Wednesday, October 01, 2008

Unfree Markets

With the US meltdown still going strong, and yet another tax-payer funded bailout of big banks in the offing, its interesting to watch these prophetic videos by Max Keiser from May of 2007:





Bottom line, the issues we see today in the US and world markets are not a problem with the "free market" because the market is not free - it is economic fascism where what regulations do exist are set up to benefit the rich and powerful, rather than protect others in the market.

That they claim it is "deregulation" doesn't make it so. And now they are poised to enrich themselves again, while we all suffer.

(h/t to Red Tory)

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6 Comments:

At 12:51 PM, Blogger Ron said...

Exactly right, Mike.

And anyone who thinks the Republicans are "free market" types oughtta think long and hard about this from Ms Palin last night: "We need to make sure that we demand from the federal government strict oversight of those entities in charge of our investments and our savings"

Yeah, like we truly want and need even more government meddling in the financial decisions of private citizens.

 
At 11:34 PM, Blogger Josh G said...

It's not about meddling in their "financial decisions" but in ensuring that the system has sufficient liquidity and stability. If bank failures affected only the stakeholders of the banks themselves there might be something to be said for a more "free market" approach, but the tendency for such failures to snowball through the system, dry up credit, and generally provoke a crisis shows rather plainly that a well-structured financial system is essential.

It's not an accident that Canada has avoided bank failures since before the Depression.

 
At 9:19 AM, Blogger Ron said...

Josh, with respect: there are ripple effects to *every* decision people make, economic or otherwise.

That being the case, please explain why financial matters require more State scrutiny and oversight than, say, romantic or literary pursuits.

After all, writing can cause more widespread havoc than lost dollars--and I doubt you'd jump to regulate that.

This: "sufficient liquidity and stability" sounds nice, but liquidity is *inherently* unstable--that's the point. It's a nice sounding inherent contradiction in terms.

But you write as if you think the State is capable of achieving some sort of desirable and objectively "correct and fair" balance between the two. I contend the best that the State can do is substitute bureaucratic or coerced collectivist preferences for those of the market. In other words, it's exactly about meddling in "financial decisions".

 
At 10:55 AM, Blogger Mike said...

I would contend Josh, as an extension to what Ron has said, that a "well structured financial system" is one that is self-sustaining and does not require the actions of an external entity like a State.

Perhaps credit should be harder to come by. That would avoid the crisis as well.

Even if I were to grant what you say is true, the problem remains that the system we have is not as you describe. Rather than a well oiled system that allows for "proper" functioning and transactions, it is one that, as the two clips show, are used to enrich the few, to maintain privilege of the few at the expense of the rest of us.

And the proof that it doesn't work is evident in the markets right now.

Don't even get me started on fiat money and central banking...

 
At 12:13 AM, Blogger Josh G said...

That being the case, please explain why financial matters require more State scrutiny and oversight than, say, romantic or literary pursuits.

It's not about ongoing "scrutiny and oversight" but rather ensuring that such regulations and laws exist to avoid (or largely avoid) the sort of crisis occuring in the US. There's rather a marked difference between setting down the rules and micro-management of the financial system.

But you write as if you think the State is capable of achieving some sort of desirable and objectively "correct and fair" balance between the two. I contend the best that the State can do is substitute bureaucratic or coerced collectivist preferences for those of the market. In other words, it's exactly about meddling in "financial decisions".

Hardly - undercapitalized banks are certainly "bad things", and labelling such preferences writ in law as "bureaucratic" or "collectivist" is not an argument.

I would contend Josh, as an extension to what Ron has said, that a "well structured financial system" is one that is self-sustaining and does not require the actions of an external entity like a State.

And there's the problem - the State is not an external entity - external to what? It's all well and good to conceptualize the "State" as some alien body composed not of individuals but of meddlesome bureaucratic stereotypes, but that's little more than an example of simplistic political theorizing.

The fact that reality falls well short of the free market ideal is not evidence that such an ideal would be attained by "throwing off the chains of the State". Can you point to some examples where this works? Even your vaunted clips point much of the problem at unregulated hedge funds.

Anyway, central banking - in a very general sense - works pretty well, and there's no such thing as a non-fiat currency. Value accrues to whatever we collectively believe it accrues to and, understandably, currency debasement or the printing of notes to finance debts (e.g. war reparations) causes inflation. That's just Econ 101, though, and hardly a prescription for how things ought to work today - it's not as if money supply-related inflation is a new phenomenon, given that it dates back at least to the 3rd Century.

 
At 5:23 AM, Anonymous Anonymous said...

The ultimate in deregulation is theft. I take what you got unless you can somehow prevent me from doing so.

Fortunately, most of us realize that that's not sustainable. It leads to a market where people are too afraid of being ripped off to engage in any significant trading. Hence, we invent government and regulation so that we can operate in an atmosphere of trust.

This is necessary because people are too damned busy to go over all the little things. If we had to spend all our time going over all the little things then we'd spend a lot less time actually doing things.

Hence why regulation is needed -- to smooth the process.

Financial markets need more regulation because they rely more on people being willing to trust strangers than most other types of markets.

 

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