Lazy Fare

If we need or not a New Deal that is one issue but if we were ever to construe it, please do not build it on the myth of us having had a free financial market.

We have not have had a free market! You do not have a free market if you direction the capital flows, using minimum capital requirements for banks based on vaguely defined risks and empowering credit rating agencies to show them the way through the mined fields, all based on the bedroom fantasy of the financial regulators of being able to avoid bank defaults.

They conceive the market as akin to a big steam driven machine with a few key control valves that they can adjust to spew out whatever results they desire.

This "Fed let the money supply contract" meme is a totally distorted, one sided view.

In their view, the key cause of the Depression was the expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom. In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame.

In opinion, Hayek, writing for the Austrian Institute of Economic Research Report in February 1929[15] predicted the economic downturn, stating that "the boom will collapse within the next few months."

Ludwig von Mises also expected this financial catastrophe, and is quoted as stating "A great crash is coming, and I don't want my name in any way connected with it,"[16] when he turned down an important job at the Kreditanstalt Bank in early 1929.

One reason for the monetary inflation was to help Great Britain, which, in the 1920s, was struggling with its plans to return to the gold standard at pre-war (World War I) parity. Returning to the gold standard at this rate meant that the British economy was facing deflationary pressure.[17] According to Rothbard, the lack of price flexibility in Britain meant that unemployment shot up, and the American government was asked to help. The United States was receiving a net inflow of gold, and inflated further in order to help Britain return to the gold standard. Montagu Norman, head of the Bank of England, had an especially good relationship with Benjamin Strong, the de facto head of the Federal Reserve. Norman pressured the heads of the central banks of France and Germany to inflate as well, but unlike Strong, they refused.[17] Rothbard says American inflation was meant to allow Britain to inflate as well, because under the gold standard, Britain could not inflate on its own.

In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable.

The artificial interference in the economy was a disaster prior to the Depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. According to Rothbard, government intervention delayed the market's adjustment and made the road to complete recovery more difficult.[18]

Furthermore, Rothbard criticizes Milton Friedman's assertion that the central bank failed to inflate the supply of money. Rothbard asserts that the Federal Reserve bought $1.1 billion of government securities from February to July 1932, raising its total holding to $1.8 billion. Total bank reserves rose by only $212 million, but Rothbard argues that this was because the American populace lost faith in the banking system and began hoarding more cash, a factor quite beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and this, Rothbard argues, was the cause of the Federal Reserve's inability to inflate

We've just seen free markets self implode. The Free-Marketeers asked for and got the ability to make products like CDO's in an unregulated opaque fashion and they destroyed the economy with them with no assistance from the government. Indeed they got rich and will remain rich. They truly know what they are doing and they are happy to have faithful inculcated followers covering there tracks.

The wealthiest 400 people in this country increased their wealth by $650 billion dollars (they now own a combined $1.5 trillion dollars) since Bush came into office and since Phil Gramm snuck in the The Commodity Futures Modernization Act of 2000 in the middle of the night.

Now they want $700 billion to pay for the lost money they never really earned.

There is too much documentation and too many smart people paying attention for people to buy the BS arguments that this Great Depression and the last one were caused by government interference or regulation.

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." – Copy to Clipboard

– John Maynard Keynes

Astounding indeed. Y'all are fighting a losing battle trying to defend a bankrupt ideology based on no supporting evidence and tons to the contrary.

They conceive the market as akin to a big steam driven machine with a few key control valves that they can adjust to spew out whatever results they desire.

Posted by: Sam Grove

And you conceive The Market as an all knowing God to be praised and not questioned.

Oilshock,

I am sympathetic to your/ Mises views on the problems with the money supply. Certainly I'm no expert but the arguments I've heard against the current system of debt driven money supply seem to make sense and to in part explain some of our current problems.

I am indeed listening to the Mises lecture and Podcast you directed me to. I'm not convinced but the views do seem to have at least some internal consistency.

muirgeo says “We've just seen free markets self implode. The Free-Marketeers asked for and got the ability to make products like CDO's in an unregulated opaque fashion and they destroyed the economy with them with no assistance from the government.The Free-Marketeers asked for and got the ability to make products like CDO's in an unregulated opaque fashion and they destroyed the economy with them with no assistance from the government."

What? With no assistance from the Government? And then what do you call it when the regulators (governments) played out their bedroom fantasy of a world with no bank defaults, and started to channel the capital flows of the world by imposing minimum capital requirements for banks based on vaguely defined risks and empowered the credit rating agencies as the expert guides?

Do you think the credit rating agencies could have caused all damage they did without the full support of the government? Of course not!

I am in no way defending the market operators, there was and is most certainly a lot of unethical behavior, but please save us from the utter nonsense that the markets were or are free. They are still guided by the credit rating agencies!

Out of curiosity, how would you determine whether a national economy was a bona fide free market economy? For example, most European nations are clearly more regulated that the US and a few nations like Hong Kong are clearly more free. And you could attach numbers, e.g. percent of GDP consumed by the government. (I'm skeptical of such numbers because the government could easily regulate an economy without consuming much simply by avoiding social and defense spending.)

But what's the qualitative mark that delineates a free market economy from a welfare state?

JUST WHAT IN THE HELL ARE YOU GUYS BASING YOUR BELIEFS ON? WHERE DOES YOUR FAITH COME FROM? Please some empiricism would be nice because otherwise it simple looks like religion to me.
The science of archaeology (via grave goods) has provided us with much information that markets existed long before government. They provided folk near and far long before people could even speak to each other. However, I need not offer evidence as to the effectiveness of markets. Let us instead turn ourselves to the effectiveness of governments. They have proved remarkably capable of slaughtering large numbers of people. Our faith comes not from what we are (we often do not have a clue), but we are damned well sure what we are not. We despise the state (a necessary evil perhaps), but an evil non-the-less. If you wish empirical evidence than look no further than the millions murdered by the good will of those building utopia. That’s what I love about statists, they will create hell on Earth and sleep well at night thinking that they are doing it for the greater good. I only hope that there is a Hell so that those who produce misery with their good intentions suffer the consequences of their ignorance.

muirgeo says:

There is too much documentation and too many smart people paying attention for people to buy the BS arguments that this Great Depression and the last one were caused by government interference or regulation.

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." – Copy to Clipboard

– John Maynard Keynes

Enough of this utter nonsense. The New Deal did not start the Great Depression it only helped to extend and deepen the depression.

As for your comment that capitalists are wicked, what about the meddling government bureaucrat that pushes a ridiculous ideology to give everyone homes regardless of their ability to pay for those homes?

The bozos that created and pushed the CRA are in fact building grass root organizations to push a mindless socialist agenda to redistribute wealth and in the process build an army of sycophants.

Wicked, socialistic? No, just altruistic…

Who believes the manure?

It may have been Vidyohs that made the statement some time ago that the country should be split into two: one for those that value personal responsibility and freedom and the other for those that want to live their lives in a nanny state where big brother does the thinking and guides the Stepford citizenry through life.

I will ask you since for 2 years now no one supporting the libertarian ideology here has been able to even attempt to answer my question.
- muirgeo

I cannot possible express in mere words how hysterically roll-on-the-floor funny that is. I just wanted to extract it in case anyone missed it.

No one has even attempted to explain it him! Not even once! It's not that we tried & failed, but that we never even tried! We haven't even been able to try!

Too funny. Honestly.

Hey George. Maybe once, just once, just one time, you could tell us which political party you think is better at running the economy. Come on. Never once have you been able to even attempt to tell us if you think either particular party has a better track record.

So tell us: is it the Republicans or the Democrats? For 2 years now you have refused to even attempt to give us your opinion on this issue.

I can't even guess what your answer would be, since you never even tried to tell us! Ever!

Point to the time or place in history where your idea of a free market existed such that it gives you confidence in your current belief that such a system could work.

But George, you keep insisting that the Great Depresson was caused by the Laissez Faire policies of Hoover.

And you conceive The Market as an all knowing God to be praised and not questioned.

I have a had time believing you really are that dumb. I think you are projecting.

"The market" doesn't know anything. Is that what you need to know?

Come on, why don't you tell us what you think "the market" is.

Your faith in "democracy", however is rather, uh, what is it based on?
You define democracy as a government that is run by the people.

When has that ever occurred?
Who, exactly, are "the people"?
Is it people that agree with you or is it those others?

Keynes: a jackass.

I cannot possible express in mere words how hysterically roll-on-the-floor funny that is. I just wanted to extract it in case anyone missed it.

Posted by: Hans Luftner

Now if you are done with your fake ROFL simply give me some years and a country. That's all I ask.

I do remember some wing-nut here telling me how the 19th century was lazy fare and productive and referenced some data which he misinterpreted as supporting his claim and which I used to beat him over the head to show how magnificently wrong his point and his calculations were.

But other then that, nothing…. so come on Hans … pick yourself off the floor and state some years and a country for which we should model Libertopia after.

You can do this….. I'll destroy your Fairy Tale but you can do it…

You''re trying real hard, I'll grant you that.

I am glad muirgeo is back; I think his posts are interesting and sometimes give me something to think about. Having said that, I feel that he gives government too much credit and doesn't give enough attention to many of the disasters brought on by concentrated government power.

Muirgeo, I am sorry if others haven't tried to explain what the free-market is. According to Murray Rothbard, a libertarian philosopers and economist:

"The free-market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services. Thus, when I buy a newspaper from a newsdealer for fifty cents, the newsdealer and I exchange two commodities: I give up fifty cents, and the newsdealer gives up the newspaper. Or if I work for a corporation, I exchange my labor services, in a mutually agreed way, for a monetary salary; here the corporation is represented by a manager (an agent) with the authority to hire.

Both parties undertake the exchange because each expects to gain from it. Also, each will repeat the exchange next time (or refuse to) because his expectation has proved correct (or incorrect) in the recent past. Trade, or exchange, is engaged in precisely because both parties benefit; if they did not expect to gain, they would not agree to the exchange."

I hope this is a satisfactory definition of a free-market. I guess the primary way to tell if a given transaction is part of the free-market is to check if there is coercion on the part of one or more of the actors engaging in the process. If there is, then it is not part of the free-market. If none of the parties is coerced, then it can be said to be part of the free-market.

I hope that help. Let me know if you need more clarification.

Also Muirgeo, while we don't have any example of Libertopia we have enough examples of attempted Statist Utopias and we all know they are not pretty.

muirgeo says:

"And since you'd have no environmental laws or standards it would be great to store our nuclear wast in one of your neighbors back yards. I'd also bet that you guys would come up with your own sort of cheap but good version of Libertopian Pure Grain alcohol drink so that would be good too."

Thank you for providing a great example of a false analogy:

The side that chooses personal responsibility and freedom also chooses to destroy the environment by storing nuclear waste without regard for safety.

This type of thinking is dishonest and your statement is one that a high school debate team member could debunk.

I will ask you since for 2 years now no one supporting the libertarian ideology here has been able to even attempt to answer my question.
- muirgeo

Muirgeo must be either lying or is very ignorant. Muirgeo, in my opinion, left this website, and with the lack of attention given to him in his daily life, had to come back.

Answer: 99% the credit rating agencies with their AAAs

Question: Who empowered the credit rating agencies, the governments or the markets?

Answer: 100% percent the governments.

I rest my case.
Posted by: Per Kurowski

I think you are right that the credit rating agencies are a big part of this collapse. BUT they are privately run businesses as far as I know. I know of no regulation or change of regulation that would cause them to inflate their ratings. They are an example for my side. It would be like saying lets privatize what the FDA does and let private companies screen our drugs for efficacy and safety.

Just re-reading Atlas Shrugged.

Posted by: Randy

Whenever your faith is being tested re-read the bible.

Muirgeo,

I actually had the same thought. Its been a few years, and I'm taking the time to read it more carefully than usual as I've been flying a lot and have plenty of time to kill. I am amazed at Ayn Rand's insight, and how applicable it is to the current state of affairs. Who is John Galt?

Yes Babinich, it was me and more than ever I yearn for that simple solution. Not that seeing starving fools is my real goal but I do have to admit that looking across the border at the silly bastards that think "they" have the answers to the consistent failures of socialism and watch them sink steadily in financial vitality and quality of life to the point that they make a choice of coming to the border and begging for some of our prosperity or thinking they could out gun us and invade would indeed be interesting.

muirduck thank you for muirpidity #25. Damn, if you keep it up I am going to need to upgrade my memory.

Muirpidity #25
"It may have been Vidyohs that made the statement some time ago that the country should be split into two: one for those that value personal responsibility and freedom and the other for those that want to live their lives in a nanny state where big brother does the thinking and guides the Stepford citizenry through life.
Posted by: Babinich

I'm all for that. I sometimes wish we'd have just let the southern successionist have their way. Of course it'd just be another border problem issue with all those rednecks wanting to come work in our productive economy. Posted by: muirgeo | Sep 28, 2008 3:09:20 AM"

Art Laffer said Economy is working beautifully, because of good monetary policy, good economic policy, good trade policy etc. He and his supply-side statists have no right to blame democrats or the government for the current crisis. He quotes GOVERNMENT produced lies, damn lies and statistics to "buttress" his statements.