Here's a letter that I sent on March 2nd to the Washington Times:
The Dow fell
another 300 points today ("Dow plunges nearly 300 to close below
6,800," March 2). This fact means that the Dow is now down 41 percent
since the first trading day in September (the month in which the Bush
administration and the Fed shifted wildly into a mad mode of bailouts,
"stimulus," and money creation), down 30 percent since Barack Obama's
election, and down 15 percent since Mr. Obama took office.
Who
really knows why? But paraphrasing a question asked by my colleague
Bryan Caplan, at the blog EconLog, I ask: If laissez-faire policies
had been the order of the day since early September, would not
politicians, pundits, and "progressive" preachers be unified in their
angry assurance that such a decline was caused by the free market? And would not these same persons insist that this steep decline would have been avoided had only Uncle Sam bailed firms out and
stimulated the economy with goo-gobs more spending and faster
money-supply growth?
Sincerely,
Donald J. Boudreaux
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I'm sure the answer is "yes", Don. I'm also sure that the actual response to your letter will likely be something along the lines of a muirdiot response where a lower Dow is the result of evil, blook-sucking, paper pusing self-interested short sellers taking advantage of poor innocent investors in this time of trouble by conducting bear raids on perfectly sound companies – and evil mark to market accounting, of course. If the market were going up, it's optimism about a new administration and Obama's genius after ascending to throne of all mankind.
Even now the control freaks are complaining that the problem with the government's policies is that they are NOT SPENDING ENOUGH. That was the problem during the Great Depression. That was the problem during Japan's lost decade (and lost $61 trillion dollars of apparently inadequate Keynesian stimulus).
Keynesianism thus has one important thing in common with other religions–it can never be wrong, because its arguments can always fall back upon an infinite regress.
Viking that's what I thought when I read the letter. The government should always do as much as it can. It can take credit if things go well, and if things go poorly, it will say either or both of "we weren't allowed to do enough" and "but for our efforts things would have been worse".
I believe the argument has already been made about Lehman? If only we had stepped in….
Personally, Iâm looking forward to Dow 5000, er, 4000, because we just had to elect the right people to âfixâ this âproblem.â
Does anyone really believe that the stock market (and economy) wouldn't be quite a bit worse if BoA, AIG, Bear Stearns, WaMu, Fannie & Freddie, Citigroup, etc. all had to liquidate all their assets?
I've seen arguments that we'd be better off in the long run by allowing the collapse of the global financial system, but not in the short run.
Stephen,
Given all the bailouts, if dow hits 4000 points in the next year or so, would you still say it could have been a lot worse, had we allowed the rule of law to take it's course?
Dr. Boudreaux,
May I appropriate your idea for a letter to my own paper, so long as I don't copy your verbiage?
"I've seen arguments that we'd be better off in the long run by allowing the collapse of the global financial system, but not in the short run."
Stephen-
someone once said while critizing Keynesism(sorry I can't remember who) the long run is nothing but the short run added up.
My view is if you cover up the smell of shit with air freshner in the short run it still smells like shit in the long run. So would you clean it up now or later?
While what Prof Boudreaux said needed to be said, the fact remains, as noted by our commenters here, and Mises long ago:
"Every historical experience is open to various interpretations and is in fact interpreted in different ways…History can neither prove nor disprove any general statement."
But economics can, and "Up there," as in The Treasure of the Sierra Madre, "is where we need to go," up to economics.
We have gone a long way up to it, but not far enough, not to what Hayek called "the crucial issue on which the whole character of future society will depend," and, Boudreaux, "the bottom line."
Redistribution.
We certainly shouldn't neglect all else for it, but neither should we neglect it for all else. There ought to be some little place for it, just once in a while.
"as in The Treasure of the Sierra Madre"
Didn't they all shoot each other at the end of that movie?
Dave,
Of course you may.
Don
Shooting each other at the end?
I would hardly think so. They were economists of a sort, with the Walter Huston character, the old prospector, leading the seminar, like Mises, though from a different slant, and with the conclusion that "an ounce of gold is worth what it is because of the human labor that went into the findin' and the gittin' of it."
I have never heard of Marxists shooting one another.
Oh you guys are silly. Obama and company would be doing all these things regardless of the DJIA. It's just a giant exercise of power. The popular indicators give them cover to call it an emergency and hold back opposition.
" "an ounce of gold is worth what it is because of the human labor that went into the findin' and the gittin' of it.""
Labor theory of value? I thought we were all marginalists here.
All marginalists here?
Yes, on the margin of lucidity.
Yeah. An ounce of gold is worth whatever the prospector can trade the nugget for (which is why he'd bother trying to find a gold nugget). Or, by the labour value theory: a gold nugget = a copper = a silver nugget = a fools gold nugget, etc.
I have never heard of Marxists shooting one another.
Posted by: dg lesvic | Mar 5, 2009 11:37:39 PM
I guess you never heard of Stalin's purges. My god man, how ignorant can you be?
Gil and Crusader,
You're absolutely right, and I thank you for expanding my marginal mind.
It's interesting because I am kinda siding with the Libertarian position on this as far as the bailouts go.
I don't pretend to know what would have happened if we had not done the bailouts but the guys on Wall Street… the die hard free market guys like Bernake, Greenspan and Paulson and many other experts scared the bejesus out of us saying total economic collapse would have resulted within days.
Is it possible that the economic collapse would have caused economic and societal collapse, riots, revolution and many deaths. We will never know but I think it was a consideration that makes the right answer not so simple for me to know.
It is important to realize some of the more left leaning politicians did not support the bailout as well. And you can go watch the YouTube videos of Rick Santelli's mob half supporting the bailouts. The supposed heart of Wall Street cares far more about making money then principles of free market economies, principle and ideology.
And finally the bailout is not the same thing as the stimulus. I support the idea of a stimulus to get aggregate demand rolling again and we'd have much more money to do so if we hadn't broken our bank on what I understand is now about $5-7 trillion dollars total in bailouts…
muirgeo: "die hard free market guys like Bernake, Greenspan and Paulson"
Well, let's look at Greenspan first. As Murray Rothbard pointed out 22 years ago:
"He is, like most other long-time Republican economists, a conservative Keynesian, which in these days is almost indistinguishable from the liberal Keynesians in the Democratic camp. … Which means that he wants moderate deficits and tax increases, and will loudly worry about inflation as he pours on increases in the money supply. … at no time in his prominent twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it."
Bill Fleckenstein warned us five years ago that Greenspan was not a laissez-faire Fed chair but rather a serial interventionist:
" The dollars decline has been promoted by Greenspan's irresponsible policies and attempts to continually bail out his most recent mistake. He has been doing this serially since junk bonds and bad lending nearly took down the financial system at the end of the 1980s and wiped out the savings and loan industry in 1990-1991."
"the die hard free market guys like Bernake, Greenspan and Paulson and many other experts"
What a bunch of crap.
Cease your lies NOW, you insufferable little troll.
"the die hard free market guys like Bernake, Greenspan and Paulson and many other experts scared the bejesus out of us saying total economic collapse would have resulted within days."
-Muir
Die hard free market guys who scared us into the bailout. Amazing that you fit this into one paragraph and didn't see the contradiction…
The Troika could turn this around very quickly by promising not to repeal the Bush tax cuts until 2020 at the earliest, taking immediate action to further reduce corporate taxes, taking immediate action to create new and significant tax breaks for small businesses, dropping any and all intentions to psuedo-nationalize healthcare, energy, and education, and by paying for the loss of revenue with a dramatic across the board decrease in federal spending. They'll have to put it in writing and under oath, because right now no one is going to accept their word. Not only could they do this, but they should, because investors and employers are not going to take any risks until the regime uncertainty is ended.
muirdiot – we get it. you are a proud Communist. Now leave.
From the increasing anals of
"Muirpidity of the duck".
#30:
the die hard free market guys like Bernake, Greenspan and Paulson and many other experts scared the bejesus out of us saying total economic collapse would have resulted within days. Posted by: muirgeo | Mar 6, 2009 8:08:48 AM
Consistency is the halmark of a true idiot and muirduck certainly displays that.
Consistency is the halmark of a true idiot and muirduck certainly displays that.
They are consistently inconsistent, not only with reality, but internally as well.