which results in conflict and distrust.

Look above at the total idiocy of Jeff's posting again. The pain of his own stupidity must cause his head to hurt constantly. Nothing else explains his post.

Hammer,

The evidence of Aurthur Anderson and ENRON gave us should make it clear to Privileged market advocates that bail-outs should be forgotten and a company in distress allowed to sink quickly into memory, because vast numbers of people were thrown out of work when those two companies went under and only the rare few are still unemployed today, or even a year later. They had marketable skills. I am not saying they suffered for awhile and had to undergo change, but guarantees of outcomes, as we know, are of the socialist way, not the capitalist.

Ooops! Should read.

I am not saying they did not suffer for awhile and had to undergo change, but guarantees of outcomes, as we know, are of the socialist way, not the capitalist.

Do we allow them to play both sides of the argument?

No, we're staying principled and call BS when it is warranted. It is people who do not share our point of view that mistakenly believe that people of our persuasion somehow allowed this to happen. Besides, what is the alternative...not take the side of commerce when the asshats and moonbats talk of more regulation? Nope, we've got to call BS there, too, even though the knife in the back will likely be coming later. Principles are principles and liberty always needs defenders...especially when the defenders are in short supply.

Are we just being used?

Defenders of liberty do not get used. Rather, we get run over roughshod by the paternalists and nanny-stares on a daily basis because they're in the majority. We're neither tools nor fools but loney voices in the wilderness who are doing our best to get the others to appreciate liberty again (or, for the first time in many cases).

It is not possible that someone as cunning and intelligent as Bernanke would really be unaware of "unintended consequences". He KNOWS that by bailing out those who should be punished he is increasing the systemic risk of the whole market. He KNOWS that in the near future more intervention will be necessary. But that is precisely what he wants: more POWER to the government!

Through the slow but steady encroachment of our economic liberties, we will soon all be led around by the government collar. Our only option will be to decide which politician offers us a nicer, plusher, comfier collar.

Where my head is:

I'm in favor of free-markets. I'm against all forms of government intervention in the economy. I also think it is important to constantly question ones assumptions and beliefs. I constantly try to understand why people don't think the way I do and I try to understand their side of it. Often times I don't have answers for their concerns from a free-market perspective. That is due to my failings, but I'm always looking to remedy that.

Jeff,

What has any libertarian ever said here to give validity to any of your allegations?

Let's hear it.

When I read screeds like yours above, I'm actually saddened by how misunderstood we libertarians are. The nonsensical twists of logical and sheer irony that the sheer ignorance of our positions provokes in people like yourself is a disheartening thing to read.

The bigger problem is that you like it that way. You don't strike me as interested in wanting to know what we really think.

You don't strike me as interested in wanting to know what we really think.

Posted by: John V | Apr 16, 2008 10:26:24 AM

I had a college professor who called it being "contentious truth seeker." Most people cannot be described this way. They are content to just live their lives by dogma.

I thought this particular viewpoint was worth importing:

John Stossel, today's Townhall article:

"The lawyer's sophistry continues as he blames corporations for "making the dreams of millions of Americans 'disappear' in the form of home foreclosures and job losses."

This is more nonsense. Yes, some Americans (2 percent of those who had mortgages) suffered foreclosures, and some jobs disappeared (80,000 last month). But the lawyer and other anti-business hysterics in politics and the media never acknowledge that corporate America built those homes in the first place. It was corporate America that made homeowners' dreams possible by giving mortgages to the 98 percent of homeowners who haven't defaulted. It was also corporate America that created 25 million jobs over the past 15 years."

please replace "contentious" with "Conscientious".

thanks.

Deryl,

Pardon me for pulling on my "teacher's hat" but if I may point out you seem to have no convictions about your positions. Is this because of youth, inexperience with the world outside of our American brand of socialism, or just a lack of education in how things really work?

It is good to question your own stance, do a systems check so to speak, to keep yourself anchored in the proper position; but, once you have been educated, actually put the principles into operation and see they work better than anything you have tried before, for God's sake don't let some one come along and cause you confusion by offering as new something you have already tried and now know will fail.

Have the courage of your convictions and be able to look a challenge in the face and say, "No, I tried it and it failed, I know you tried it and it failed, I know our ancestors tried it and they failed, and finally I know that others, around the world,who thought they were smarter than you and I tried it and they failed; and, all that failure did not come because of lack of funding, or love, or devout belief, it came because the idea itself is flawed in such a way that failure is assured.

I don't understand your problem with understanding free and defending it.

vidyohs,

I think there is a great disparity between the image you have of me and how I really am. I suspect this is because I have not done a very good job of expressing my thoughts, and for that I apologize.

I don’t understand why you think that I don’t understand free or that I would not defend it.

Let’s go back to the question I originally asked about Jeff’s post. I felt that the general response to his post was belligerent, which I think he invited by the way he posted. However, I think inside of that post was an issue that non-libertarians may have about the free-market. I wanted a bunch of people who are smarter than me (most of the people that post here) to take a serious look at that question. From their discussion I thought I could learn and I would be in a better position to rebuke those concerns in the future.

I am 100% in favor of free-markets. I’m 100% against intervention in the economy. I am willing fight and die for freedom.

Also, I am not a utilitarian. The fact that the free-market works better than everything else, which I believe is true, is irrelevant to me.

Deryl,

Jeff was not asking questions, he was making stupid statements based upon total ignorance and hurling insults.

This is becoming redundant.

"How much do free-market advocates help businesses in these bailout situations? Do we allow them to play both sides of the argument?

Posted by: Deryl G | Apr 16, 2008 8:40:40 AM"

There is the question or point you saw in Jeff's post, and the only way it can be a question or a point is that you do not understand the words "free market advocate". This has been pointed out to you now several times by myself and others.

"Free market advocates advocate free markets." There it is Deryl. A pretty cut and dried concept, eh? Do you see any regulations, restrictions, or special privileges in the sentence in quotes?

If.....IF, Deryl, some one advocates regulations, restrictions, or privileges for business (any business)he is NOT a free market advocate. Got that?

Now, do you want to discuss Privileged market advocates and try to advance the claim that the participants of this cafe are "privileged market advocates"? That will be an entirely different discussion.

"Also, I am not a utilitarian. The fact that the free-market works better than everything else, which I believe is true, is irrelevant to me.

Posted by: Deryl G | Apr 16, 2008 11:11:03 AM"

Perhaps I begin to see a little better now why you express confusion and hesitancy.

This (that the free-market works better than everything else, which I believe is true, is irrelevant to me.) is quite breath taking. You wouldn't happen to be a certain peditrician from California using a new name, would you?

Jeff was not asking questions, he was making stupid statements based upon total ignorance and hurling insults.

True.

"Free market advocates advocate free markets." There it is Deryl. A pretty cut and dried concept, eh?

Yes.

If.....IF, Deryl, some one advocates regulations, restrictions, or privileges for business (any business)he is NOT a free market advocate. Got that?

Yes.

Now, do you want to discuss Privileged market advocates and try to advance the claim that the participants of this cafe are "privileged market advocates"?

I do not wish to have this discussion. I do not support the claim.

Do you think that it is possible that business will use adovocates of free-markets to advance their agenda, which may or may not be pricipledly free-market?

This (that the free-market works better than everything else, which I believe is true, is irrelevant to me.) is quite breath taking. You wouldn't happen to be a certain peditrician from California using a new name, would you?

Posted by: vidyohs | Apr 16, 2008 11:33:24 AM

Do you think that free-markets cannot be defended from a Natural rights view point?

If it became clear that certain regulations would create better outcomes would you be infavor of them?

"Do you think that free-markets cannot be defended from a Natural rights view point?"

What have I been advancing if not a defense from a natural rights viewpoint?

If it became clear that certain regulations would create better outcomes would you be infavor of them?

Posted by: Deryl G | Apr 16, 2008 11:52:56 AM

If, Deryl, if. If frogs had wings they wouldn't bump their ass when they hop.

You find those certain regulations, explain them, and I'll consider them; but please in the process don't rehash all that has been hashed since the city of Ur. Bring something new to consider. I won't hold my breath.

Vidyohs,

How do you feel about Rothbard? He was a big supporter of free-markets, but he was not a utilitarian. If you have not read For a New Liberty, I would recommend it. It contains an excellent arguement against supporting free-markets via utilitarianism.

You find those certain regulations, explain them, and I'll consider them

I wouldn't consider them. I'm against state interference in the market on the principle that they do not have a right to tell anyone what to do with the fuits of their labor.

Deryl,

There are grey areas in every topic that philosophers (philosopher as a deep-thinking person) dare to enter. Some grey areas are wide and some are narrow. Some philosophers prefer central planning and other prefer individual liberty. Some frequently change their preferences based on the grey area being discussed while others tend to be fixed on principles.

Here at the Cafe, many libertarian philosophers will attempt to stay fixed and principled on those values of liberty because that is our preference. While sometimes 'leaving the reservation' for a grey area, or two, our default position is one of sidling up to liberty. I'm finding your most recent comments (doubting) troubling. And just like another person has mentioned, I'm starting to wonder if you've been genuine with us.

I have never read Rothbard and probably never will except in quotes found in Reason or Liberty magazines. The same can be said of Adam Smith, Freidman, Mises, Hayek, Keynes, Marx and Lennin.

I know enough of what they thought and wrote to know I either agree, disagree, or have misfeelings about all of them; but, none guide my thoughts or actions.

I know enough of life to know that no theory fits everything so I have been and still am prepared to think my way through life.

The fact is, Deryl, everything I know about free markets et. al, is from the process of reverse engineering so to speak. I thus formed beliefs and am reluctant to change them because I know they work, that's why they become beliefs.

I am not disparaging the thought of Rothbard, Mises, Freidman, or Hayek. If you tell me that Rothbard is a supporter of free markets, but not being utilitarian he........ You would lose me at the word but because I am not interested in his or your but(s) concerning free markets.

I know that America has never had free markets and do not at this date, but history does show that on those occasions that restrictions on markets have been the least the more dynamic and prosperous the people, individually and collectively, have been. So I see no reason to compromise in any way in my belief in and desire for free markets. I see the intelligence in the observation, "If markets can be dynamic and properous loosely restricted, what could they become totally free"

Let Rothbard and Deryl et. al. work on theories of why this should all be so. Vidyohs will concentrate on working to make it so.

Interesting discussion. Is it possible that concepts of "Rule of Law" and "regulation" are conflated?

LCJ,

I don't know how to address the issue of my honesty. Obviously making the claim of being honest does not do much of anything. I'll keep posting here and maybe people will be pursuaded.

I would like to state that I have never advocated for any interference in the economy from the government. I may have asked questions of those who advocate for free-markets, but I saw this in more of a devils-advocate role. I used it as a way to better understand the issues. Also, sometimes I don't agree with a persons reasons for advocacy, and I will question those reasons.

An example would be my discussion with Methinks about coporations. A lot of that was centered around my misunderstanding of how corporations work, but even then I was only calling for a removal of state interference and not for an expansion.

Obviously if I've lost all credibility then there won't be much sense in me to continue to post, but I hope that is not the case.

No, Deryl, you have not lost all credibility with me but you have lost some. This is just with me, though. And I am just another faceless person on an Internet forum with an opinion who enjoys -- perhaps too much -- sharing it with others whether they wish to read it or not. Continue to post, then. Because even if I were the self-nominated member of the board police around here, I really could not do anything from keeping you from sharing your views.

Vidyohs,

Would this be a adequate (although not pefect) summary of what your stance is:

The more markets are fee the better they peform, so lets free them up as much as possible.

If so, I have no wish to interefere with that.

I enjoy the theoretical side of freedom. It's just a preference I have. That is what I'm here to discuss. In that discussion I may ask questions that challenge the free-market position, but that is not because I'm anti-market. It is because I find that asking challenging questions is the best way I learn. If someone claims 'A therfore B', even if I agree with the conclusion, I may question A because I don't have as good an understanding of the whole idea as I would like. Getting answers to those questions is how I hope to resolve my problem.

"I enjoy the theoretical side of freedom.

Posted by: Deryl G | Apr 16, 2008 1:04:56 PM"

Perhaps you might just revel and rejoice in the practical side as well?

Lucie....you gots some splaining to do!

Interesting discussion. Is it possible that concepts of "Rule of Law" and "regulation" are conflated?

Posted by: Methinks | Apr 16, 2008 12:45:58 PM

If you please.

Perhaps you might just revel and rejoice in the practical side as well?

Posted by: vidyohs | Apr 16, 2008 1:21:50 PM

While I'm not 100% confident that I know what you mean by this, I think I do 'rejoice in the practical side'.

I marvel at the accomplishments of capitalism and I get frustrated on a regular basis by those in government who are essentially leeches living of the productive members of our country.

I don't ask this to be flippant; could you give me a bit of an explanation of what you mean?

Do not assume that difficulties in communication are all your own. It takes two to communicate.

I once went through a whole list of points with a young woman. After every point I made, she said: "I agree with that."

After about ten points had been agreed with she said: "I agree with everything you say, but I disagree with you."

I just threw my hands up.

Emotions often get in the way. If someone has an emotional investment in a contrary opinion, then it really doesn't matter much what you say. They will have to make a discovery before they can move off of their 'investment'.

Is it possible that concepts of "Rule of Law" and "regulation" are conflated?

Maybe, but I think the larger problem is ignorance and sheer hypocrisy.

I remember briefly covering mercantilism in high school, but it was viewed in a historical perspective only. It's a term entirely absent from the lexicon of the left.

Perhaps we should forthrightly present ourselves as opposed to socialism AND mercantilism.

I think we should also reclaim the 'Liberal' label and call those other folk 'Progressive'.