Some errors die hard. In today’s CNN Money, an interview with economist David Rosenberg featured this distortion:
The crisis came about because of excessive leverage, a misunderstanding of credit quality as linked to securitized products, and a general lack of appreciation for risk. Thanks to years of deregulation, the government created a wild west and never established a strong sheriff. The head of the Fed was a libertarian who believed that all economic problems would always be solved in the private sector and that the private sector would always adequately price risk. The degree of supervision never matched the extent of the regulation.
A few observations:
Ron Paul, who is undeniably America’s (if not the world’s) most famous libertarian at the moment, has always opposed Greenspanism as a central threat to both liberty and economic prosperity. If both Paul and Greenspan are libertarians, then the word has no meaning.
Rosenberg blames the crash on a “lack of appreciation for risk” and “excessive leverage.” Like all establishment economists, Rosenberg never bothers to ask why these two phenomena occurred. Could it have possibly been due to the Fed’s repeated forcing down of interest rates that in turn led to mal-investment based on the wrong conclusion that savings and investment were plentiful? The common answer is just that it was greed, and for some magical reason, greed was worse all of a sudden in the middle of the last decade. Animal spirits will surely be blamed since animal spirits are the great deus ex machina of bad economics.
Rosenberg also states that Greenspan believed that “the private sector would always adequately price risk.” Where was this fabled private sector? If by “private” he means the sector in which the government and its Fed set the interest rate, the money supply, reserve rates and lending standards, then the word “private” has no meaning either.
Update: Mr. Engelhardt raises a good point in the comments below. Rosenberg does seem to make a very weak attempt at providing a “why,” although Rosenberg’s explanation has almost nothing to do with his stated problems. He blames lack of regulation, yet, why should lack of regulation cause a private company to take on excessive leverage or to misunderstand credit quality or risk? The two aren’t connected logically without invoking animal spirits since in an unregulated free economy, private owners are very much preoccupied with minimizing risk. No one cared about risk because of the Fed’s policies and because everyone knew that the feds would bail out the GSEs. So sure, lack of regulation was a problem, but it was the governments and quasi-government agencies that needed to be reined in, not the “private” organizations.
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It’s really important to call attention to the falsehoods and BS in economics — and to call attention to the specific individuals who trade in BS, made up “facts”, lies, etc.
It’s just as important in economic science as it is in global warming “science”.
Good point Mr. Ransom, especially the comparison of economics with mainstream climate “science.” I have commented for several years that the same disregard for truth, objectivity, and scientific integrity that has permeated the mainstream economics profession since at least the mid-1930s is also increasingly driving mainstream analysis in certain areas of the natural sciences.
Calling Alan Greenspan libertarian is like saying George Bush II was man that believed in peace. Actions are what matter, labels and rhetoric are meaningless.
“If both Paul and Greenspan are libertarians, then the word has no meaning.”
Fixed:
If EITHER Paul or Greenspan are “libertarians”, then the word has no meaning.
Ron Paul is not a libertarian. No I don’t mean he’s registered with the RP not the LP (which is also not libertarian). He advocates the Constitution, not as a step towards liberty (as some sort of strategy), but as a goal in itself. The Constitution is most definitely not libertarian. No State is. Ron Paul advocates a State, he is therefore not a libertarian.
Libertarian means you advocate liberty. It’s right there in the name. People who advocate something other than liberty are not libertarians, they’re “something-else-ians”.
Liberty means self-ownership. A monopoly with fiat jurisdiction obtained/maintained by aggression is completely incompatible with liberty.
Whether a libertarian society (i.e., a state-less, voluntary society) is feasible, or just a utopian pipe dream is irrelevant to whether someone can honestly be called a libertarian or not. You either advocate self-ownership and are a libertarian, or you do not and are thus, not.
Paul may be a classical liberal, minarchist, Constitutionalist, and/or a “true conservative” (whatever that is), but he is most definitely NOT a libertarian.
That he’s the world’s best known “libertarian” indicates the unfortunate consequence of allowing (by acquiesence) those who support some degree of slavery (non self-ownership) to be embraced as “libertarian”.
I’m not advocating savage hostility towards non-libertarians who want to falsely accept claim (or accept) that name, simply that the truth be told to avoid having the word “liberty” and “libertarianism” be muddled and confused beyond useful meaning.
“Libertarian leaning” may be useful to those who are partial advocates of self-ownership (which is still advocation of partial slavery). But whatever factor prevents full embrace of liberty is what truly defines their ideology since their action indicates their highest value. Pragmatarian perhaps? I’ll-accept-violence-against-innocents-since-I’m-selectively-ignorant/inconsistent in my understanding-of-how-the-market-works-and-that-makes-me-scared-and-me-being-scared-justifies-my-aggression-ian?
Much adieu about nothing. I am often fascinated by people who can take a simple sentence and expand it into a novel. Bravo.
While I definitely agree with the ideas behind the post, I do have to point out one inconsistency. You claim: “Like all establishment economists, Rosenberg never bothers to ask why these two phenomena occurred.”
This isn’t true. In the quote that you give us, Rosenberg says:
“Thanks to years of deregulation, the government created a wild west and never established a strong sheriff.”
He clearly believes it was deregulation that led to excessive leverage and a lack of appreciation for risk.
And, to some degree, he’s right.
As you point out, our system of Federal Reserve intervention + Deposit Insurance creates “a monster” that doesn’t care about risk. Some regulations can help “cage the beast” – but those regulations got eliminated in the late 90s and early 00s. So, the beast ran rampant.
Obviously, the best solution is just to kill the beast – by eliminating the Fed and Tax-subsidized Deposit Insurance – but that doesn’t make it any less true that the very poorly designed deregulation that happened did play a role in the problems we are facing now.
It is correct that financial deregulation and, I would add, other actions taken by the federal government channeled the problems into specific areas, largely the housing market and certain financial instruments tied to this market.
However, and this cannot be repeated often or strongly enough, without the massive credit expansion that the Fed deliberately undertook in the early 2000s, the above-noted problems would never have materialized at anywhere near the current levels. The Fed’s credit expansion is the root and driving cause of the economic crisis. It is this fact that the large majority of economics and financial professionals will not acknowledge, I believe due to ideological, academic, and professional considerations.
Let’s assume for a moment that government “de-regulated” the financial industry to the point that “the beast ran rampant.” The other side of government restriction/tyranny is government privilege/favors. The financial industry was encouraged/protected in bad investments. This could not happen in a libertarian free market. “Freedom” without its corresponding responsibility is no better than responsibility (regulation) without freedom. Neither can achieve free market results.
No, he is not right to any extent. FRB + Greenspan guaranteed a bubble in some form. Anything else is smoke.
Ron Paul is not a libertarian. No I don’t mean he’s registered with the RP not the LP (which is also not libertarian). He advocates the Constitution, not as a step towards liberty (as some sort of strategy), but as a goal in itself. The Constitution is most definitely not libertarian. No State is. Ron Paul advocates a State, he is therefore not a libertarian.
He is, you anarchist trolls!
“Ron Paul advocates a State, he is therefore not a libertarian.”
Sorry, but your mistake is thinking all libertarians are anarchists. Not so. Ron Paul would fit into the ‘minarchist’ branch of libertarianism (which, btw, includes people like Mises and Hayek), most of whom are constitutionalists.
Please excuse a bit of pedantry, but I’ve seen the same spelling error too often.
Those who reign pull on the reins. Best not to confuse the two words.
Thanks.
MB and scineram,
Rather than begging the question, would you please explain how advocation of a state is compatible with liberty? Again, I’m not looking for a diatribe on the infeasibility of anarchy, just an honest explanation of how self-ownership (liberty) is compatible with aggressive monopoly (which, by nature, is asserting ownership claims on those in its fiat jurisdiction).
If advocation of liberty (self-ownership) is not what makes one a libertarian, could you please explain what does?
Mises and Hayek weren’t libertarians. Classical liberals, yes, libertarians no.
Yes, of course, there are a million colors in the libertarian rainbow. Just because Ron Paul is a little bit deluded doesn’t make him not a libertarian. And while on far shakier ground, even our own “Domestic HUMINT” Russ, Randians, Noam Chomsky and Bill Maher are all advocates for certain kinds of liberty.
terrymac: oops. my bad.
mpolzkill, the only “liberty” Noam Chomsky supports is to liberate our wallets from us! Also, I agree with the article – Alan Greenspan does not deserve to be in the same sentence as Ron Paul.
I don’t pretend to have any deep insight into how economic systems work. But could all of this simply be overthinking? Could a sense of community been lost in the wake of Cowboy Capitalism, Economic Darwinism, the horrible disconnect from Main Street and Wall Street and maybe one of the most ancient defects of man–greed. Maybe taking on undue risk isn’t because the Fed attempted to keep inflation in check but that much of the private sector said to itself “I’m getting mine and the rest of you can pound salt.”
I’m a regular guy making an hourly wage but with my limited understanding of things; I see exploding productivity and hourly wages remaining flat in the last 30 years.I see wealth distribution close to Herbert Hoover levels.
And whether it’s libertarian, fed policy, and an endless array of other intellectual gymnastics–who cares? In the end will it let 80% of the American population have more than 20 cents of every dollar of America’s wealth? I don’t think so-economic theories be dammned. Not until a culture shift, a monumental mindset stirs to life, will it make a difference for so many like myself. It was suppose to be a rising tide but they got it wrong–it was a tsunami and most of America didn’t or couldn’t get to safe harbor.
Oh, I’m with you on that, “crljones”. Though we do both want out from under the state-corporation partnership, though, and (an aside) we both despise William F. Buckley and most all he stands for:
http://www.youtube.com/watch?v=VYlMEVTa-PI
And of course, I did not wish to associate the great Ron Paul with those other four in my jest.
isn’t there a regulation against billion dollar ponzi schemes?
maybe once the sec proves it can handle one of those, we’ll let it police the “big boys”. until then, legislating regulations is nothing more than a rain dance.
also, why would the regulators also not be subject to “animal spirits”?
jack
“… that much of the private sector said to itself “I’m getting mine and the rest of you can pound salt.”
This is a basic concept of economics. People work together for their own gain. Adam Smith is not loved here but his clarity of the “invisible hand” statement is.
“…In the end will it let 80% of the American population have more than 20 cents of every dollar of America’s wealth? ”
What is “America’s wealth”? There is no such thing, only the wealth of the individuals that live in America.
The economic system described by Austrians does not attempt to help individuals; but free them from any impedance of helping themselves.
“Just because Ron Paul is a little bit deluded doesn’t make him not a libertarian.”
Then what does make him a libertarian?
“Randians, Noam Chomsky and Bill Maher are all advocates for certain kinds of liberty.”
What “kinds” of liberty are there? I’m aware of only one. You own yourself and I own me. Anything other than that is not liberty.
Of course, if you are a kind owner of another person, you will grant them certain “liberties”, but those are simply permissions from a lenient master.
Liberty, it’s boolean. You have it or you don’t. You advocate it or you don’t. With the scarce resource of your body, someone has the final say of how it will be used. Is that you or someone else? If it is not you, then that other person (or group of persons) is your owner.
To say “you have freedom to do whatever you want except decide how you will or will not provide for protection of your property (because my minarchist State must monopolize that “service”)”, is to really say, “I own you and I’m 99% lenient in my allowances to you, my property”.
Does it really matter if Ron Paul is an anarchist or not? I think we can all agree that moving towards constitutional government is a step in the right direction.
Sorry, Jack, but without government-regulated protections, selfish greed has its limits. No business can stay in business without satisfying a sufficient number of customers without such protection, because all voluntary trade requires that both parties benefit from it, or the trade won’t occur. The financial industry is no exception.
Economic theory matters because it can tell us what the real problem is–government intervention. When enough Americans realize this, then the system can be changed for the better. That may not be the change in mindset that you’re looking for, but there it is.
What makes Ron Paul a libertarian? IMO, he’s the greatest popularizer of the philosophy of liberty in the history of the world. I’m getting choked up here just thinking about all the kids he’s influenced and has introduced to the great libertarian philosophers these last couple years and imagining what they are going to do.
“What ‘kinds’ of liberty are there?”
There is a continuum. The U.S.S.A today is still not the U.S.S.R., it is more libertarian. America ca. 1789 was a hell of a lot more libertarian than today (for white men, anyway).
In my my examples of admittedly non-stellar libertarians: Russ wants to live with the gangsters he knows, because he’s afraid gangsters he doesn’t know will take over and be even worse for his personal liberty. Both he and Randians clearly think liberty is more for Americans than non-Americans. That’s a special kind of libertarianism that makes me sick. Noam Chomsky wants liberty from fascism. In my dream of Federalism he can have a commune. I think he’s a decent sort, just an impossible egghead; I’d send him food. And finally, Bill Maher wants the liberty to snort coke off of strippers in broad daylight, or something. That’s a kind of liberty…I don’t want it in my neighborhood, but I think all scumbags should get their own Vegas/Amsterdam. A mutual defense federation of Republics. Community standards. And you move to the one with the most anarchists. It’s the direction we need to move in. It’s the only way. Competing republics are the only way that the theories of anarchy can be proved for all the faint of heart and worse.
I was reading Ayn Rand’s “Capitalism: The Unknown Ideal” a couple weeks back and went through three sections written by Mr. Greenspan. One section, “The Assault on Reason” argues that the element of goodwill has been removed from business by government assuming the responsibility for quality control regulation. He argues that government organizations such as the FDA reduce the need for companies to build up their own reputation with their own quality controls; their primary goal becomes simply to meet FDA requirements. Logically, this should extend to the Fed, who removes the bank’s quality control in the lending process. Nowhere in the article does he argue it being a matter of the right people (such as himself) being put in charge of these government organizations but rather implies that they should not exist.
In analyzing the current crises in retrospect, he argues that he did make the mistake of “not having enough regulations on the market.”
The most curious chapter by Greenspan was titled “Gold and Economic Freedom”. Here, he explains why the medium of exchange must be a luxury commodity and why it came to be gold.
It gets really interesting and a bit Austrian. He speaks about the Fed’s actions circa 1927:”The excess credit which the Fed pumped into the economy spilled over into the stock market–triggering a fantastic speculative boom.” Later, he laments that: “The abandonment of the gold standard made it possible for welfare statists to use the banking system as a means to an unlimited expansion of credit.” So how did he believe the banking system should operate?: “A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy.” …While not optimal, Mises does argue that such a Free banking is the next best thing and would essentially push reserve ratios up rather high.
This article was written in 1966 and he did not become chairman of the Fed until 1987; perhaps he simply had a change of opinion? In Ron Paul’s book “End the Fed,” Paul speaks of a meeting with Mr. Greenspan in 2000, where he questions him on this particular article: “..opening the small booklet to his “Gold and Economic Freedom” article, I asked if he would autograph the article for me, which he promptly did. As he was signing the article, I asked if he would like to put a disclaimer on it. Astoundingly he answered that he had just recently reread it and wouldn’t change a word of it.”
The essence of Austrian economics revolves around the concept of human action. Men often vote and argue for issues contrary to their action on the market. Praxeology deals not with opinions stated through verbose rhetoric, but rather the real and observable actions of man. By this measure, no libertarian words uttered by Mr. Greenspan could erase his sanctimonious statism.
“There is a continuum. The U.S.S.A today is still not the U.S.S.R., it is more libertarian. America ca. 1789 was a hell of a lot more libertarian than today (for white men, anyway).”
I think you need to specify WASP men not just white men. The amount of prejudice to those who practice Catholicism, Judaism and other variations of Judeo-Christianity was largely ignored until 1800s.
Dennis,
Agreed. Without the Fed’s credit expansion – as far as I’m concerned – there is no “beast” to cage.
Michael A. Clem,
Also agreed. In a truly free market, we would have neither the “cage” (the regulations that were eliminated), nor the “beast” (the Fed, Deposit Insurance, expected bailouts). However, I think that, as advocates of liberty, we do need to be somewhat careful in what we call for first. As long as we have the beast, we shouldn’t worry about the cage – nor should we advocate getting rid of it until the beast is slain. Otherwise, the beast gets out, screws things up, and people call for a cage again. The ultimate goal is having neither cage nor beast – but the order in which we eliminate them matters – both economically and politically.
Caley McKibbin,
I think that’s true to some extent – but I don’t know that I’d say that it’s “necessarily” true. As a practical matter, every cage has an “escape hatch” (through which bubbles will form), but that doesn’t rule out the logical possibility of there being a cage that doesn’t have one. Actually, I think regulatory capture provides a good explanation for why we never see this mythical unescapable cage, but that’s another matter.
My point is just that Rosenberg is at least a bit correct – in that deregulation played a role in the way the situation worked out. Naturally, he missed the more fundamental points. But, that doesn’t mean that he’s totally wrong.
KP, fine fine, the point is today we can really be proud to all be equal in our peasant state.
Please watch and consider these two videos, one after the other, and think about what has happened to us in just the last 40 years:
http://www.youtube.com/watch?v=6EIEKe8fVmg
http://www.youtube.com/watch?v=riboisae0JY
“peasant state” isn’t right. “State of serfdom”, I don’t know if that does it either.
Ron Paul constantly extols mises.org and lewrockwell.com. If he was truly a minarchist and had no sympathy for anarcho-capitalism he would not do so.
I suspect that Ron Paul advocates constitutionalism because he sees it as a practical step toward which people can be led without stressing them too much with “forbidden” thoughts about anarchy. The state education system still pays a certain amount of homage to the names of the more libertarian of the founding fathers, if not their ideals. By re-educating Americans about the ideals of these men, he is hoping to open an avenue into people’s minds which will lead them in the right direction, away from the authoritarianism of today and towards the more free regime of the old USA of the time of Jefferson and Washington.
The danger that Ron Paul runs is prolonging people’s belief in the supposed efficacy of voting in democratic elections. The last place that anyone should seek to fix America’s problems is in the polling booth. The powers that be could not give a damn if a lot of Americans vote for an outsider or a third party candidate as a “gesture”. All they need to do is ensure that a reasonable plurality of saps and stooges show up on voting day, and for everything else there are crooked voting machines and various instruments of backroom deal-making and kneecapping.
Brian,
We, of course, all have our standards of measurement but my favorite for determining who I consider to be a true Libertarian is Murray Rothbard’s “button pusher” test:
Ron Paul is a button pusher. I believe he wants anarcho-capitalism in his heart but he just hasn’t been convinced it can work — or doesn’t dare come out in favor of it for fear it would tank his political career.
It’s amazing that this guy is an economist, he obviously hasn’t been paying attention these last few years. I’d like for anybody to point out some serious deregulation wave that helped create or compound the crisis by means of misunderstanding the risk behind many of those toxic financial instruments. Secondly, how hypocritical is it of these so called “economists” (and other establishment Left types who believe in these ideas) to somehow blame this crisis on “over leveraging.” Leveraging in and of itself is not something that some centralized authority can deem appropriate. Our own state’s are already heavily in debt as it is, and not only for their deemed “investments.”
In Greenspans book The Age of Turbulence here’s a passage on page 297 where Greenspan describes his debate with Li Peng:
“He responded by asking how, if the United States was so devoted to unregulated markets, I could account for Nixon’s wage and price controls in 1971. I was delighted that the knew to ask. Not only was he connected to the real world, but also, for a reputed hard-liner, he sounded almost reasonable. I acknowledged that price controls had been a bad policy and that their only saving grace had been to reaffirm that such controls don’t work. I added that we had not been tempted since.”
Thus does Greenspan (who at that time was controlling interest rates) say that we don’t have price controls.
Calling Greenspan a libertarian is the intellectual equivalent of calling Obama a Marxist. Anyone who spews either laughable falsehood has proven that they are too ignorant to participate in such discussions of libertarianism vs. statism.
And isn’t this the reason why the utopia of a stateless voluntary land will never happen?
What you do end up with is people squabbling over the semantics of if someone is more or less as pure in thought as the ideal!
Meanwhile, big government is changing history, repeating the chant of ‘blame the bankers’ and slowly erasing their responsibility for this whole mess.
Eventually, it will take a new generation of historians to point out that it was the actions of government around 100 years ago which actually exaggerated the effect of the boom and bust cycles which have marked the 20 and 21 century.
The answer? Stop squabbling and start pointing at that elephant!
@ Brian Drake:
If you who believe that minarchists are Statists and that anarchy is the only way to go…what would be your opinion of a situation in which an anarchist is being preyed upon by another anarchist who has greater financial resources. Would it not become a situation where the anarchist with greater financial resources would have power over the anarchist with fewer financial resources and would therefore be able to strip that first anarchist of their rights?
To: Brian Drake
I am a libertarian in the way you are defining the term. However I would advise a reading of Rothbards “Ethics of Liberty” if you have not already. In the last section of the book he explains that even “anarchists” must use strategy to achieve their desired ends of total liberty. He warns libertarians to not become divided between those that call themselves the “true” principled defenders of liberty and those that give in and simply except a short term liberty gain (a politician). However he also explains that a libertarian politician would be satisfactory if he never gave into voting for anti-liberty bills, thus Paul remains a libertarian because of the fact that he has not voted for an anti-libertarian bill. Paul’s ideal society would likely be the type Rothbard argues for, but Paul is using strategy to get there (he has read Spooner and understands the problems with the Constitution). Paul is a libertarian, even if he has decided to use a political strategy to achieve his goal.
Hello Jack,
I feel that these guys are too intellectual sometimes myself. But if you do not make the effort to understand Human Action, you will be swept into the meat grinder without ever understanding how it happened.
When we had a gold standard and no central bank, money gained value as people went about their day working. So the mattress made sense because your savings were growing in value as you slept. A gold standard is a tough situation for bankers, though, because you are asking people to pay back future dollars that are more valuable than the ones lent.
The Fed is the US Central Bank whose purpose is to expand money and (government) debt. The result is a dollar that looses value forever. It is easy to get people to borrow, because the future dollars that they pay back are less valuable than the ones lent.
So the conclusion is that the Federal Reserve benefits Wall Street and Washington DC at the expense of everyone. While the gold standard benefits everyone, especially the poor.
Most people do not have the chutzpah to tell the truth like Rothbard and Mises. and Ron Paul for that matter. You all know how the mainstream tried to ignore and punish them. Greenspan is just weaker and has less character than our heroes.
When he became chairman he tried to slow the rate of growth of money and debt and the debt bubble began to deflate. So he did a quick about face and provided all the liquidity they could ask for. He got a “soft landing” and became a genius. Then when the economy began to heat up and Greenspan was supposed to “take away the punch bowl” he did not. Instead he came up with irrational exuberance. In other words, “we all realize that this is a bubble but the fed cannot do anything about it. You have to save yourselves.” So when he testified before congress that he did not understand why businessmen did not save themselves, he was not saying the free market does not work, he was admitting that the Fed does not work.
mpolzkill wrote:
“…Bill Maher wants the liberty to snort coke off of strippers in broad daylight, or something. That’s a kind of liberty…I don’t want it in my neighborhood, but I think all scumbags should get their own Vegas/Amsterdam. A mutual defense federation of Republics. Community standards….”
What? You think that the force of government should be used to enforce “community standards” (whatever those are)? And now Daffy Drake’s “binary” libertarianism is trumping your relatively wimpy variety? HAHAHAHAHA!!!!
Face it, Polzy, you’re just like me. You want the government to use force to protect you from certain things. We just differ on the niggling details of what those things are.
And welcome to my world of not being quite libertarian enough to pass muster in the eyes of some self-righteous asshole. HAHAHAHA!!!!
Russ,
I’m a panarchist. People have every right to have masters if they choose. I don’t know of any True and Orthodox libertarianism (though we *do* have to coalesce philosophically and learn to think tactically or the Marxoid intellectual bodygaurds of the power elite will eternally eat us for breakfast). I am profoundly dissatisfied with the way most anarchists think around here. With all the general theorizing on the “way it should, or will be”, besides sounding “Buck Rogers”, they come off as wanting some kind of central world “anarchy”, intellectually authorized by master libertarian eggheads, (CWAIAMLE) (haha) (and they apparently gave you that impression, which is what I have always feared they’re doing to everyone). That would be absurd, of course. There is almost no talk of what I see to be the only way towards maximizing liberty for homo sapiens: federalism. And I laid that out a bit above. And all of this is what I’ve believed for years.
“You think that the force of government should be used to enforce ‘community standards’”.
Not “should”: *will*. There are always going to be natural elites, I just don’t want every one of them in the world to either have to all the time go to D.C. with hat in hand or commit suicide (by booze or bullet, their own or one of the Pentagon’s).
“niggling details”
!!
wait a second: !!!! Your most notorious “detail” is how you want the Federales to start in with Domestic “HUMINT”. That is one step away from a Hitler type situation and a little bit away from what I’ve called for here. You’re going in the opposite direction.
“And welcome to my world of not being quite libertarian enough to pass muster in the eyes of some self-righteous asshole. HAHAHAHA!!!!”
I don’t think I care nearly as much as you do about what anyone says about me. This isn’t some game, I *really* want to stop being a serf who is robbed to murder people (with the lovely bonus that the relatives of the murdered want to kill me for my troubles).
Overly opaque and complicated financial instruments were the result of regulations and increased, inflationary induced, economic activity. The first Basel accord placed extremely restrictive and ad hoc regulations on the banking system–thus the banks side-stepped the regulations with innovation (natural market process). I would also like to add the speculation is the rational reaction to artificially reduced yields on loans (pushed down by the monetary authorities), which is why banking has moved away from loans and moved towards funds. Thus, the government takes full blame. Any concession placed on the market is an unnecessary one.
Regulation/deregulation has nothing to do with a relative overproduction of producer goods–they can only channel where the newly created funds flow (fairy dust capital). And blaming the financial system for this crises is akin to blaming your thermometer for your fever. It’s absurd and unscientific.
Also, Brian Drake is one of those “radical” libertarians (the “real” libertarians) who believe that they are the defenders of “true freedom.” He will attack those who aren’t as “radical” as he is (those who don’t buy into the overly naive and self-refuting doctrine of Utopian anarchy). He ignores the fact that anarchy has been, and always will be, a power vacuum. But when you’re as “radical” as he is, facts don’t matter.
EIS: “anarchy has been, and always will be, a power vacuum”
That depends on the powers possessed by individuals if and when they don’t have a cop standing over them. If people don’t or can’t govern themselves, and they fight against those who because of this would govern them, then yes, that’s an unwelcome state of anarchy. This is all a conceptual problem; voluntarism vs. coercion should be the way to look at it so as to avoid these confusions we’re having with Drake here. Contra Drake, and for instance: of course Ron Paul is for the maximum amount of voluntarism that he can conceive of. Russ is too, I think (for Americans anyway). The problem is, you guys aren’t conceiving as sharply as I’d like, haha.
Credit expansion for the sake of itself and without any sustainable economic value lying underneath is indeed wrong. If we leave the market regulate itself, Smith’s ‘invisible hand’ should be directing it. However, what we can do, is minimize agency problems and enhance transparency. And, most of all, not support escalations of greediness as has happened before 2001 and 2008.
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