The End Of Free-Market Fundamentalism?
Amid the chaos and chatter about this week's financial bailout, one clear theme emerged in some quarters: The era of free-market fundamentalism is over. But is it, really?
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The End Of Free-Market Fundamentalism?
Nick Penniman
American News Project, Sep 25, 2008
http://americannewsproject.com/node/130
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Saturday, October 04, 2008 | 03:00 AM | Permalink
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Barry
not a chance - the nanny state will ride to the rescue, throw god money after bad at the the "market", and then eventually (perhaps after we are all dead ;-) things will recover, and the zealots will claim that the market "corrected itself", and moreover, would have done so quicker if the government didn't intervene ...
Happened before, will happen again
Posted by: Marcello | Oct 4, 2008 4:17:17 AM
Here's one for you Barry.
Given that 1000s of institutions around the world have suffered huge losses buying these securities based on trumped up claims and phoney AAA/AA ratings where are the lawyers? Where is the avalanche of massive lawsuits?
I find this missing piece puzzling and suspicious. And couple that with Paulson's hellbent stance to buy these debt securities when he knows that buying preferred stock will add ten times more solvency to banks. Why?
Maybe if a promise was made to say a giant foreign institution to make good on any losses they might reconsider legal action.
Just a thought.
Posted by: Jerry | Oct 4, 2008 5:58:30 AM
Free market capitalism the culprit ? What about socialist massive lending policies (imposed to financial institutions by governments not only in US) favouring people unable to repay their debts ? What created the credit bubble and who are the owners of forclosured properties ?
Posted by: Pablo | Oct 4, 2008 6:18:17 AM
Because people are fearful they are now listening. It is this attention which offers a platform to the “players” to further their own pet projects, ideas and agendas. All they need to do is convince people they have the solution everyone is desperately seeking.
Posted by: gpmgroup | Oct 4, 2008 6:29:10 AM
great vid...but not sure what the point was...
what was the conclusion? is it or aint it?
did i miss something?
Posted by: peterthepainter | Oct 4, 2008 6:36:18 AM
There is no 'perfect form of capitalism' nor of any other economic system. All systems are a mish mash of competing ideas, balanced by practical realities. there isn't even a a specific balance embodied by a system because systems change all the time. Fascinating to watch people professing to talk about the real world spouting fiction. They might as well start banging the table and predicting the coming of Muad'dib -- be just as useful. In either event it should be grounds for immediate disqualification from meaningful debate. That it isn't shows just how nutty american public life is. American economic discussion is just as shot through with religion as russian economic discussion was and look what happened to them.
As for 'historic moment' well I guess if you call the trap sprining shut then it's historic, but the idea that we've been living in a free market country and now will not be is complete fantasy land, anti-zealoutry perhaps, but religion nonetheless. 6 months ago, much less 6 years there were plenty of people bellyaching about the horrors of government intervention.
People have a very strong bias toward seeing events as pivotal. Massive change on very short time scales. Actually real change is much slower, but has sudden 'catastrophes' where the change that was in progress suddenly accelerates rapidly. We have been slowly moving toward corporatocracy for at least 50 years, with a pickup in the 80's, slowdown in the 90's then raccelerating in the 00's. The system has just reached a break point where that change is no longer at the margin but instead is now the new dominant organizing principle.
Posted by: VoiceFromTheWilderness | Oct 4, 2008 7:19:30 AM
To all who truly want to understand the origins of this crisis:
Read all my comments and counter-play here:
http://bigpicture.typepad.com/comments/2007/02/alan_greenspan_.html
…You’ll learn what Adam Smith (Wealth of Nations) truly thought about un-restrained free market capitalism.
Then read all I’ve written here, but particularly the posting at 4:09:51 AM (Feb 24):
http://bigpicture.typepad.com/comments/2007/02/bernanke_vs_gol.html
…You’ll learn why Keynes got ever-so-close to understanding the crisis he tried to explain in his day and why he was slightly wrong.
Finally, read everything I’ve written here (particularly at 3:19:20 PM, Nov 25):
http://bigpicture.typepad.com/comments/2006/11/econojunk_fix.html
…You’ll understand that what I’ve written and explained is a description of what is happening at this very moment in our present crisis and what it likely means for the upcoming intermediate term.
---
The most innocent form of admonition I could give to all the contributors to the crisis (including the "dealers" of Smith's own admonition) is that they suffered from Optimistic Willfulness, a deadly form of self-delusion in which the favorable elements of optimism are too powerfully expressed as pure willfulness. Willfulness poisons objectivity and removes its valence. In other words, a rational and analytical mind can remain optimistic even in view of objectively pessimistic circumstances. But the willful optimist can never alter his course in any circumstances because his willful nature just won't permit it.
In the final analysis we will still benefit in the future from the best elements of capitalism. Whatever is about to happen, however painfully or slowly, is yet to be known.
And when it's over, capitalism will just return to a form more closely monitored for the excesses that even Adam Smith, the supposed "High Priest" of un-restrained free-market capitalism, already 230 years ago well knew it could produce.
Posted by: Eclectic | Oct 4, 2008 7:20:20 AM
The dynamical system that is the United States has moved out of a basin defined by widely distributed wealth and power, and into a basin defined by highly concentrated wealth and power. The events of the past week merely signal that the transition occured, but it actually occured a few years ago.
Posted by: VoiceFromTheWilderness | Oct 4, 2008 7:24:46 AM
Let me clarify something I just posted.
"In other words, a rational and analytical mind can remain optimistic even in view of objectively pessimistic circumstances."
I meant to indicate that such a person can still maintain an optimistic perspective on life in general but at the same time take actions when he realizes that circumstances have changed. When the circumstances change, his optimism doesn't blind him to a willful adherance to the original course.
Human culture puts a high value on optimism and a low value of pessimism. Thus, the valence that might be applicable to ordinary optimism to suppress its capacity to produce excesses... is i-t-s-e-l-f suppressed by peer pressure.
Posted by: Eclectic | Oct 4, 2008 7:36:13 AM
Free market fundamentalism out. Regulatory fundamentalism in.
Posted by: Phil Spector of Deflation | Oct 4, 2008 7:43:07 AM
Posted by: peterthepainter | Oct 4, 2008 6:36:18 AM
toward the end, starts @~3:50, summed as 'schemes' bought by Big Business. Big Gov't provided the cover, rules®s tilted toward, for Big Business, here, esp. Finance, in exchange for massive campaign, and other, slush funds.
earlier though, it, basically, called out the current crop of 'academicians' as hopelessly clueless--they spend too much time snorting laser toner, instead of exhaust fumes.
as well, 'politicians, think tanks y business groups' as putting lie to the concept of 'free markets'..
past that, I always did like Sen. Hollings, his type will be sorely missed.
Posted by: Mark E Hoffer | Oct 4, 2008 7:52:16 AM
I don't know why people are so troubled by the credit "crisis"...I renamed it the credit MORASS (Much Ordered Return To Actual System-wide Sanity). I told people 3 years ago a depression was coming...I predicted this would be the worst year in market history. I'm not Nostradamus. I was mocked by friends and family. How did I know it was coming? One simple chart, which I have posted here numerous times. It shows that the amount of total credit in our system outstrips the ability of the economy to service the debt on a scale that is unimaginable. If you see the chart spikes in the 1930s...the scary thing is that credit/GDP spiked then NOT because of too much debt, but because GDP plunged after 1929. The current amount of debt is thus unprecedented, the result of Greenspan's reign of error, and can only be worked down through massive debt defaults, bankruptcies and depression. Just look to the chart, its the elephant in the room and it is closely tied to housing, which fueled a big chunk of the debt. The credit bubble made many Wall Street millionaires and fueled a baby boomer party...they are trying to stick all of us with the tab and Greenspan cashed in an $8 Million book advance.
Posted by: Steve Barry | Oct 4, 2008 8:35:08 AM
I see 'Jerry' as in Bowyer has been on the board. Please take your partisan head out of the sand. It is over, Reagan, Friedman, all of it done.. kaput. The challenge now is to put the pieces back together in some sensible manner. People must start being constructive in how we move forward. Denial, digging in, due to strong ideological biases is NOT what we need. Those of us who have a pulpit are NOT doing the Country any favor in trying to assess blame. STOP WITH PARTISAN BLAME GAME.
Posted by: Fred S. | Oct 4, 2008 8:36:30 AM
Perception vs. reality?
Americans think they had capitalism and free markets but in reality, just like most countries in this world, it was a mix of socialist and capitalist policies.
As soon as you have government collecting taxes and redistributing them, you don't have pure capitalism.
Even if no taxes at all were being collected but government mettling was 100% financed with debt issues it would still be something other than capitalism and free markets.
Since the US government is one of the largest mettling governments in the world we could argue that the US has been one of the least capitalist countries worldwide!
But for some stange reason, 99% of people are blind to this and for even stranger reasons many Amercians will be calling me a commie for stating the obvious!
Posted by: D. | Oct 4, 2008 8:38:30 AM
We have been slowly moving toward corporatocracy for at least 50 years, with a pickup in the 80's, slowdown in the 90's then raccelerating in the 00's.
--------------------------
Good point. It probbly slowd down i te 90s because te were httin their roth ceilings. Rules and laws had to be changed for that groth to contiue. Corporations got them all (Glass-Steagall, reserve equirements...) and it gave America an extra decade.
Since our world today is one where individuals are forced to specialize, few have had time to study world events. Most today have no idea what's about to hit them.
Posted by: D. | Oct 4, 2008 8:47:29 AM
Sorry about spelling, having trouble with keyboard...
Good point. It probably slowed down in the 90s because they were hitting their growth ceilings. Rules and laws had to be changed for that growth to contiue. Corporations got them all (Glass-Steagall, reserve requirements...) and it gave America an extra decade.
Since our world today is one where individuals are forced to specialize, few have had much time to study world events. Most today have no idea what's about to hit them.
Posted by: D. | Oct 4, 2008 8:51:13 AM
Since our world today is one where individuals are forced to specialize, few have had time to study world events. Most today have no idea what's about to hit them.
Posted by: D. | Oct 4, 2008 8:47:29 AM
D.,
a minor point, though, I hear ya about 'specialization', this: "few have had time to study world events.", is G**bage.
one fact: 'Fantasy' sports leagues are a multi-U$D Bn./yr. .biz v. "few have time to study world events...", puts askew that excuse for our Wholesale lack of Responsibility.
Posted by: Mark E Hoffer | Oct 4, 2008 8:59:33 AM
As Will Rogers commented, "Fear not, America has the best politicians money can buy!"
One thought, if everyone is clueless, why not give a listen to people like Nouriel Roubini and Bill Fleckenstein, (and possibly, you, Barry, who have a record of predicting this melt down as far back as 2005? The ability to predict the future may be an indication of understanding.
Additional thoughts, profits are the life-blood of business. Business can't do anything ultimately without them. It's how they use the profits that needs to be watched. Also, I am not sure stockholders have received very good returns the past few years. Also, it seems to me most of the toxic waste was generated in the banking - finance - mortgage industry. Is Apple, Google, railroads, or even Exxon to blame for the toxic waste?
Posted by: Michel Caldwell | Oct 4, 2008 9:03:01 AM
@ Steve Barry:
That same chart now reveals total debt is over 350% of GDP. Therefore you need to update your chart to reflect the current numbers.
It's even worse than you thought.
Posted by: OkieLawyer | Oct 4, 2008 9:13:14 AM
Milton Friedman famously said we should replace the Federal Reserve with a computer that gradually increases the money supply. When the dust settles, that's a fundamental idea that might get its day in the sun.
Posted by: Namazu | Oct 4, 2008 9:13:38 AM
I question the motives behind Paulson's plan. It's not trying to blame in hindsight and it's not partisan. The process of putting the pieces back together has just begun.
It's critical that the initial steps to do that are focused on the real underlying causes. For that to happen the intent should be to limit the damage to as many as possible not to protect the interest of a few or even a few industries.
The derivatives' scheme gets it's value, however far removed in too many cases, from mortgage payment cash flow. Paulson's plan concentrates on financial institution losses. It doesn't deal with those losses' underlying cause - mortgage defaults - in any meaningful way.
The current freeze in lending isn't a liquidty crisis - the world has been up to it's eyeballs in cheap money for years - it's a trust crisis and a solvency crisis.
Plenty of banks have money to lend to other banks. But who can tell which borrowers are solvent and which are insolvent or nearly so. Therefore lend to no one.
Also many lenders are probably questioning their ability to remain solvent in the coming months - cash hoarding follows.
The question is why does Paulson believe that relieving the losses of financial companies is a greater good than reconstructing the cause of those losses - mortgage defaults. This question is not yet answered.
Posted by: Jerry | Oct 4, 2008 9:19:55 AM
Mark:
It's not as if it is that easy to find the truth. Crap, investment pros were fired left and right for being too conservative in the last decade! Imagine those NOT in the finance industry living on much lower salaries. You close your eyes and play the game, you can't change it anyway!
When you're trying to raise a family and pay the bills, it's hard to stay on top of world affairs especially when every news media is controlled by financiers who have everything to gain by not showing you a balanced picture. How many people have the time and the energy to search fo the truth.
Being a contrarian has been tough for the last decade with everyone laughing at you. Contrarian living is only for a small minority.
And in all the pros I know, only a few have time to read non work related stuff. I can only imagine how life is for those making ends meet.
Posted by: D. | Oct 4, 2008 9:26:01 AM
@okie...good point...I was aware that it hit 350% amid the private equity boom, but I have no nice link to the chart that shows it. Even the 350% number is a bit outdated...anyone know what the chart looks like currently? Remember as credit drops, GDP will be dropping too, making the return to normalcy a slo-motion crash.
Posted by: Steve Barry | Oct 4, 2008 9:26:55 AM
Mark:
Anyway, the world is too complex to expect the masses to understand what's going on.
Eve when we're knowledgeable we still argue with each other on every point.
Posted by: D. | Oct 4, 2008 9:29:10 AM
I wouldn't worry Barry. I have a feeling your about to get all the government intervention you can handle over the next few years.
Posted by: Dave | Oct 4, 2008 9:31:54 AM
