Coming global economic collapse?

[KendallJ]

I think that you make excuses for business I think they don't deserve.

Maybe this is the premise you should check.

If you check the original statement that drew you into this discussion, you will see that it was a statement made about the actions of businessmens relative to the actions of govt as a cause in this mess.

One does not effectively advocate for the free market, by continually adding the disclaimer "I realize not all businessmen are (rational, blameless, perfect... you fill in the word), but..."

The free market can and will fucntion properly to clean up this mess, even though not all businessmen are (xxx). The free market would never have created this mess on its own, even though not all...

I am not making excuses. I am defending the free market, clearly and completely and unequivocally. The market fixes this stuff. The errors made by businessmen are understandable (not blameless) given misdirection in the market. The primary FAULT (ethical, moral) for the broader crisis here lies with the govts policy of economic intervention.

The Brook article states this exact same thing. "The Government Did It"

[~Sophia~]

One does not effectively advocate for the free market, by continually adding the disclaimer "I realize not all businessmen are (rational, blameless, perfect... you fill in the word), but..."

This is false. The rightness (or not) of particular decisions is separate from the rightness of a particular economic system. It is very important, in my mind, to separate the two.

In a totally free economy people will also make mistakes and fail if they go against reality (knowingly or by honest error - even if you are not immoral the metaphysical consequences of error are still there). In a mixed economy, if they go against reality they may not fail for a short period of time (due to artificially created short term conditions) but they will in the long term. The reality is one. The rules of a free market, it's forces are known. There is no free lunch.

But the free market economy is the right and only moral system (for reasons I don't have to go into here).

The free market can and will fucntion properly to clean up this mess, even though not all businessmen are (xxx).

True.

The free market would never have created this mess on its own, even though not all...

Are you talking within America or a global economy?

Big business would/could colapse in a free market as well.

I am defending the free market, clearly and completely and unequivocally.

We have not been disputing the rightness of a system here but the correctness of and responsibility for particular decisions of particular businesses.

The market fixes this stuff.

Yes.

The errors made by businessmen are understandable (not blameless) given misdirection in the market.

So you have been saying but that is the point of our dispute.

The Brook article states this exact same thing. "The Government Did It"

Why do you mention this? Appeal to authority?

Edited September 18, 2008 by ~Sophia~

[softwareNerd]

One does not effectively advocate for the free market, by continually adding the disclaimer "I realize not all businessmen are (rational, blameless, perfect... you fill in the word), but..."

Sophia's post can hardly be considered to be in a context where she was advocating for the free-market, and therefore where she has to be wary of leaving polemical openings to her opponents.

[KendallJ]

Sophia's post can hardly be considered to be in a context where she was advocating for the free-market, and therefore where she has to be wary of leaving polemical openings to her opponents.

Thanks Snerd. my comment was in the reverse sense. I don't want my advocacy of the free market to continually be confused with blanket sanction of any particular player in it. i.e. I don't want to have to be nitpicked because I didn't add the disclaimer to my statements. It is unnecessary.

[KendallJ]

Sophia, if you want me to continue the debate, you'll have to go back to the original statement..

I find it frustrating that you several times now have interrupted a discussion with a statement made as an aside. Such statement usually pulls a single line or two of my posts, and in this case so far it has been wrong. It is then followed up with by a clip and snip quote reponse with a sentence or two responding to each to parse me out. I haven't seen you yet give a complete concise statement of what we're discussing here, but your comments about why you seem frustrated with me lead me to belive that you simply misunderstood my statement to mean something that it did not.

Please go back to the original statement and explain to me what you think it means, and what you think tha I am saying that is incorrect. I'm tired of the snip and quip methodology as I think it does not force you to be clear and concise, and allows you drop context if a previous statement of mine was relevant. It's also epistemologically tiring. A few simple paragraphs starting with my statement and your position on it is all I plan to deal with.

[softwareNerd]

Thanks Snerd. my comment was in the reverse sense. I don't want my advocacy of the free market to continually be confused with blanket sanction of any particular player in it. i.e. I don't want to have to be nitpicked because I didn't add the disclaimer to my statements. It is unnecessary.

Gotcha. Perhaps there needs to be a separate thread for the different discussion.

Clearly, most businessmen are rational and and not out to "scam" people of "take advantage of the system", in the sense that typical GOP and Democrat commentators make them out to be. Mozillo of Countrywide and Raines of Fannie are the exceptions by far (and there too Raines can be thought of more as a government employee than a business executive).

Also, clearly, the primary remedy to the problem we're facing today is to change the system, not the businessmen. People like Fuld of Lehman are likely to play hard and win big in whatever system they find. They did not cheat, according to the rules of the current system. Give them a truly capitalist system and they won't cheat; they'll play according to those rules. Similarly, buyers who were fooled into thinking real estate will go up forever (thanks to Greenspan) weren't really trying the cheat.

What I see Sophia as saying is that while they may not have knows better, some of them ought to, and either way they bear some responsibility for their false ideas (even if they are good people, making an honest error of knowledge). As you suggest, maybe that ought to be a separate thread.

From the news, it appears that the government is going to do something to formalize their last few actions. They might put some organization in place that will sit around and bail people out. They'll call it something like "Reorganization Corp.", but I'll think of it as "Uncle Paulson's Helicopter". Slowly, the consensus will build around a more explicit declaration that the U.S. government will inflate its way out of the current mess. And what about the consequences a few years from now? Well, Keynes famously answered that one: "in the long term we'll be dead!" (read: "out of office, and maybe even running the Reorg Corp")

[softwareNerd]

With every day, the Republican president and his Republican friends prove how anti-free market they are. Now, they have banned short selling in almost 700 companies. As intelligent market commentator James Grant commented, the government is banning people from acting on their views of reality, having threatened bans on free-speech (using the term "rumor") while they're about it. We even have ex-SEC head, and Clinton appointee, Arthur Levitt, worrying that the GOP guys are going too far in curbing market forces!

Now, our GOP Treasury Secretary has come up with a plan to "save" the stock market. The government will buy the low-quality mortgage-backed securities that other people aren't buying. Of course, stock prices rose yesterday, and probably will today, with this prospect. This was a bad day for investors like Buffet, who were waiting to pick up companies cheap, and for Wells Fargo who has made many millions more than it's competitors by judging risk to be underpriced the last few years, and was looking to buy some of them cheap. Every day our GOP thinks of more ways to take money from the rich guys whose judgments were vindicated and hand it to the rich guys who turned out to be wrong. I suppose this is the GOPs "compassionate conservativsm".

This might be a step into conspiracy theory area, but with Sept 30th coming soon, the GOP Treasury secretary might have wanted to pump money into the market to get the bottom lines up on the quarterly 401-K statements that will go out. For many people, that is the main way they measure the impact of the market on their lives. This year, an honest Sep 30th 401-K could have been a last straw, with the elections looming. But, what about the long term? .... Oh! we've covered that already.

Edited September 19, 2008 by softwareNerd

[KendallJ]

The short seller is one of the most valuable agents in a time like this, as are those agents with liquidity who are waiting for prices to get to the point where their liquidity is a good investment. The govt is strangling even further the free market mechanisms that would clean up this mess, and that would have prevented it in the first place.

The fallout from this will be felt in the economy for months if not years. None of us feel it yet, but we certainly will.

Philosophically, anyone who thinks that this is somehow better than the rampant socialism of the Democrats should think again. At least with the Democrats, capitalism doesn't get the black eye it's been dealt in the last few weeks. It may be a long time before we see Reagan-esque deregulation again.

The Randex Blog is full of stuff like this: http://www.ajc.com/opinion/content/opinion...ucked_0917.html

Edited September 19, 2008 by KendallJ

[eriatarka]

Out of interest, are there (m)any respected economists/academics who agree with the 'The Goverment did it' theory? I'm not trolling but there seems to be obvious conflict of interests issues with most of the popular press articles Ive read on the subject (people who work in finance writing columns blaming the government isnt unexpected) so it would be interesting to see what economists thought.

Edited September 19, 2008 by eriatarka

[gags]

The short seller is one of the most valuable agents in a time like this, as are those agents with liquidity who are waiting for prices to get to the point where their liquidity is a good investment. The govt is strangling even further the free market mechanisms that would clean up this mess, and that would have prevented it in the first place.

The fallout from this will be felt in the economy for months if not years. None of us feel it yet, but we certainly will.

This ban on short selling is absolutely the wrong thing to do. The Bush Administration's response is reminscent of the Roosevelt Admin's disasterous policies during the Great Depresssion. They took a major financial downturn and made it into a prolonged economic dislocation that crippled the country for a decade. I also see that the New York AG, Andrew Cuomo is promising to prosecute short sellers. This is eerily similar to the prosecutions of legitimate businessmen that took place during the 1930s.

Out of interest, are there (m)any respected economists/academics who agree with the 'The Goverment did it' theory? I'm not trolling but there seems to be obvious conflict of interests issues with most of the popular press articles Ive read on the subject (people who work in finance writing columns blaming the government isnt unexpected) so it would be interesting to see what economists thought.

Thomas Sowell has written about it:

http://www.realclearpolitics.com/articles/...rs_part_ii.html

Walter E. Williams has written about it:

http://www.gmu.edu/departments/economics/w...%20Creation.htm

[KendallJ]

I'm sure if you search what would be normally Libertarian academics you'll find the thoughts.

As a side, Steve Forbes has been almost prescient in pointing out the mechanisms at work as far back as 3 years ago. His biweekly editorials have been banging the same drum for that whole time, and a priori he's been pretty right the whole time. Here's his latest, and it sits responsibility squarely on monetary policy.

He's mixed when it comes to what the FED ought to do in crisis situations, but in terms of fundamentals he's very good, and very pro-market.

http://www.forbes.com/opinions/forbes/2008/1006/017.html

(It's why everyone who's interested in capatalism ought to have a subscription. )

[Ordr]

I usually find Mises to be a good, clear source for economic insight:

http://mises.org/story/3111

[eficazpensador]

I usually find Mises to be a good, clear source for economic insight:

http://mises.org/story/3111

Do these idiots think that suspending short selling is going to magically help these companies? I mean, do they really think that they can substitute their irrational whims for reality? This is scary stuff.

[UptonStellington]

Larry Kudlow (CNBC's Kudlow & Company, and an economist recommended by Yaron Brook in his investing lecture), though he doesn't make any bones about his conservative politics, has blamed the government: http://newpaltzjournal.com/?p=913

[softwareNerd]

Actually, many commentators have blamed the government. The ones named above are those who blame the government and want a move toward capitalism, instead of all these rescues. [Add James Grant -- of Grant's Interest Rate Observer to the above list.] However, there are many who blame the government, while thinking that more government intervention is required. In my estimate, the vast majority blame the government and certain selected businesses, but think that more government intervention is required. I haven't seen too many serious non-political economists and investment-professionals who say that government did not have a role to play.