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Private Gains. Public losses.
Whose idea was that?
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Laissez Faire market
Speculate don't produce
Bubbles burst loudly
Market performance
Socialist shackling
Prediction inevitable
Russ, did you see this?
http://occamsrazr.com/2008/10/22/the-sub-prime-primer/
Bailouts are easy?
A child can understand them?
Rainbows have gold pots.
Thanks Ike, hope you don't mind but I passed that link on to about 150 people.
muirgeo, I'd like you to explain how the creation of GSEs, which then "recycle" money back into lending markets and subsequently, which were THE culprits in using securitization to disguise bad assets, is "laissez-faire."
When the government is involved, there's no free market: *someone* is being pushed or pulled. You've argued otherwise around here for a long time, but that does not change the fact that any "bubbles" were purely the result of government interference in natural market happenings. If you think what's happened is the result of laissez-faire, I'd hate to see what your idea of interventionism is.
"Speculate don't produce" is what government encourages everyone to do when it gets involved in investments, whether the Mississippi Scheme of 18th century France, the South Sea Bubble of 18th century England, or the latest American "crisis."
And by the way…you're a syllable short.
Plant spring, harvest fall,
Or party hearty freely.
Winter always comes.
The child-free consume rents imposed on children, while investors in children do not, because states title this way "proper".
muirgeo, I'd like you to explain how the creation of GSEs, which then "recycle" money back into lending markets and subsequently, which were THE culprits in using securitization to disguise bad assets, is "laissez-faire."
Me too. But get ready for an impassioned non-answer replete with "data" and no relevant response.
I'm not quite a student of Japanese poetry, but-
Barney let's be Frank.
Pulled a prank.
Now we'll foot a bill.
But Laissez Faire markets do not and have never existed, so you have asserted time and again.
How can you blame anything on something which you claim does not and has never existed?
If you do not, or cannot see, and acknowledge, the logical fallacy, then what will those who do, think about you?
Is this how much of the world thinks about economics?
BTW, Muirgeo
The very existence of GSE's (among other things) negates the idea of Laissez-Faire.
Mind you, this isn't some nit-picky disqualification based on some ultra-pure nihilistic standard, it's an enormously fundamental problem to the "laissez-faire" argument you think has relevance here. It puts it totally on its head.
Barney Frank, Chris Dodd, Chuck Schumer. The guys who just won the election.
(Laughs out loud.)
Wish I was clever. Loved the poetry.
I think governments should choose winners and losers. Who thinks markets should be left alone to do this?
.
The notion that we have laissez-faire capitalism is absurd.
According to the Competitive Enterprise Institute (You can go here to see the citation): http://cei.org/articles/%E2%80%98hidden-tax%E2%80%99-rules-hits-economy
At present, some 50+ federal agencies, departments and commissions are presently at work finalizing 3,882 new regulations; 757 will apply to small businesses as well as large. More than 51,000 regulations were put into effect from 1995 – 2007. Some 48,000 were done between 1995 – 2006, when the Republicans controlled Congress. So much for the notion that Republicans “deregulated” the economy.
You can see these regulations for yourself. They are printed up in the Code of Federal Regulations (the CFR). Go here:
http://extent-of-regulation.dhwritings.com/ to see pictures of the CFR at the library of Congress.
The 50 volumes of the CFR occupy over 25 feet of shelf space.
Look at this listing of the titles in the CFR to see the scope of government‘s regulation of our lives:
1. General Provisions • 2. Grants and Agreements • 3. The President • 4. Accounts • 5. Administrative Personnel • 6. Domestic Security • 7. Agriculture • 8. Aliens and Nationality • 9. Animals and Animal Products • 10. Energy • 11. Federal Elections • 12. Banks and Banking • 13. Business Credit and Assistance • 14. Aeronautics and Space • 15. Commerce and Foreign Trade • 16. Commercial Practices • 17. Commodity and Securities Exchanges • 18. Conservation of Power and Water Resources • 19. Customs Duties • 20. Employees' Benefits • 21. Food and Drugs • 22. Foreign Relations • 23. Highways • 24. Housing and Urban Development • 25. Indians • 26. Internal Revenue • 27. Alcohol, Tobacco Products and Firearms • 28. Judicial Administration • 29. Labor • 30. Mineral Resources • 31. Money and Finance: Treasury • 32. National Defense • 33. Navigation and Navigable Waters • 34. Education • 35. Panama Canal • 36. Parks, Forests, and Public Property • 37. Patents, Trademarks, and Copyrights • 38. Pensions, Bonuses, and Veterans' Relief • 39. Postal Service • 40. Protection of Environment • 41. Public Contracts and Property Management • 42. Public Health • 43. Public Lands: Interior • 44. Emergency Management and Assistance • 45. Public Welfare • 46. Shipping • 47. Telecommunication • 48. Federal Acquisition Regulations System • 49. Transportation • 50. Wildlife and Fisheries.
The regulations in these volumes are typed in small font, double-column on each side of each page.
On ABC, on 10/17/08, John Stossel demonstrated that the pages in a single volume, when removed and laid end to end, stretched out the length of a football field and halfway back again. Go here to see a video of him doing this:
http://abcnews.go.com/Politics/Vote2008/story?id=6049954
What deregulation? What laissez-faire?
Remember this:
Laissez-faire capitalism (LFC) does not feature fiat money controlled by a central bank that has unlimited power to expand the supply of that money — thereby forcing interest rates way below their natural level and encouraging the making of ever-riskier loans.
LFC does not feature a federal government that has the power to bail-out companies that make stupid financial decisions and a track record of doing precisely that — thereby, again, encouraging business people to take risks they would otherwise eschew.
LFC does not feature a federally-controlled cartel of bond rating agencies that rated securitized bundles carrying subprime loans as "AAA".
LFC does not feature government-sponsored entities like Freddie and Fannie and the FHA, all with the mission to "make housing more affordable" by encouraging loans to people that otherwise would not qualify.
And if LFC really existed, those who’ve made irrational business decisions would be punished by the market, while those who resisted and remained rational would be protected.
In short, blaming any part of the current economic mess on laissez-fair capitalism or deregulation is like blaming it on a Martian invasion — you are blaming it on something that does not exist.
Look, kids, a pony!
Gifts now and a gift later;
Hyperinflation
In short, blaming any part of the current economic mess on laissez-fair capitalism or deregulation is like blaming it on a Martian invasion — you are blaming it on something that does not exist.
Posted by: Michael Smith
Michael what is the worlds most successful economy..EVER?
At what point was it laissez-faire by your definition?
On what basis do you make your broad sweeping claims in support of having a LFC system?
BTW, Muirgeo
The very existence of GSE's (among other things) negates the idea of Laissez-Faire.
Posted by: John V
Doesn't matter. The passage of the Commodity Futures Modernization Act of 2000 paved the way for a boom in credit default swaps.
That was a de-regulatory measure and massive leveraging of mortgages could not have occurred to the degree it did with out this deregulation of derivatives. The other major "laissez-faire-ish" deregulation occurred in steps that allowed investment bank and lending banks to merge.
Those 2 key changes to the law, which were de-regulatory allowed the collapse to happen. It could not have happened with out these changes. Sure you could have had a housing bubble and it could have burst but that alone would not cause the problems if those mortgages had not been allowed to be leveraged 100 times over with toxic paper.
The truth is clear… its simple. Just like the last Republican lead Great Depression when margin buying was deregulated and speculation created a huge bubble which burst and collapsed the economy. Same thing here. Nothing has changed.
And now over the next 4-8 years you will see massive government spending and good regulation take us out of this laissez-faire-ish catastrophe and return us to a growth oriented stable economy. All contrary to your claims of free markets.
John you have faith. You believe in something that never existed and for which you can not support with any factual evidence. Yet you believe it with all your heart and are willing to cast off rational thought to prop up your faith.
Is there any thought in your mind that a true free market just might not be that effecient and that it just might cause much more misery then it solves?
Invisible Hand
Though I have never seen it
I know it exists
Muirgeo,
Doesn't matter. The passage of the Commodity Futures Modernization Act of 2000 paved the way for a boom in credit default swaps.
That was a de-regulatory measure and massive leveraging of mortgages could not have occurred to the degree it did with out this deregulation of derivatives. The other major "laissez-faire-ish" deregulation occurred in steps that allowed investment bank and lending banks to merge.
Those 2 key changes to the law, which were de-regulatory allowed the collapse to happen.
That is simply not true.
First of all, proper monetary policy, the most anti-laissez-faire mechanism we have, would have staved off the behavior and choices that led to the bubble. Secondly, you ignore the role of GSE's totally in your explanation. You also ignore that measures were taken to control these GSE's and make them more accountable and failed. You ignore that GSE's have abilities that more private institutions did not have.
Allowing banks to merge didn't aid in causing the melt-down. In fact it would have been worse had they not been allowed to do so.
Finally, you totally ignore that tainted goods handled freely are prone to big problems.
None of this faith. OTOH, your confidence is what will happen now is nothing short of faith in itself.
Way to subvert the point addressing your assertion that laissez faire had something to do with the market.
First you claim laissez faire is at fault.
You are asked: "What Laissez Faire?"
You respond: "How can you defend Laissez Faire?"
The original quote from Smith: "as if by an invisible hand"
AS IF! Not "BY an invisible hand".
He did describe the actual mechanism: via trade, self interest leads producers, in pursuit of profit, to provide for the wants of others.
Nothing mysterious or theological about it.
Supporters of free markets, real free markets, understand that self interest cannot be removed from the equation. I repeat, self interest cannot be removed from the equation.
The progressive response: regulation is needed to inhibit self interest.
My response: regulation merely provides an alternate channel for self interest to express. Further, regulation is anti-competitive, thus reducing consumer choice as well as increasing consumer expense.
Self interest cannot be removed from the equation.
If you try to point a gun at it, it will grab the gun.
Make sure bold is closed.
Michael what is the worlds most successful economy..EVER?
The greatest periods of economic growth have occured during the periods of least economic regulation and government intervention — that's been true not only in the United States but also in almost all nations. See, for instance the performance of the U.S. economy from the founding of the country up to about 1880.
Or, see the 1920s which saw very good economic growth even as the federal government shrank in size.
Of course, our standard of living has improved marvelously since then, but the rate of economic growth has been tragically hampered by all the statist intevention and by such grossly unjust institutions as the welfare state. Quite simply, if we had LFC, we'd have an even better standard of living.
At what point was it laissez-faire by your definition?
It has never been laissez-faire. Under laissez-faire capitalism, there is complete seperation of economics and state, just as there is a seperation of church and state. Though it was much freer in the beginning, our economy has always featured some amount of economic interventionism. The interventionism drastically accelerated in the 1930s and continues to grow today.
As Mises pointed out, the pattern of growing regulation is always the same: regulations create economic problems, which are then used to justify still more regulations, etc.
On what basis do you make your broad sweeping claims in support of having a LFC system?
I am in favor of LFC because it is the only just and moral system. It is the only system based on individual rights, wherein the initiation of force is banned and government's only function is to protect citizens from those who initiate force (in all its forms, including fraud.)
It is the only just system because it is the only system in which all transactions and relationships are fully voluntary, with neither party having the power to force the other party to agree to any terms or to any trade or transaction against their will — which means it is the system where you get only what you can earn and you have no power to demand the unearned.
It is the only moral system because it is the only non-sacrificial system — that is, it is a system in which people are free to trade to mutual benefit — or free to reject a trade and seek a better deal elsewhere — wherein no one has the power to force another party to sacrifice any of his values.
Fundamentally, I am in favor of LFC because I am in favor of individual freedom.
Doesn't matter. The passage of the Commodity Futures Modernization Act of 2000 paved the way for a boom in credit default swaps.
But the credit default swaps are not the fundamental problem.
The fundamental problem is two-fold: First, trillions in capital has been pissed away in bad loans encouraged by the CRA, Fannie, Freddie, FHA and the Federal Reserve's preposterously loose monetary policy – not a single one of which would exist under LFC. Second, rather than let the institutions that acted irrationally go under and go bankrupt, the Fed and the Treasury are proping them up at our expense — which only aggrevates the problem anad which would NOT happen under LFC.
Your lame attempt to blame this crises on deregulation only exposes your economic fallacies all the more.
The truth is clear… its simple. Just like the last Republican lead Great Depression when margin buying was deregulated and speculation created a huge bubble which burst and collapsed the economy. Same thing here. Nothing has changed.
Utter baloney. It was primarily increased corporate profits and booming economic growth, not speculation, that caused the stock market to grow during the 1920s. Stocks increased in value by 385% during the decade while corporate profits increased by 387%.
The stock market crashed because Hoover's vicious anti-business rhetoric, his pushing of the Smoot/Hawley tariff and his promise to limit profits and raise taxes promised an end (or a least a severe slow down) to economic growth.
And Hoover made good on his word. His tariff combined with his increasing the top tax rate from 24% to 63%, combined with his insistence that wage rates not be allowed to fall proved disastrous. These are all interventionist, not "deregulatory", moves.
"You believe in something that never existed and for which you can not support with any factual evidence. Yet you believe it with all your heart and are willing to cast off rational thought to prop up your faith."
muirgeo | Nov 12, 2008 4:10:30 PM
There's so much wrong with this that I don't know where to start.
Your understanding of the word "market" is limited. Markets exist on the micro as well as macro level. You needn't point to an economy as a whole for an example of a free market. Though there is a rather large economy that was much more free than others. Just take a look at how well it did…
The British left Hong Kong alone, and in just a matter of sixty years in went from being a rock off the coast of China to having one of the largest economies in the world. In fact, its economy is larger than most countries and its just a city with seven million people.
Despite what you might think, freedom works.
Muirgeo, if you know of any attempted comparison of economic success(and how do you define "success") of every economy in history, please share it.
Defining "success" as per capita GDP adjusted for purchasing power(and sticking to current data), you'd get the following rankings.
If you look at the top 25 by GDP(I'm using the IMF numbers here) you'll note that 17 of those countries are also in the top 25 of the Economic Freedom of the World index. Note also that 4 of the 8 relatively (economically) unfree countries with high GDP are major oil exporters and their GDP would be abnormally high due to the oil prices of 2007.
Is it that hard to fathom that economic freedom and wealth are related?
Muirgeo,
Like I have said here earlier, I grew up under a democratically elected communist regime. Social democratic utopia. Things often went terribly wrong under that system. Do you know who the government and the proles always blamed? The greedy capitalists. Do you know what their solution always was? More power to the government/regulators.
We have discussed your version of utopia versus our version. Same arguments have been exchanged ad infinitum. It is time to stop. You don't like our answers, and we don't like the fact that you don't like our answers. Let's agree to disagree. Do you have anything to say about Fannie and Freddie specifically? Let's leave out Laissez Faire out of it and discuss the topic – "Whose idea was that?"
Barney Frank walks free
But individually
He should be frog-marched
I hate my freedoms.
Pondering a collective.
F*C my property!
——————————-
My idea is sound.
You shall adopt my idea.
Legislation works.
The continued evasions of the blame free markets crowd continue to astound me. I have given up trying to convince them. Trying is interfering with my sleep.
The fact remains that the bakers are being blamed for causing the crisis by doing what the politicians have been trying to make them do for about 70 years–grant mortgages to people whom what was left of the free market judged unworthy of them. Thats what the GSE's, the CRA, the National Homeownership Strategy, and a whole bunch of other measures were all about. Now that the politicians got what they wanted, and we are suffering the unintended consequences, they need a scapegoat.
Unfortunately for them, the suspect they intend to frame for their own crime has an alibi.
"muirgeo, I'd like you to explain how the creation of GSEs, which then "recycle" money back into lending markets and subsequently, which were THE culprits in using securitization to disguise bad assets, is "laissez-faire.""
Because the GSE's had some element of private ownership and were consequently not under the complete control of The Glorious State.
"The fact remains that the bakers are being blamed"
Not a problem. Treasury will probably throw a few bucks at the bakers too.
Apparently, it's a free market until it is TOTALLY controlled by every conceivable regulation that can effected.
See, there's one little activity that we haven't brought under our command, there's the problem.
Because the GSE's had some element of private ownership and were consequently not under the complete control of The Glorious State.
So at what point do you think something goes from being private to being government? The answer is easy, actually: zero. Once government is involved, there's no more free market, and no more private control. "Some" private ownership doesn't count; it's still a government operation.
If Fannie and Freddie had been fully private corporations, investors would have never had the confidence they once did, and the GSEs consequently would have never gotten to this level. But investors had far more faith than was warranted, because there was always, always the implicit promise of a federal bailout. No matter how "privatized" they were on paper, the feds would never let them fail. That moral hazard prevented rational decision-making by both investors and Fannie and Freddie's executives.
Now in the truly private sector, my employer, a not insignificant asset manager, must take care when creating portfolios for our clients. We're not a bank and don't have the promise of a federal bailout.
Please everyone, I know that Muirgeo is a wonderful punching bag.
But please don't feed the troll.
The troll is not an intellectually honest being and as such the use of reason on such a beast as a troll has little effect.
Man dies from drinking
Three parts poison, one part juice.
Blame it on the juice.
Is it that hard to fathom that economic freedom and wealth are related?
Christopher Renner, the person you replied to is not all that concerned with wealth creation as a top priority [I think that I accurately write for him when I explain that he thinks that wealth will be created anyhow and that individual incentives don't play as big of a part as most here would claim]. That persons top priority has been, and probably always will be, the relative equality and 'fair' distribution of that wealth within a society.
I have occasionally spent too much time arguing these issues on other forums, such as politicsforum.org, the James Randi Educational Foundation's forum, and SamHarris.org. When I post evidence that I found presented on this blog, I am told not to listen to those "crazy ideologues". I have given up arguing with people on those forum.
NO amount of evidence persuades them that the housing mortgage and banking markets were not free, or that it was the government control over those sectors that caused the problem. They insist on blaming what little was left of economic freedom.
And yes, I do think the bakers deserve a bailout, if the bankers are getting one, proportional to the tax burden they have had to carry.
OOPS.
At the end of the day, when all observations have been made, all education has been attained, and intellectual thought performed there are some things that intelligent people should know and agree on.
First, no socialist can ever see more than what is. Meaning that in their theology all wealth has been created and can therefore be successfully determined and shared out. That birth and death rates are random and instantly change the numbers on a second per second basis is simply dismissed as inconsequential. Of course they don't even see that to get to the distribution part one first has to determine what "wealth" is to all people.
Second, that the first is true means that the means of production can be treated with contempt because restricting it or even eliminating it has no affect on the wealth that they know is already created, it becomes always a matter of tracking the wealth down and dividing it up…..again.
Third, even though the socialist has his theology that includes the government fairy wand method of enrichment, that imagination necessary to believe in the fairy wand does not carry over to the idea that wealth is not finite but infinite and tomorrow, if left alone, brings more, new, and better ways of enrichment.
Fourth, intelligent people know that Baker Bill's wealth creation is not at the expense of Mechanic Mike's. Both may or may not become wealthy through their efforts, and that because Bill has more it does not mean that Mike has less. They both have what they create. If Mike wants as much as Bill, to an intelligent person the answer is for Mike to become more productive either in mechanics or by expanding into something else.
Five, last but not least is the understanding intelligent people must have by now; that is there are several nations where the growth and ambition is making it certain that if the USA doesn't stay the Alpha Male in the pack, the challenge for that position is just around the corner. It is simply part of the grand scheme of things that one is either a leader or one is a follower.
None of us can force a change of faith on a believer, only growth and understanding will cause a socialist to change his faith.
muirgeo postulated:
And now over the next 4-8 years you will see massive government spending and good regulation take us out of this laissez-faire-ish catastrophe and return us to a growth oriented stable economy.
A "laissez-faire-ish catastrophe"?
What you are apparently unable (or unwilling) to grasp is that in an economy based on fiat money controlled by an all-powerful central bank committed to a policy of endless inflation, featuring government-sponsered entities like Freddie and Fannie and the FHA, manipulated by regulations like the CRA and the other tens of thousands of regulations on the books, an economy wherein the central government has a stated policy and track record of bail-outs for companies that get into trouble — NOTHING that happens under those conditions is "laissez-faire-ish".
In Mao's totalitarian communist China, starvation got so bad that people ate babies — not their own babies, they couldn't bring themselves to do that — so they traded babies so the ones they ate would not be theirs. According to YOUR way of thinking, the people's ability to trade babies was a "laissez-faire-ish" lack of regulation that proves that freedom doesn't work and that additional "good" controls are needed.
Yaron Brook of the Ayn Rand Institute said it best: This mess is the failure of the unfree market; it's time to give the free market a chance.
Since "X is a troll"
is an ad-hominem slam,
moderation failed.
Yaron Brook of the Ayn Rand Institute said it best: This mess is the failure of the unfree market; it's time to give the free market a chance.
Posted by: Michael Smith
Michael don't you think if free market economies were so successful and so good for everyone they'd actually exist somewhere in the real world? Doesn't the very fact that they don't exist suggest there is some misunderstanding on your part that underlies your whole-sale cheerleading for a concept that doesn't exist and apparently doesn't work.
See you guys believe in social Darwinism at the individual level but you forget humanity and it's successes are not measured at the individual level but at the social level.
When you set up a system that ultimately exploits 90 or 95% of the working people to benefit a small elite you will not have a stable system much-less one that maximizes individual liberty or economic efficiency.
True socialism, much as I am opposed to it, can claim far more "success" then libertarianism in that it actually exist in the real world. It must have some degree of efficiency at least compared to libertarianism which is non-existent in its pure form.
But like a well referred soccer game what works best is democracy and mixed economies and regulated competitive markets. I don't deny the overall success of our system but I claim it simply needs to be more democratic and needs better not more regulation. That's the best you can do in a country of 300,000,000 and a world of 7 billion.
Looks good on paper:
Ownership society.
Cafe Hayek slept.
While most posters are heatedly debating the meaning and existence of laissez-faire, I have one very minor comment:
"Whose idea was that?" has 6 syllables, not 5.
A ray of sunshine
Libertarian humor
Clever nonetheless
A true free market
No government to meddle
Hail Somalia
Idea: aɪˈdiə
Rhymes with "I see!"
As in Grampaw McCoy "I have the ghost of an idee!"
You insensitive regionalist.
muirgeo,
You write "libertarianism [...] is non-existent in its pure form."
How does Somalia fail?
Many see it here,
A few can not nor will ever.
Such, Complexity
No intent but see
Interaction, understand;
A boy becomes man.
Holaday, certainly warlords who have ultimate power over life and death of those living within their domains count as government.
Recall that the famine of the early 90's was not caused solely by drought, but by warlords seizing food and using starvation against each other's followers.
When men with weapons are taking the production of people involuntarily, that is government. Whether they do so for the good or ill of their subjects is irrelevant; it is still a government.
Hammer,
Does any armed person have ultimate power over life and death?
Is every armed robber a government?
Holaday
Question 1: No. Only when there is no recourse for the rest. For example, my neighbor does not have that power due to the fact that if he decides to kill me, there are expected repurcussions, either by law or by social response. If he could kill me and everyone said "Man, that sucks, but that's how it is" that is ultimate power over life and death, in this sense.
Question 2: No. A sufficiently large group of robbers that can opperate with relative impunity in a given area, such that they exert at least nominal control, is a government. When one group can get individuals to do as the group wants without needing to resort to force, but rather leveling a threat of force that is credible, that is a good sign of an actual "government".
Somalia!?!? You think they're an example of a free market. Where's the rule of law? Where are the property rights? Absolutely ridiculous. I can't believe I'm even responding. Holaday… you are ignorant.