Is the United States no longer the global beacon of unfettered, free-market capitalism?
In extending a last-minute $85 billion lifeline to American International Group, the troubled insurer, Washington has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, but it has also probably undercut future American efforts to promote such policies abroad.
“I fear the government has passed the point of no return,” said Ron Chernow, a leading American financial historian. “We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams.”
“For opponents of free markets in Europe and elsewhere, this is a wonderful opportunity to invoke the American example,” said Mario Monti, the former antitrust chief at the European Commission. “They will say that even the standard-bearer of the market economy, the United States, negates its fundamental principles in its behavior.”
Mr. Monti said that past financial crises in Asia, Russia and Mexico brought government to the fore, “but this is the first time it’s in the heart of capitalism, which is enormously more damaging in terms of the credibility of the market economy.”
In France, where the government has long supported the creation of “national champions” and worked actively to protect select companies from the threat of foreign takeover, politicians were quick to point out the paradox of what is essentially the nationalization of the largest American insurance company.
“Today the actions of American policy makers illustrate the need for economic patriotism,” said Bernard Carayon, a lawmaker of President Nicolas Sarkozy’s center-right governing party, UMP. “I congratulate them.”
An appropriately funny comment from MikeN: “If it moves tax it, if it keeps moving regulate it, and if it stops moving subsidize it.”
Modern day “Free Market Capitalism” is just “Privatize the Profit, Socialize the Risk”.
I’m going to post now and RTFA/thread later – – but – – I’ll wager the hole in a doughnut that no one has mentioned that under classic models there can be no free market in the brokerage house transactions that have been in the news this week.
Informed buyers and sellers dealing at arms length with ready alternative available sets the stage for when the free market can work. This does not describe “debt swap guarantees” at all.
No–any kind of linking of “high finance” to free market or capitalism concepts is total BUNK. In essence, these higher level financial instruments are in fact all a type of “regulation” on the free market from which they derive==but without the regulatory orientation.
I would go on to an analogy of a person driving a car he owns vs driving a rental, but I’ll check the thread first to see if this outlook has been throughly covered? In my experience, this baseline issue is always assumed, when just the opposite is the norm.
#34, Bobbo,
I don’t follow your thought on this. Would you care to expand it?
Thanks.
Here’s what McCain said, “The Federal Reserve should get back to its core business of responsibly managing our money supply and inflation. It needs to get out of the business of bailouts,”
Obama is in Florida consulting with his econ advisor’s from Freddie & Fannie. It will be interesting to see his position…
#35–Fusion==it is all context. This thread is Captioned “Is free-market capitalism dead?” in the context of all the bail-out taking place and the general discussion of whether or not all the bail-outs/guarantors should be more regulating or less regulating of the underlying transactions taking place.
Everyone is on record saying the system was going to fail.
Obama said more regulation (or closer regulation or better regulation as you may please) but actually did nothing just like everyone else.
McCain said less regulation or even NO regulation was better and that is in fact what happened. He recently changed his position on this core strength of our economy.
And yet the discussion continues today as if, let me emphasize AS IF, these financial markets have anything to do with a free market where the concept of more or less regulation is apt. High finance is NOTHING BUT A REGULATORY FUNCTION. They act as traffic lights. Traffic lights need to be regulated==red and green at the right times. Unregulated allows green lights in cross traffic, a guaranteed smashup, and thats what we have.
Does anyone think that house loans should be given to people with No Income, No Job, and No Assets? If not, does anyone think that the mortgages should be bundles up and sold as security instruments with the Federal Government guaranteeing payment on default?
Well, if you are for the “free market without regulation”–yes, you are.
Pretty stupid in my book and it springs from the basic error of not recognizing when the CONCEPT of free market applies, and when it DOES NOT.
I want a highly regulated market for all those areas of human activity that is not appropriate for free market enterprise. I want the traffic lights to be regulated at intersections and not open to competition between the opposing corners.
#37 You’re right.
Money supply (which includes the whole Fed, etc.)
needs to be highly regulated. The Fed should be abolished. Monetary policy and supply should ONLY be done as part of the Gov’t. Like the Constitution says…
Hmmm, maybe we shouldn’t disregard that document.
#30, You do realize of course, that by putting the people on the hook for over 5 Trillion dollars, you just signed your kids’ slave papers, right?
When I said “the government can’t afford to do that,” I meant exactly that. Where do you think they are going to get the money to pay for it? Answer that question and you will see that the rest of your post makes about as much “cents” as your 401k that you speak so highly of.
[snip the rest of your whining]
Great Depression
Read this.
http://www.amatecon.com/gd/gdcandc.html
In a nutshell, this entire problem is caused not by a free market but by a government that thinks it can do a better job at managing your money than you can.
Are you bankrupt? Why not? Because you live within your means. The government doesn’t. Democrat, Republican, it doesn’t matter.
#38–Paddy==there is nothing wrong with delegating duties to people with greater expertise BUT the responsibility always stays with the principals. Thats where Congress has failed us==complete and total incompetency in favor of holding onto power. “Time to be partriotic”–I agree. And the only way that can be demonstrated is to vote every incumbent out of office. They have all failed. Rail against government inefficiency and then vote for pork? You are out of here! ((The only saving grace and high mark McCain has.))
Whats funny is that Congress (Harry Reed)) admits they don’t know what to do. Its not a new game though, its just a game that makes the dancer pay the fiddler and congress doesn’t like that.
So==whats funny is, yes, economics is difficult and reality oriented. The market does exist outside of Washington Rhetoric and it does respond eventually to all bad decisions. No appeals to patriotism will counter a declining dollar because of irresponsible guarantees made. Gosh, 4 times now I haven’t gotten to whats really funny===so, Congress authorizes the Federal Reserve because economics is so difficult, and the Federal Reserve goes off the tracks making a basic error that Econ 101 or children playing marbles in the school yard would not do. You don’t allow Group A to benefit from deals made and make Group B bear the burden for mistakes made. Is that over regulation or very complicated?
Is free market capitalism dead? Well, depending on your definition, was it ever alive?
#40 “there is nothing wrong with delegating duties to people with greater expertise”
In the case of “coining money” it is illegal per the Constitution.
The Fed is technically unconstitutional. Sorry, you’d have to rewrite the doc to make it legal.
#41–Paddy==arguing the Constitution doesn’t allow something that is well established is=====irrelevant.
#42 “arguing the Constitution doesn’t allow something that is well established is=====irrelevant.”
It’s relevant IF you want to fix it. Otherwise, you’re right, it is irrelevant.
Kinda like saying discussing the 1st Amend is irrelevant if it becomes well established that people are being jailed for speaking…
When Chrysler wanted a bailout, didn’t they have to go to Congress for a loan? Same thing when Mexico was bailed out under Clinton. Why the automatic payouts now? Isn’t this what almost got President Grant into trouble?
#44 “Why the automatic payouts now?”
Pelosi is currently pushing through a bill to do the bailouts. Check your local coverage.
#45, yeah and she isn’t being cheap with her requests either – food stamps, welfare, longer unemployment, etc.
The bill is coming due.
#46 Our money isn’t really worth anything anyway…
we regulate markets for the same reason people build flood walls because s**t like this is gonna happen.
in fact, the reason why the usa is the world’s economic hub is precicely our regulatory regime,
it’s pretty damn good, not too tight, not too loose — don’t think so? ask yourself how much you trust putting your money in russia, where whatever regulation there may be is just plain ignored, sparky
the free market arises from the very fundamentals of human society — we’re born to be capitalists, but anarchy is bad for banks.
#48 “we’re born to be capitalists”
Actually, strictly speaking, capitalism is the practice of making money from interest off of loans and manipulating the monetary systems.
Free markets can be divorced from this. You can have a free market to PRODUCE & sell goods and services that doesn’t involve making money without producing anything…
#49 actually, maybe in amish country you have a point, but the fact is that in our industrialized society, money is in and of itself a good, bought and sold for a profit.
unless every individual is directly involved in the production of some tangible product (no, middle-mgmt doesn’t count), your argument is arcane at best.
#50 “money is in and of itself a good, bought and sold for a profit.”
And hence the problem, as paper money is only supposed to represent something else. When you stray from the basics you lose.
I have no idea how the Amish relate though.
#37, Bobbo,
Does anyone think that house loans should be given to people with No Income, No Job, and No Assets?
I don’t know that anyone would authorize a mortgage in a case like that. I’ve heard about these loans yesterday (or day before) for the first time. My suspicion is that they are fraudulent. In other words, a straw argument.
If not, does anyone think that the mortgages should be bundles up and sold as security instruments with the Federal Government guaranteeing payment on default?
Again, another straw argument. The Federal Government has not purchased any loans. They advanced money to keep large mortgage companies afloat.
I agree with the rest of your post. Thank you for clarifying that for me.
#39, LibertyLoser
I am not going to waste my time reading someone’s opinion when they didn’t take the time to sign it.
You do realize of course, that by putting the people on the hook for over 5 Trillion dollars,
You do realize you obviously don’t understand the first thing about macroeconomics.
When I said “the government can’t afford to do that,” I meant exactly that. Where do you think they are going to get the money to pay for it?
The government CAN afford to do it. They could pay for it simply by removing all those Bush tax cuts for starters.
Are you bankrupt? Why not? Because you live within your means. The government doesn’t.
The government, and you may include local, state and federal, are not businesses, nor are they families. They may be run in a business like manner and have the compassion of a family, yet that will still not make then either. Go back and read your gr. 6 Civics again.
#41, Cow-Paddy,
In the case of “coining money” it is illegal per the Constitution.
The Fed is technically unconstitutional. Sorry, you’d have to rewrite the doc to make it legal.
Wrong and wrong. I don’t know where you get your information but it is wrong.
#44, Lyin Mike,
When Chrysler wanted a bailout, didn’t they have to go to Congress for a loan?
Chrysler never got a loan from Congress.
Same thing when Mexico was bailed out under Clinton.
Same thing, didn’t happen.
Isn’t this what almost got President Grant into trouble?
No. He was a Republican. His administration was corrupt. That got him in trouble and set back civil rights 100 years.
Mike, you really should think before trying to write something.
#52–Fusion. Straw Argument? So, reality actually is worse than you imagine:
http://en.wikipedia.org/wiki/Ninja_loans#Ninja_loan
Mr. Fusion:
Here are some more examples to describe what you refuse to believe.
Redlining is discrimination against people trying to buy homes, finance businesses, or obtain bank services in minority neighborhoods. The term comes from banks allegedly drawing red lines on maps in the early 1970s to mark neighborhoods where they had offices to take deposits and provide bank services but where loans would not be made. Since the mid-1970s the megamergers that have transformed the banking industry have exacerbated the problem of redlining by reducing the number of bank offices in minority neighborhoods, often leaving only check-cashing stores and pawn shops to provide bank services.
At the same time, the megamergers have alleviated the problem of redlining by creating favorable conditions for increasing the flow of credit to minority neighborhoods. The 1977 Community Reinvestment Act gives community groups, like the more than 600 nonprofit organizations organized into the National Community Reinvestment Coalition, the authority to challenge the megamergers if the banks involved do not have good records of lending in minority neighborhoods. To avoid such challenges, banks have established partnerships with community groups to expand mortgage lending, new and rehabbed housing, and small business lending. The 1992 Federal Housing Enterprises Financial Safety and Soundness Act has also been helpful in this regard, by requiring government-sponsored credit agencies (Fannie Mae and Freddie Mac) to purchase more mortgages that banks issue in minority neighborhoods.
http://www.answers.com/topic/redlining
The following law pretty much makes it impossible to deny a loan unless the person is white. Am I saying that non-whites are riskier? No, I am saying if you are not white, you can’t be turned down. If you do, the government comes in and sniffs around until they find something wrong. It is better to just give the loan and pass it up to F/F Mac. What the 1992 re-interpretation did was say, “I don’t care if no one in the area can afford the housing. You have to loan them money anyway.” Why? Because otherwise it would be called “indirect discrimination,” in which case you are discriminating.
http://www.usdoj.gov/crt/housing/title8.htm
So, the combination of the unconstitutional Federal Reserve artificially keeping interest rates low and the Fair Housing Act requiring banks to give risky loans, it was only a matter of time before all this came crashing around our heads.
Look through your rose-colored glasses all you want but ultimately, the cause of this is attempted social engineering and NOT free trade.
#53,
I am not going to waste my time reading someone’s opinion when they didn’t take the time to sign it.
Wow! I feel honored that you read my stuff, then 🙂
His name is Ross Nordeen. Stop having other people do your research for you.
Now you can read it.
You do realize of course, that by putting the people on the hook for over 5 Trillion dollars,
You do realize you obviously don’t understand the first thing about macroeconomics.
When I said “the government can’t afford to do that,” I meant exactly that. Where do you think they are going to get the money to pay for it?
The government CAN afford to do it. They could pay for it simply by removing all those Bush tax cuts for starters.
Ah! So you are leveraging what your children plan to make when they grow up to pay for today’s mistakes. Do you really look your kids in the eye and say, “I am supporting a plan that will help millions of people but you will have to work six months out of the year for free?” Abusing your children like that, you should be ashamed.
Are you bankrupt? Why not? Because you live within your means. The government doesn’t.
The government, and you may include local, state and federal, are not businesses, nor are they families. They may be run in a business like manner and have the compassion of a family, yet that will still not make then either. Go back and read your gr. 6 Civics again.
And THAT is the problem. Too many like you treat the government like a “magic piggy bank.” Get your hand out of my pocket!
#54 “Wrong and wrong. I don’t know where you get your information but it is wrong.”
Because you say? Please site the part of the Constitution that allows any but the Congress to issue legal tender…
Didn’t think you could show it.
With the Repukes RUNNING THE MONEY PRESS OVERTIME – ESSENTIALLY 24/7/365 – FOR THESE BAILOUTS, they will have to admit that “We are all Keynesians now” – just like NIXON !!!
#60 “With the Repukes RUNNING THE MONEY PRESS OVERTIME – ESSENTIALLY 24/7/365 – FOR THESE BAILOUTS, they will have to admit that “We are all Keynesians now” – just like NIXON !!!”
The presses have been running 24/7 ever since the Income tax amendment was passed & the gov figured out that having a tiered income tax bracket system + inflation = more of the total wealth goes into the Treasury.
#56, Bobbo,
I understand your point but disagree. Anyone may loan money to anyone else. For example, I could loan you money even though your situation was truly dire; no job, no home, no income, huge debt load etc. I would be a fool to expect repayment anytime soon though.
No responsible financial institution would loan someone money when they know there is little to no chance of being paid nor would anyone else buy such a loan. To take out a loan without revealing those facts would fail, to lie about your facts would be fraud. To sell a loan that had no chance of being repaid without full disclosure would probably also be a fraud.
How many loans like this were made and how many are in default, I don’t know. I seriously doubt it is very many. Just because one existed or was made does not mean they were common or easy to find. That is the basis for my strawman point.