The current financial crisis

13 October 2008

I forcefully reject the thesis that “unrestrained capitalism” caused this fiasco. It has been unrestrained government meddling which laid the foundations for the meltdown. The extremely loose monetary policy established under Greenspan’s Federal Reserve left banks feeling giddy with liquidity. Bush cheerleading riskier mortgages and loan terms certainly exacerbated the problem.  So then how is it due exclusively to the “eeeeeeeevils of capitalism?” Intelligent, cautious investors like Buffett and Soros wouldn’t have touched the SIVs, CDSs, and other sundry repackaged garbage with a ten-foot pole. Are they not also representatives of the capitalist system? Bank of America is another example of a corporation that has largely stayed out of trouble. It recently purchased Merrill Lynch for a song and is now the largest bank and brokerage in the world.

This article in MoneyWeek, from two years ago, points out that all of this was not inevitable. Unfortunately, living beyond our means has become the norm in the US. The article states that if the US had the savings rate of most European countries, it would be in a depression. Just because the government makes available the rope to strangle ourselves doesn’t mean we have to avail ourselves of it. The most damning statement of the Fed: “…the Fed kept the banking system liquid enough to continue an aggressive credit expansion.” Stated another way, the Fed enables the rich to get richer on the backs of the poor. Frankly.

Lew Rockwell says it much better than I can: “[I]nterventionism doesn’t accomplish its stated ends. Instead it distorts the market. That distortion cries out for a fix. The fix can consist in pulling back and freeing the market or taking further steps toward intervention. The State nearly always chooses the latter course, unless forced to do otherwise. The result is more distortion, leading eventually, by small steps, toward ever more nationalization and its attendant stagnation and bankruptcy.

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2 Responses to “The current financial crisis”

  1. zokilavabe said

    Well, troll-that-calls-itself-omgdidisaythat, the reason I didn’t approve your comment is because it was poorly written with bad grammar and worse spelling. I had no idea what your point was. If you want to be taken seriously, learn to express yourself.
    And if you check out my earlier posts from 2007, you’ll see a number of comments that explicitly contradict my opinions. I am all about free speech and the frank exchange of ideas, but let’s do it like educated folk, hmmm?

  2. Nina said

    Rockwell is not the messiah; I’m sorry to say, but he does have a few rather good points. Interventionism is always arbitrary and self-serving and there is always an unknown, unanticipated result which sends the masses scrambling angrily in the opposite direction. But the U.S. will never learn, feeling so just, so morally on-high. He makes for fascinating reading and is thought-provoking, however.

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