This article in the Independent by Brendan Keenan addresses the issue of blame for the economic crisis. He just about gets it right. The Invisible Hand of government (aka Central Banks) was acting to deceive the Invisible Hand of the marketplace. This is the topic for my lecture for tomorrow’s conference at the Mises Institute. He also draws the connection between Richard Cantillon’s economic analysis as the foundation of Adam Smith’s invisible hand which I first pointed out here. Cantillon discovered how the invisible hand of the marketplace works. Smith just provided a rhetorically successful title.
Source link: http://archive.mises.org/16694/cantillon-the-invisible-hands-and-the-economic-crisis/
Cantillon, the Invisible HandS, and the Economic Crisis
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How Are Adam Smith And Al Gore Alike?
I am trying to find a contemporary figure who copied the method of Adam Smith, who claims to originate something even though he practiced the complete opposite. Adam Smith – the statist – attaches to himself laissez-faire!
Who I come up with is Al Gore! If there was significant human-caused global warming then Al Gore would be one of the worst perpetrators but the pseudoscience that grew up around his claim was not without the influence of his political extortion tactics. Likewise, Adam Smith did his share of manipulation to conjure up a false image.
Keynes set the foundation for Gore.
The beauty of a free society, without an all powerful government handing out favors, is that we would not have to care much about how much credit people are using. Say some company BankCardCo is loaning too much money to Mike. Mike can’t pay it back. Who cares, except BankCardCo and its stockholders? BankCardCo will be out of business soon, and its stockholders will be poorer, but it doesn’t affect me much.
Sure, I would prefer that BankCardCo had made better decisions, but that is their business. Almost all companies like BankCardCo will make good decisions, if they lack government backing.
The bug in the soup is that we do have an all powerful government, contrary to our Constitution, that hands out favors. They are willing to bail out BankCardCo, and did so before our eyes, using our money. Now, bad decisions are encouraged (moral hazard) by the political guarantees of the government. When BankCardCo’s lose money, the cry goes out that we have to save them (sniff, tears).
They are robbing us blind, under the guise that they are only taking the money of the other guy (the rich guy). Wake up. They are taking the future from us all and stuffing it into their pockets.
Our recession was promoted by collapsing home prices and mortgage losses, after an extended period of government providing easy money and guarantees to support Fannie Mae, Freddie Mac, and the entire banking system. The government is still doing this. The bad housing policy was designed, encouraged, and required by government, mostly by Democrats.
The government’s ability to issue guarantees is an unlimited, off-budget, extremely dangerous power. Guarantees were granted to Fannie Mae and Freddie Mac (among other institutions) under the table, who used them to borrow and lend massive capital resources. Used unwisely, to build houses that could not be paid for, this has caused our financial crisis.
Here is what the guarantees mean: “Heads I win, tails you lose”. The government (politicians) made good on its guarantees with the bailouts. Motto: “Government – We’re the Solution”.
See → We Guarantee It – The Government Caused the Economic Crisis
My dad would always say that the first rule of business is “never spend your own money.” Were these politicians held accountable for every dollar they gave away their actions would surely differ. Bailing the banks out and the public doesn’t win. Bail out the auto industry and public doesn’t win.
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