I am glad that I was able to amuse you a bit. If you have any evidence that contradicts my statement, I am all ears. Based on the data that I have seen, the various measures of the world's economic freedom have increased steadily through the years.
When All Else Fails Blame "Free Markets"
- Thread starter Tsing Tao
- Start date
Using the gov't to put your competitors out of business cannot be called laiz fair.
The term used for it is crony capitalism.
Evidence? The fact that Central Banks across the globe have, for the first time in modern history (or ever on this scale) engaged in direct and total intervention/manipulation of the markets - that would be my evidence. Trillions and trillions of dollars of fiat printed, massive bailouts on unprecedented scale, Bond buying by nation's own central banks, interest rate suppression, risk distortion like never before, a federal government caused housing crisis, direct regulation fail, etc. and things are getting better.
Why don't you show me where you come to that conclusion?
I am in no way absolving the banks for their role(s). My objection is to any claim that what we have is an any way a "free market" despite all the evidence to the contrary.
It's reasonable to surmise that the government "coercion" of banks into making subprime loans may have had something to do with the recent financial crisis. I have read a number of opinions to that effect. Apparently it is wrong, however, and Martinghoul is correct. The data does not support the idea that fair housing laws had a substantial role to play in the subprime loan fiasco.
Those who have studied and written widely on this topic seem to be overwhelmingly of the opinion that the subprime loan debacle was driven by the huge demand for CDOs created by investment banks, which in turn created a demand for new mortgages to be bought and repackaged. The demand was great enough that it could only be met by lowering underwriting standards.
The collapse of the CDO market was ultimately a result of too free a market, i.e., one lacking the right kind of regulation or enforcement. Consequently, your opinion that, " A free market would have never put that capital at risk in the first place" seems incorrect. Alan Greenspan, the chief regulator of mortgages at the time, has admitted that he was wrong to have thought that banks would never act against their own best interests. After Greenspan was informed of the declining standards in the mortgage industry, he took little action because he had an abiding belief that markets would self-correct if left alone. He was wrong.
There were, of course, those in the investment banks that knew that the quality of mortgage backed CDOs was being misrepresented. They took advantage of this through the then essentially free,i.e., unregulated, credit default swap market.
If we accept that these quotes are essentially true must we therefore conclude that:
a. unless we can prove Plato wrong, the libertarian dream is an impossible reality.
b. what is needed is fewer and more enforceable laws.
Here, below, is a link to a blog column which states with humor and a flawless argument why our libertarian sensibilities are nothing but wishful thinking.
http://examinedlife.typepad.com/johnbelle/2004/03/if_wishes_were_.html
(Thanks to Ricter whose reminding me of the Washington Post Article on Polanyi led me to the link above.)
I'm not following...
I have to keep going back to the question of why the heavily regulated banks went broke and the completely unregulated hedge funds, who invested in the same kind of products, came out for the most part ok and were actually asked by the regulators to bid on the leftovers of the banks to help salvage the mess.
There is little doubt that the forcing of the banks to make loans where they didn't want to resulted in losses. There is no doubt that investment banks that put together cdo's used low underwriting standards. There is also no doubt that the gov't did not make fannie and freddie be prudent. Barney Frank is on videotape proving that.
What do they all have in common? All these entities were either heavily gov't regulated or had an explicit or implicit gov't guarantee backstopping them. Why would anyone be prudent with their capital when someone is going to bail them out?
To say that the free market was the problem you have to conveniently overlook all these facts. And that was the m. o. of the books written blaming the free market. That and using bogus studies. Like the study that showed the banks who were accused of redlining and were forced to make loans in low income areas didn't have any higher percentage losses than other types of mortgage underwriting. Of course this study was supplied by the federal reserve, which was to be considered proof of its legitimacy. But the federal reserve refused to supply the underlying data that could be used to confirm this study. And people who attempted to replicate the study found that there was no way it could have been legitimate. The results of that study were ridiculous. Low income, minority, inner city neighborhoods didn't have any higher default rates than others? Yeah, right. They're bulldozing entire neighborhoods in Detroit.
Forget all that and just ask yourself why the hedge funds didn't suffer the same result as the banks. And keep in mind that the 'fix' that gov't has hoisted upon the banks is to stop them from trading like hedge funds. As if that was the problem. The problem was that they traded like hedge funds and they had a gov't backstopping them, which hedge funds do not.
Or "c", better people.
But given that "good" people have held only a razor-thin edge over "bad" over ten thousand years, I wouldn't hold my breath.
The essential point......
libertarian sensibilities are nothing but wishful thinking
I would add something obvious, govt and regulation is just a tool that can cut both ways.
libertarian sensibilities are nothing but wishful thinking
I would add something obvious, govt and regulation is just a tool that can cut both ways.