Democrats & Liberals Archives

The Free Market: What's The Real Debate Here?

Did we defeat Communism with Communism? Marxism with Marxism? I think the most salient test of the Republican and Conservative rhetoric at this time is to ask whether we considered the policies they’re attacking as socialism, when they were in effect before in this country. For virtually all the Cold War, New Deal economics and big government were there. This WAS capitalism, when we made those comparisons. What made Free Markets free wasn’t liberty from regulation but from the economic controls that typified Soviet Economiic Policy.

In the Soviet Economy, everything was planned out. It wasn't government encouraging this or that, it wasn't government setting a standard. It was government making all the decisions, from the distribution of materials to the value of the currency, to the pushing of certain products. You didn't have thousands of individual companies making decisions under the protection and policing of a set of laws and regulations, you had the government literally giving the orders on everything, for everything.

Not even in the heaviest days of New Deal economic policy did we see America approach this level of Central Planning. Our system rejected much of that, and what we ended up with was an economy where we all had freedom, within reasonable limits to make our own economic decisions. We could make national plans and go for national goals when we had to, or wanted to, but most choices were left up to the consumer, to the capitalists.

The Republicans want to talk about Liberal economic policy as if it's the opposite of the Free Market, as if putting restrictions on dangerous financial practices is the equivalent of Stalin's Five Year Plan, or Mao's forcing people to smelt metal in their front yards. What reasonable argument can be made for that? What about the deceptive practices and shoddy bookkeeping that got us into this mess is indispensible to the free market? What makes a market a free market is that people are free to decide what to buy and sell. I don't see how forcing people to tell the truth about how their companies is doing is contrary to the spirit of that. I don't see how allowing monopolies to form, allowing companies to become so big that their failure guts our economy is in the spirit of the free market. I mean, isn't the point of a free market that there be enough participants so that not everybody's taken down by the same boneheaded decisions? That people have enough choices of who to shop with that if one guy lowers his prices or improves his service, the others feel compelled to follow suit?

Part of the reason we can have a free market economy at all is the success of the New Deal in stabilizing the market, the success of generations of good regulations which have cut down on the fraud, the overconsolidation, the abuse of labor and the underpayment and undercompensation of workers. We raised the education level through public schools, to the point where we had a decent, thriving middle class, where people could get ahead and get out of poverty. Republicans grumble about punishing success when they speak of the coming phase out of the Bush tax cuts. Some even talk about "Going Galt", a bit of silliness I'll cover later on in another post. But what success can most people realistically aspire to? What's the greater chance, moving up from poverty to the middle class, the lower middle class to the upper, or each of us getting rich? If you're ambitious enough to become rich, I don't think a few percentage points of the top bracket of your income is really going to get in your way.

But what about the policies of the last few years have been good for the milder, more realistic ambitions that most people will have some likelihood of acheiving? The Middle Class has shrunk under the previous administration, and millions have descended into poverty. This has been the Republican Party's rewarding of success.

We have to decide whether Capitalism is meant to be a vehicle for the rich to get richer, or a means for an entire society, rich and poor, middle and working class alike to prosper. I think the logical position to take is that an economy that only works well for the ambitions and needs of the few is not an efficient economy, nor a stable one. The capitalism, the free markets that won the Cold War won that cold war because it proved that you didn't have to resort to a centrally planned collectivist economy in order to do the most good for the most people. By keeping the system fair to the middle class and poor, Liberalism smothered socialism in the cradle, prevented the need for more heavy-handed intervention and long term economic centralization.

The Republicans must realize that their laissez faire economics paved the way to this current situation. They led the charge to give the banks the ability to consolidate, making the economy less robust in the face of their failure. They led the fight to prevent the new, emerging financial instruments from being regulated, to keep those markets dark and opaque to regulators and investors alike. They led the fight to change accounting rules so that businesses could mark up profits they hadn't even truly made. They trusted that the markets would take care of the cheaters and the financial morons, that competition would cleanse the pondscum out automatically.

They didn't allow that businesses practices would simply take the shape of their container, flowing anywhere they were allowed to flow in their quest for profit, and that if that allowed cheating and fraud to occur, well that would be what would happen. They didn't realize that the market doesn't really judge beyond the balance sheet, and that some, in their competitive zeal, hide things from the market or engage in certain trickery in order to manipulate it.

So we've come to this: a point where the most dangerous question you might ask of your financial asset is " what is this damn thing really worth?"

Any market where a due-diligence attempt to establish the worth of an asset can lead to such devastating upheaval is not a stable or sustainable economy. It's not unlike those ungainly, unsightly stacks of furniture and miscellaneous items you see in the cartoons that the characters build in the attempt to get some place high, and the results of this, much of the time, aren't much different: Crashes and resounding thuds, much to the disbelief of those involved.

In no real world market can you prevent all fraud, all deception. There will always be hidden corners of corruption and double dealing. There will always be those who won't keep just one set of books. The question is, do you create an environment that encourages and rewards their misbehavior, or do your raise the risks for their behavior, raise the disincentives?

We need to restructure this economy so that it's no longer so fragile and top heavy, to where a sector or a corporation can fail without taking out half the country with it. The capitalism and free market economics of the nineties and the Bush years proved definitively that they weren't up to the challenge. Hopefully, we can bring about a new version of our old Free Market economy that can get us prosperous on a more sustainable basis, and once again save capitalism from itself.

Posted by Stephen Daugherty at March 13, 2009 9:02 AM
Comment #277563


Your vision is high. It would be a lot easier to accomplish if we were not embroiled in a world economy. I’m afraid the middle class cannot survive. The odds are far to great against such survival, as this collapse and multinational trade will collude to keep recovering a middle class from forming.

What I’m more afraid of is that this has been the master plan all along. It is hard for me to accept that our leaders have been too dense to see this coming…

Posted by: Marysdude at March 13, 2009 11:20 AM
Comment #277570

I find it very easy to believe they were that dense. People who have strong opinions (myself included) can be very dense indeed!

It would be easy to accomplish if we were simply in the position of not having to consider world trade, but in truth, we had to consider it before! Failing to consider it is one of the reasons our economy had so much trouble; protectionist policies reduced our exports by triggering trade wars.

I would rather hope and be disappointed than be cynical and always have my expectations confirmed. Cynicism breeds despair, and despair breeds inaction.

Posted by: Stephen Daugherty at March 13, 2009 1:14 PM
Comment #277572

This is probably the most pivotal debate we can have at this juncture. And I do not see one’s political persuasion being very material right now.

But, since the question will naturally arise, my politics are on display in my blog under the entry, “A Letter to My Sister on Plato Republicanism.”

My issue with what is going on right now, does not differ much, I believe, from what others are feeling who are looking at this standing aside from political ideology (btw am not inferring that this is the thrust of Stephen’s post).

Bush made a hash of domestic issues, national governance and leadership. That said, the Congress and their push for and refusal to take any action to correct the subprime loan expansion adventure, was equally damaging (see post, “Political Criminal #1 for 2009”).

We need change in this country. But what we need to discourage is shouting from bunkers, coming to hasty closure on key issues, revenge motivation,and allowing political criminals do more harm than good.

Thanks and would love to hear from anyone, or perhaps form a Facebook or MySpace group?

Indiana Oracle :: The Truth is Hard to Find

Posted by: Indiana Oracle at March 13, 2009 1:47 PM
Comment #277573


But Obama’s plans do not look much like the new deal. Old Democrats voted time and time again to keep over 200,000 troops in Germany alone.

In addition, When Democrats were last in control of Congress the only time Federal expenditures were over 20% of GDP was during WWII.

Obama has plans to radically up the amount of federal spending way past what your party has supported.

There are some big backlashes on the way in the markets.

Just today the Chinese are expressing concern over federal default. Wow less than a month after a new president launches his budget outline and our Bankers (the chinese) are publicly expressing concern over out credit status.

You are being told no.

Also Obama is not as popular as you propose. He is about as popular (or a little less popular) than Bush II was at the same stage of his presidency.

What you have going for you is that the public overwelmingly blames Republicans for this financial mess and wants your party to fix this mess. (more regulation)

It does not want massive federal spending as Obama proposes.

Add these three things up, and hear the message.

1. Obama is dropping in the polls.

2. Obama already holds the record for the largest market decline ever for a new US president.

3. Chinese are publically calling into question America’s ability to pay for it’s debt.

4. (I know I promised three). Four months after election Obama still does not have a fully staffed Treasury department, and is bring criticized abroad for it before g20.

Kill the liberalism for now and fix the economy.

It’s the economy stupid.

Posted by: Craig Holmes at March 13, 2009 1:58 PM
Comment #277579


5. You own party says it does not have the votes to pass Obama’s budget.

Why blame the Republicans when your party doesn’t have the votes?

Posted by: Craig Holmes at March 13, 2009 2:23 PM
Comment #277590

The idea that this is Obama’s economy is a great dishonesty. YOUR side spent trillions on wars and tax cuts, and led the greatest reversal of equity(middle class to rich)in modern history. And do not try to tell me that lowering taxes doesn’t cost money. It’s like saying that a cut in your paycheck doesn’t cost you money. SURPRISE Republicans!!! We run on a progressive taxation system. When the tax rate for very rich people is reduced….it costs us revenue!!!

Obama inherited this. There are further cosequences for all the interest rate swaps and credit default swaps (insurance that is not called insurance, and so not regulated. Thanks republicans!) totalling……trillions? Tens of trillions? Hundreds of trillions? Where’s this money going to come from?

We are (little rally notwithstanding) about one inch from the precipice now. Imagine GM, AIG, and Citibank going down. Imagine the Dow falling another 2,000-3,000 points as a result. Imagine all those who have already lost sixty percent of their life savings completely losing their confidence in the economy and running, en masse, to withdraw the remainder of their investments. Thats how close we are to a total collapse of our economy, complete with a massive devaluation of the dollar.

Makes people standing on the sidelines sniping look a little silly. And this is not a manufactured crisis like Iraq. Are you getting that? That the entire country is at the edge?? Do we really need to act like children, and make the other side look bad?

Posted by: steve miller at March 13, 2009 4:18 PM
Comment #277592


Actually according to the Congressional Budget office tax revenues pre recession were just fine when measured by history. Well post WWII history.

I don’t ever recall saying this is Obama’s economy. I do think the latest sell of is his however since it occured when investors saw the real numbers in his budget.

On the tax cut issue here is why Bush’s tax cuts did not mean lowering revenue over time.

1. Reason one: Inflation. Tax brackets are not indexed for inflation. Without lowering taxes from time to time all our taxes go up as we move into higher brackets. Eventually (we may not live to see this), $250,000 will be the poverty level in our country.

2. Income gap. Because higher income workers were the ones who saw their incomes rise the last 20 years or so and because they make so much money, our corporate USA “marginal tax rate” stayed within the normal range.

In terms of Obama inheriting this,

Dems have controlled Congress for 2 years

the S&P was 1200 when he went ahead in the polls, 1000 when he won election 900 at the beginning of the year and 750 now. When do you want to start measuring? When do you take responsibilty?

And no it wasn’t “Republicans” that are responsible for all those terrible things, that is political crap. It was Congress and at least two presidents. Your party has played a huge roll in this mess.

Even so, what do you care? You have the votes just pass his plan. you have majorities in each house. Oh that is right Obama doesn’t have his own party on board.

I wonder why Obama doesn’t have Democrats on board?

I wonder why the Chinese are NOW expressing concern?

I wonder why Obama is slipping in the polls?

I wonder why he doesn’t have the Treasury Department staffed?

I wonder why he holds the record for the largest market drop of any new president in American History?

The reason is because he is extreme and the markets are reacting. I have hope for Obama. He will turn to the right and moderate. He has no choice. His banker is struggling with loaning him the money he wants, and he doesn’t have the votes in his own party to get the money from taxes. Obama is limited by the amount of money he can borrow and tax. Both sourses have said this week there are limits.

Obama is check mated. Since he has no other alternative, he moderates. When he does, the market will reward him.

Posted by: Craig Holmes at March 13, 2009 4:54 PM
Comment #277595

>Obama is check mated. Since he has no other alternative, he moderates. When he does, the market will reward him.
Posted by: Craig Holmes at March 13, 2009 04:54 PM


Reward him with what???…a bundle of derivatives? A broken market can hardly reward someone who is trying to repair it.

Posted by: Marysdude at March 13, 2009 6:10 PM
Comment #277596

Somehow the message has been missed by several posters here…the reason the market has fallen so radically is because it has been caught with its’ pants down (playing footsy in a bathroom?). Until the ‘toxic assets’ (what an oxymoron) are absorbed into the economy the market will never be anything except an albatross around our necks. That is why it is so important for our recovery to go forward. Quit sniping at the guy who just MIGHT be able to cause that to happen.

Posted by: Marysdude at March 13, 2009 6:16 PM
Comment #277598


Reward him with what???…a bundle of derivatives? A broken market can hardly reward someone who is trying to repair it.

First of all, it’s not clear Obama is trying to repair the market. It looks like he is both trying to repair the market and take adavantage of the market at the same time.

Remember Obama now holds the record for the greatest market decline of any new president in American history.

If Obama will do what Clinton did, and become a true fiscal conservative, he will be rewarded by a more positive market.

Right now he has to deal with the Chinese looking to pull back.

Somehow the message has been missed by several posters here…the reason the market has fallen so radically is because it has been caught with its’ pants down (playing footsy in a bathroom?). Until the ‘toxic assets’ (what an oxymoron) are absorbed into the economy the market will never be anything except an albatross around our necks. That is why it is so important for our recovery to go forward. Quit sniping at the guy who just MIGHT be able to cause that to happen.

No, the market is down because of fear about the future. You can track this by looking at the symbol VIX. Here is the link:

Right now there is as much fear in the market as there was after 9/11. The Obama budget IMHO is adding to that fear. Well the Trillion dollar deficits that last for many years are causing great concern. The market looks foward. Right now there isn’t much Hope out there.

Posted by: Craig Holmes at March 13, 2009 6:27 PM
Comment #277599

Plainly, by stating that the economy tanked with the presidency of Obama, the inference is that he has something to do with it. You go on to say so more clearly in you last post. So why bother to deny it =).

If tax revenues were so fine under Bush, why the huge (Bush ) deficit? Other than the mad militaristic war spending and shifting the tax burden to the middle class that is?

Look, there is just no spinning the facts. Surplus eight years ago. lower taxes (only for the rich, of course). Insane spending on an elective war. Huge deficit. Is this not so? Uh huh.

It’s amazing the lenghts you (and many other Repubs) go to in trying to “debunk” the “myth” that Bush’s tax cuts cost us big time. Do you not see that the factors you list, I.E. inflation and”income gap” don’t increase anything when you lower significantly the rate paid by the wealthiest. All other things being equal, we still took in billions upon billions LESS than we otherwise would have, absent the windfall for those among us who needed it the least.

As for whether Obama inherited the economic mess;
the die was cast when the housing bubble was punctured, when mortgage backed secuities nosedived, when the cds’ reared their heads. I could be wrong, but I think there may be much worse to come before much better. And while I agree fully that there was complicity on the Democrat’s part, I think that the party that stands for deregulation and big business may enjoy more ownership of this mess than the guys who stand for the middle class.

The idea that because the dems had a slight majority they “controlled congress” is laughable. When you say the dems don’t have the votes to passs the budget, are you correct? How do you get something that passes the Senate with 52 votes past a Bush veto? And as for the present budget….don’t you mean that they lack a filibuster-proof majority?

And regarding the effort to conflate chinese worry about their investment with Obama’s handling of the economy???? Again you try to call this Obama’s mess, without quite coming out and saying it. This was brought about by too much tax reduction, too much insane spending on elective warfare, and too few regulations on insurance that was not regarded as such. In other words, your thoroughly discredited republican management.

I notice you steered clear of the danger we as a country are in financially. I would too, if I were a republican. Be that as it may, we are only a couple of week’s bad economic news away from a crash that could overwhelm the fed’s printing presses. I must confess to a lot of head-scratching at the Republican response the meltdown that has been coming at us for years. No matter what Obama does (ok, short of cutting taxes), it ain’t good enough. Look, he’s been in office for almost two months now, AND THE ECONOMY IS STILL FALLING!! The guy is amazing, but not a magician. It took eight years for the economy to get this f#$$#d up. Give the guy a little time. Stop sniping from the sidelines. A difficult situation takes a little time to fix, an impossible situation (like we are in) takes a little longer=).

Posted by: steve miller at March 13, 2009 6:33 PM
Comment #277601

Craig Holmes-
It’s a pity that you only looked at WWII. You’d find that Roosevelt kept the GDP to debt ratio at about 40% throughout the Great Depression. This despite the fact that he had been handed a rate rapidly rising from 20 to 40%, and his immediate decision to spend a whole bunch of deficit dollars. More than anything, this is proof that such spending can stimulate an economy.

But then, you were probably not shown that or given that information.

I question the basic intelligence of blaming Obama for kneejerk economic reactions and current economic conditions. He’s had less than two months to do his job. Most people agree with this sentiment: eighty percent of the people believe this is something dropped in his lap, not a ball he’s dropped in his first months in office.

At this point, I would also question the validity of any argument that depends on the reactions of Wall Street executives. We’re talking, in most cases about the people who thought it would be a smart idea to leverage themselves to the eyeballs in the pursuit of short term profits. Do you really want to ask these people, who aren’t even necessarily good at reading the numbers, what’s economically wise? Bear Stearns was lead by a guy who was hired for his bridge skills. It’s like that Michael Lewis story I linked to a while back said: many of these people just did not understand what they were doing.

And you want us to fall back on their knowledge of what’s good for the market?

Obama is extremely popular for a President at this point, and people generally support him. Yes, people are telling him no. But that happens to everybody, and part of it is requiring what has to be enervating level of effort on your party’s part to maintain a solid resistance.

Let’s add the facts up: Obama’s dropped in the polls only after a withering attack by the Republican party, and most of that drop is made of Republicans. The Congress that backs him has literally doubled its rating, though.

Obama was handed some of the worst economic failures by his predecessor since the Great Depression. Reference the entry I got that immediately precedes this. Trying to hold this collapse against Obama is worse than just wrong or unfair, it’s silly.

As for the Chinese? The Chinese know damn well that pulling the plug on us is suicide for them. Maybe they’re letting us know they can’t be on call for more US debt forever, but if they stop supporting the US, what do you think happens to them?

As for the staffing issues? We’re dealing with a variety of issues, including an incredibly cooperative Republican party, and the fact that he’s going through these people’s pasts with a fine-toothed comb. Add to that the fact that they’re having to look for people with economist background who haven’t fouled their own nest in this current debacle, and it adds up to personnel problems.

As for Killing the liberalism? You mean go back to the conservative ideas that served us so well? This notion that liberal programs and ideas are inherently flawed by comparison is more rhetorical bluster than it is historical fact.

Posted by: Stephen Daugherty at March 13, 2009 7:07 PM
Comment #277602


If tax revenues were so fine under Bush, why the huge (Bush ) deficit? Other than the mad militaristic war spending and shifting the tax burden to the middle class that is?

Because Bush significantly increased spending as a % of GDP. And it wasn’t just on the war; domestic spending was dramatically increased as well. Republicans decided that spending was good and deficits didn’t matter. And look where it got them.

As for revenue, it did increase every year even after the tax cuts. But if you believe that most tax cuts create only nominal economic stimulus (certain cuts do better than others), then tax revenues would have been even greater had the rates not been cut.

Posted by: George at March 13, 2009 7:08 PM
Comment #277603

Some of the ‘fear’ in the market is because Obama included the costs of war and other items Cheney/Bush had hidden from view. I don’t care how scared the market is or how scared it gets, because as soon as things stabilize a little the market will respond. That is the best reason for NOT responding to market fluctuation..allow the market fluctuation to respond to you. What part of ‘volatility’ in the market don’t you understand?

Our problem is not so much with the market slide as it is with the reason for that slide, and that should be the target of our efforts. Those problems were and still remain in the stratosphere of high finance, i.e., AIG et al who still hold way too many valueless bundles of trash paper.

Confidence in the market and in America will return only when the problems associated with the criminal failures of GLB are solved.

I’ve seen nothing that would indicate Obama has done anything or left out anything that would cause the market to drop. The market is full of greedy little weak people and all they need is to be bottle-fed some news that says they can make a buck.

Posted by: Marysdude at March 13, 2009 7:17 PM
Comment #277604

I suppose the Jimbo Wales Bubbapedia quote was deliberately intended to irritate people, having this qualifier on the top of it:

“This article is in need of attention from an expert on the subject. WikiProject Economics or the Economics Portal may be able to help recruit one. (November 2008)
This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed”

Anyway, back to the European revolutions of 1848 where communism and fascism both originated. People there thought that we had a democratic system established by Andrew Jackson. It was mostly based on crooked elections and wonderful emerald isle immigrants whose descendants will be celebrating all weekend here after turning the river green in downtown Chicago.

When the railroads became dominant, we got amalgamation and capital with the help of the federal government, including the military. Then the balance of power here shifted back to the have mores, able to buy anything they wanted with the assistance of purchasable governments. By that time movements for social equality were viewed as foreign, and social equality was eliminated here by the duopoly.

The progressive movement put the brakes on, to some extent, and the depression made people who didn’t have a lot to do, more aware of what the government was doing, saving the free market system from its own excesses.

After WW2, some pursued an agenda cloaked within another agenda, until the change of regional parties gradually occured. In 1968 there were 2 Rpblcn senators from Illinois and 2 Democratic senators from Mississippi.

The current US government wants to prop up the same system, based on 19th century notions propagated by people who thought that only money mattered. If you could buy anything, no one should stand in your way, regardless of the willingness or effect on the majority of the population.

Posted by: ohrealy at March 13, 2009 7:48 PM
Comment #277611

Craig Holmes-

I don’t ever recall saying this is Obama’s economy. I do think the latest sell of is his however since it occured when investors saw the real numbers in his budget.

At best, that’s what I’d call a blind panic. Honestly, I hate it when people try to draw simple takeaways from the stock market. It’s this far removed from the reading of entrails. You’re either wrong, or you’re dealing with the fast twitch reactions of people who are more salesmen than economists or mathematicians.

On the question of Bush’s tax cuts, you’re having to explain why it looks like revenue was lowered, but it really wasn’t. You pick inflation, which was next to zero when Bush took office, and income gap, which is problematic because blue and white collar worker salaries remained relatively stagnant, while CEOs took home most of the money.

As for inheritance? The Democrats weren’t six months in office when the Mortgage Meltdown became public. Talking about the decline of the stock market since election means nothing besides pure coincidence. Would the markets blow such a massive hole in their own foot just to express displeasure at Obama’s election? I don’t get it.

There are policies that this crisis is traceable to, without which it would not be possible, and without Republican support and advocacy, not to mention their majority, would not have become law. Yes, some Democrats went along, but those were the conditions the Republicans set up, post Reagan, post-Gingrich, when it was your time to tell us what was good for the economy. When are you going to realize that being wrong with company is still being wrong? Where is the Republican’s sense of Responsibility for the economy they helped make this way?

I think people accept that Obama’s been handed a pretty lousy beginning by his predecessor, and that the effects of this beginning won’t go away soon. Unless Obama makes a truly catastrophic move, he’ll be FDR to Bush’s Hoover. There will always be some allowance made for him.

But I think people will begin to judge his response over the next year on his own. They’ll see the Bush economy as context, but will judge him on how he responds to it, and how much he can help recover America from it.

You wonder why Obama doesn’t have ALL Democrats on board. It may just be that you have the bad coincidence of a conservative Blue Dog running a budget committee, which gives him disproportionate power over the budgetary process. Still, nobody was saying Obama would get everything. Maybe, as a Republican, you see the failure of Obama to rule over his party with Bush’s iron fist a liability, but the Democrats aren’t that kind of organized party. There is a such thing as the separation of powers, and however temporarily embarrassing and confounding it is, it’s an encouraging sign. I doubt the blue dogs will get more than a few token concessions, and even if they draw some real blood, just what do you think are the chances that they won’t come with something far more liberal than what’s come out of Congress in ages?

I think its long past time that you start to look at the market as something else than this quasi-divine rewarder or punisher. Obama is hardly checkmated. We’re aren’t seeing half the game, and its hardly begun, and already you’re saying he’s a failure. Well thank you for taking so much time to come to this important conclusion!

I would think that on a matter like this, it doesn’t pay as a party member with an obvious vested interest in the next election to get ahead of the public consensus. Even if Obama does fail, nobody’s going to forget the wishing for failure beforehand, or the efforts to stymie his policies. They are not going to come to the conclusion that Obama failed on his own, because of the nature of his own policy. They are also going to see the self-interest there.

By not waiting, by being obstructive now, you’ve deprived yourself of the prologue, where you let the President go in his radical direction because that’s what the people want, and then, as that President fails, you pull people back with good, common sense analysis of the failures. The Democrats won over the Republicans in no small part because they became the party of policy analysis that the other side stopped being long ago.

Posted by: Stephen Daugherty at March 13, 2009 10:09 PM
Comment #277612


What I’m more afraid of is that this has been the master plan all along. It is hard for me to accept that our leaders have been too dense to see this coming…

I am inclined to agree with your assessment here. I stood by in amazement over the last decade or so wondering just how all that magic market money was materializing. Also how all that massive easy credit was able to flow into the households of most anyone with a job of any kind. Even a financial simpleton like myself was capable of realizing that all was not kosher in money land. In the end it all comes down to greed and allowing the greedy to openly scam and dupe anyone who might believe claims that there were more than enough riches to go around for anyone wishing to play in their game. Lack of oversight, deregulation, outsourcing jobs, stagnate wages and a different set of rules for those at the top, allowed those at the top to play easy and carelessly with the lively hoods of the rest of us. Needless to say we are paying the price for allowing the wealthy eight years of free unregulated game time at our expense. We are the losers. Ultimately the average citizen will pay the price for being foolish enough to allow the ultra wealthy con men to convince us that they had a firm grasp on our financial well being. They had a firm grasp, but it wasn’t on our well being, just our money.

None of this is the result of happenstance. The factors that created today’s situation were allowed to happen by the so-called financial leaders. Those people in my estimation are no better than Madoff and they should all be held accountable for turning a blind eye in the face of greed. They are very ethically and morally challenged folks. But then I guess I am making the mistake of associating ethics and morality with the money world.

I think that what I have learned from all this is that now days the term free market really means freedom to manipulate anyone who is foolish enough to believe that ten dollars can magically turn into a million dollars over night. Now that I think about it I am remembering time and again Bush and his administration looking us straight in the face and telling us that all was good with the world. Despite inclinations to the contrary.

Posted by: RickIL at March 13, 2009 10:13 PM
Comment #277615


You wonder why Obama doesn’t have ALL Democrats on board.

Personally I am remembering 12 years of lockstep republicanism. The party that was not allowed to sway from the agenda for fear of retribution. Look where all that unquestioned republican loyalty has gotten us. I am wondering why we should think that lockstep politics is a good thing in lieu of the last eight years. Your points regarding this situation are very clearly correct and obvious for all who want to see. Those who are looking for a bit of payback, perhaps in the form of political retribution, may be suffering extreme tunnel vision. I admire your persistence and patience in dealing with these folks, but I think you are speaking to deaf ears and closed minds.

Posted by: RickIL at March 13, 2009 10:35 PM
Comment #277616


Oh I think Obama will make a fine president. It is just that Obama is hearing from some other “voters.”

His policies will of course take them into account as well.

Here are some additional voices/voters.

1. Our banker, the chinese.

2. Shareholders of stock.

3. Bond holders.

4. The constitution. By that I mean this is a Republic and it takes the radicalism from the left and the right out of the process with only 41 votes in the Senate or the Supreme Court.

Once Obama “tips” he will be fine. He still believes he can pass his agenda out of hand. I actually see some signs of him changing already.

I like that Pelosi is angry and McCain is supportive on the military.

I look for a toning down of the holier than thou talk concerning the top 5%. He now understands that he needs them and that they aren’t as evil as the far left contends.

There are four parts to committee work.

(Actually this is pretty good).

1. First you form.

2. Then you storm.

3. Then you conform.

4. Then you perform.

We are in the “storming” phase. I do think the sell off over the last few months is related to Obama’s budget. That is the “storm” part.

I look for Obama to start having more meetings like the one today with business leaders, and to have a less lecturing “no it all” approach to these businessmen and women who have spent their careers in their industries. When he changes his attitude, and takes a humbler tone they will reach out and help him.

I will be careful to give Obama credit once he turns. He will likely be rewarded with a strong bull market and a second term when he does.

Posted by: Craig Holmes at March 13, 2009 10:44 PM
Comment #277618

Here’s another detailed take on the transformation which Republicans helped bring about and made necessary. For those who don’t want to wade through the blow by blow, scroll to the last paragraph for the summary, bearing directly on the issue raised in this article.

Jim M asked an important and insightful question in the comments to another WB article: “I wonder if someone could help us understand where those “trillions” wound up? Who is holding all this money?”

To which I replied: The objective answer is complicated and multi-faceted. But, to get the core and bulk of it, an example is in order.

A house built and sold for $100,000 15 years ago is put up for auction. A and B bid up the price of the house and A wins the bid for $400,000, immediately goes to CountryWide and gets a mortgage on that house for zero down to pay the loan shark uncle the $400,000 back used to buy the house. A moves in, and six months later the housing bubble bursts, and A is out of a job, and can’t make the payments.

The house sits on the market vacant for 6 months as A files bankruptcy and foreclosure proceedings take place. Where did the money go, is the question.

Well the loan shark uncle got his. The auctioneer got his. A is not out very much except the lawyer fees for filing bankruptcy. But, CountryWide bundled A’s mortgage and sold the package to an investment bank at a small discount, so that CountryWide could get cash for making more loans, collecting origination fees which it pockets immediately as well as pocketing the interest collected before selling the mortgage, well that interest above the pro-rate discount lost in selling the bundled mortgages to the investment bank.

OK, with the House A bought now still sitting empty, without buyers willing to pay $400,000 for it, the investment bank holding the mortgage is having an impossible time trying to sell that mortgage to anyone else, and is holding this mortgage asset which now has a market value considerably below the asset value on its balance sheets. It bought insurance to insure against just this sort of thing happening with AIG, but, AIG had so many claims on similar insurance policies that it hasn’t the cash reserves to make good on the claims, even if AIG could establish a market value to subtract from the asset value to determine the exact amount of the insured claim by the investment bank, which of course, it can’t.

So, where did the money go? Some of it evaporated with the devaluation of the real estate values. Some of it was pocketed by AIG which spent it on the high life, shareholder dividends, and employee bonuses and junkets to the Bahama’s for training seminars in how to consume copious quantities of Bahama Mama drinks, instead of being set aside as reserves against the total face value of insurance policies it had issued.

The investment bank, likely Lehman Bros. or Bear Stearns or Freddie or Fannie, is left holding the bag for the bulk of the loss as they paid for that mortgage at near market value, pre-bubble burst, and are left holding that mortgage as an asset on their balance sheet even though it is no longer worth its previous pre-bubble value. Subsequently, its balance sheet of assets suddenly turned into a deep well of liabilities, which it can’t sell, and it becomes insolvent as its liabilities in devalued unsellable and even value less assets exceed its projected net revenues for years to come. It’s share price drops out, and its shareholders lose considerably, moreso if they bought at the highest peak price before the bust, less so, if they bought shares 6 years ago at substantially lower prices.

But, though these investment banks, and their insurers, and the mortgagors still holding mortgages as assets, have become insolvent, the money that was made during the bubble expansion was transferred from the business entity to private individual asset accounts to be either spent or, in turn invested. Those who spent it got to live the high life while the living was good. Those who invested their bonuses, dividends, and salaries probably saw as much as 60% of their investments shrink away with the Recession and Bear Market in equities and even bond markets eventually.

That accounts for where the money went. But, the money has not all left the scene yet, as the negative balance sheets still must be zeroed out before the credit markets and equity markets can being go back to the business of lending and creating wealth again. That is where the government comes in.

In order to prevent a rising unemployment causing restricted consumption from creating ever higher unemployment, as a vicious cycle, from turning into an all out depression with 20 to even potentially 50% unemployment rate from occurring, the government steps in with borrowed dollars and printed dollars to infuse cash into the insolvent financial institutions and to offset runs on money market funds, to unfreeze the credit markets and prevent a cascade of financial and other corporate and business failures, as well. Which means the money is still leaving the economy, just not this economy, but, a future economy, in the form of interest on national debt, eventual higher taxes, and higher interest rates as a consequence of fighting inflation by constricting money supply.

Over time, beginning with 2008 and extending out for unforeseen decades, those borrowed government dollars will incur interest expense, which tax payers will have to foot, and that accounts for where some of the borrowed money to offset the losses will go, 40% back to American investors in government debt, and 60% to foreign investors in government debt.

Then, more distant into the future, much more distant, tax payer rates will fail to lower due to the addition of these borrowed dollars today being eventually paid back to creditors.

In the less distant future, the printed money to offset financial institution insolvencies, will create inflation, which the Fed Reserve will attempt to contain by reigning in money supply, which will tighten credit and cause interest rates to go up, which the consumers will foot, both American and foreign importers of American products and services.

So, in answer to where did the money go. Some of it went to those who spent it while the spending was good, Execs, shareholder dividend recipients, boards of directors, and employee bonuses of financial institutions bubbling over with cash revenues and profits, prior to that bubble bursting, and to the recipients of capital improvements prior to the burst, investments in buildings and machines of these corporations, and those who built or improved these capital assets.

But, there is still more costs to be born by this bubble bursting, much more. Folks just don’t seem to realize that this bubble / bust cycle is costing us in the bust end than is being created in the bubble end. Which is why Laurence Summers, (White House Economic Counsel Director (If I recall correctly his title) was on TV explaining why there must be an end to these boom bust cycle extremes, a containment policy that allows for peaks and troughs as a balancing mechanism but cuts off the high peaks and valleys through increased oversight, real time regulation as needed, and higher transparency and accountability standards vigorously enforced and applied and leaving no areas of the financial or banking sectors out of reach.

The money that went with the bubble bursting is no longer available to bankrupt and insolvent corporations and businesses dually affected by the bubble bursting and delveraging and the subsequent recession, and that is an enormous hit upon our economy and productivity. But, the costs of either allowing the economy to fail and find its own balance with a devastating cost to the middle class and workers and small businesses for decades, (i.e. a depression of huge magnitude), or, rescuing our economy from that fate through government intervention, borrowing against the future, are the real measure of how devastating the policies were that allowed these crises to occur.

Summers is right. We can’t afford the policies of the past any longer. There must be a fundamental change in the relationship between government oversight and regulation and the private sector. Failure to make this change will result in the eradication of the middle class, which has defined this nation’s strength and power for over a century.

Posted by: David R. Remer at March 13, 2009 11:29 PM
Comment #277621


Thankfully you have at least admitted that soviet style central planning doesn’t work! This is progress. We can work with this.


The goal of the Obama admin is to eradicate the middle class entirely leaving just two classes: rich government bureaucrats and everyone else.

Remember, we are all to blame for the evils of America. It is our middle class suburban values and lifestyle that has caused the great danger to the planet (global warming) after all. We must accept a smaller American dream.

Posted by: eric simonson at March 14, 2009 12:25 AM
Comment #277625


We can’t have a debate in which we can’t agree on the facts.

Part of the reason we can have a free market economy at all is the success of the New Deal in stabilizing the market,

This is factually inaccurate.

First of all what caused the great depression?

You will say that Free markets caused the great depression and new dealism fixed them. I say that this is liberal dogma. (A friendly retort to your previous over-broad characterizations of conservative points as ‘dogma’.)

The great depression was not caused by unregulated markets. While I’m not saying that unregulated markets can’t crash there is plenty of history to look at and come to an informed conclusion.

The depression came about during a time of greatly restricting global trade. Protectionism is generally held to be one of the primary factors leading to economic decline. Another big factor was the Federal Reserve actions with the interest rate.

Further most of Hoover’s efforts were not free market at all but were in fact more along the lines you advocate.

Remember Hoover was elected in 1928 just as Obama was elected in 2008 and came into office in 1929. The slide began just as he took office. All his efforts to fix it failed. Sounds like someone we know perhaps?

This is from wikipedia: (remember ‘progressive’ is a historical term not exactly meaning what it does today.)

After his successful election in November 1928, Hoover entered office with a plan for reform of the nation’s regulatory system. A dedicated Progressive and Reformer, Hoover saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism. Long before he entered politics he denounced laissez-faire thinking.[19] As Commerce Secretary he had taken an active pro-regulation stance. As President, he helped push tariff and farm subsidy bills through Congress.

Hoover expanded civil service coverage of Federal positions, canceled private oil leases on government lands, and by instructing the Justice Department and the Internal Revenue Service to go after gangsters for tax evasion, he enabled the prosecution of gangster Al Capone. He appointed a commission which set aside 3 million acres (12,000 km²) of national parks and 2.3 million acres (9,000 km²) of national forests; advocated tax reduction for low-income Americans (not enacted); closed certain tax loopholes for the wealthy; doubled the number of veteran’s hospital facilities;


In order to pay for these and other government programs, Hoover agreed to one of the largest tax increases in American history. The Revenue Act of 1932 raised income tax on the highest incomes from 25% to 63%. The estate tax was doubled and corporate taxes were raised by almost 15%. Also, a “check tax” was included that placed a 2-cent tax (over 30 cents in today’s dollars) on all bank checks. Economists William D. Lastrapes and George Selgin,[33] conclude that the check tax was “an important contributing factor to that period’s severe monetary contraction.” Hoover also encouraged Congress to investigate the New York Stock Exchange, and this pressure resulted in various reforms.

Raising taxes at the beginning of the depression didn’t bring us right out of it?

Posted by: eric simonson at March 14, 2009 12:58 AM
Comment #277627

At the beginning of this depression…where are the tax increases?

Posted by: Marysdude at March 14, 2009 5:57 AM
Comment #277632


Very simply, the notion that the economy was in any way effectively deregulated during the Bush administration is false. It’s a canard, a lie.

More pages of regulation were added in the Bush administration than in any previous administration since Nixon. The lie is built on an assumption, nothing more, that Republicans are de-regulators. Not so. Wimpy, socially middle-of-the-road Republicans like Bush and Nixon are so worried that they will be seen as cold and heartless they they are very effective growers of ineffective government,

This also makes these wimpy, conflicted Republicans very poor regulators. They lose track of the clarity necessary to make regulation truly effective, as they allow government directives like the folly-ridden “Mark to Market” rules to replace rules requiring true market transparency and the insistence on directors of market decisions bearing a heavy burden of privately assumed risk.

Weaving lessons out of fairy tales is what got us the Great Depression. Weaving solutions out of those fairy tales is what caused the U.S. economy in 1938 to look almost exactly like the economy of 1933. If it had not been for the magnificent failures of America’s foreign policy during the first two Franklin Roosevelt administrations delivering to him a World War on which he could run for a third term his two terms in office would today be viewed as the most failed presidency in the 20th century.

No president in our history has ever so benefitted from having “greatness thrust upon him”. No president ever deserved it less.

Posted by: Lee Jamison at March 14, 2009 11:22 AM
Comment #277640

Many have posted their disgust that others are not giving PO a chance to prove himself and for not going along with his, and this congress’s, solutions.

Well, I wonder how many of these same folks would be registering opposition if we now had President McCain? While not a conservative, McCain’s policies would still differ from PO’s and that would cause disagreement among Dems, libs, and many conservatives.

Do I believe our economy would be any further along in recovery if we had a PM? No. Do I believe we would be hearing dems and libs giving PM more time to fix things? No.

I will continue to argue for the conservative philosophy in governing and others will continue to advocate the liberal philosophy. They counter balance each other and neither is all good or all bad. The majority of American’s are in the middle and sway both ways…only rarely embracing fully either position, but always expecting more than either can deliver.

Posted by: Jim M at March 14, 2009 12:29 PM
Comment #277652

Eric said: “The goal of the Obama admin is to eradicate the middle class entirely leaving just two classes: rich government bureaucrats and everyone else.”

What a baseless partisan piece of propaganda. Not surprising though from a minority member of society whose Party continues to lose favor with the majority in this country.

Once, you called for Americans to unite behind their president (if I recall correctly) for the good of the nation, regardless of their political differences. Shoe is on the other foot, and taking one’s own advice no longer seems palatable, does it?

Posted by: David R. Remer at March 14, 2009 1:45 PM
Comment #277653

Jim M said: “Well, I wonder how many of these same folks would be registering opposition if we now had President McCain?”

McCain would have shut down government by now, with his vow to veto earmarks. I somehow think in the midst of a recession, McCain would have been a loathed president for having shut down government at this time on principle.

Posted by: David R. Remer at March 14, 2009 1:47 PM
Comment #277656

Lee said: “Very simply, the notion that the economy was in any way effectively deregulated during the Bush administration is false. It’s a canard, a lie.”

Technically, you are correct, Lee. The Bush administration did not roll back regulations over institutional players in our economy, for the most part. What he did do, was promote a climate in which many of those extant regulations were not enforced, and oversight was converted to turning a blind eye (Cox and Madoff for example). Then there is the case of failure to install new regulation as warranted by trillion dollar sectors of the financial industry subject to effectively no regulation or oversight at all, (CountryWide for example).

You appear to have accomplished an fine skill of word smithing to posit accurately, statements which read true given the words and scope chosen. Even if the limits of the words and scope become themselves a canard or lie in addressing the bigger issues alluded to, but not addressed by your careful word choice.

Welcome to the proficient debater’s club of WB.

Posted by: David R. Remer at March 14, 2009 1:56 PM
Comment #277658

Jim M,
I don’t understand, John McCain preached the entire conservative spiel throughout the 2008 campaign and has earned a lifetime rating of 82.16 from the ACU, how is he not a conservative? He advocated cutting government spending as the only solution to the national deficit, supported increased fossil fuel use in spite of the potential risks from global warming. Senator McCain also supported the entire radical right-wing religious agenda.

As for what things would be like if we had a President McCain? I’ll be honest with you, I would oppose any policies he put forth that I did not believe would work. Nevertheless, I would not express the sentiment recently shared by Rush Limbaugh. I would say that while I do not think radical cuts to government spending would be the best way to fix the economy, I would not hope that they won’t work. I think you and I can admit that we are all human, and we suffer from Confirmation Bias, therefore it should be no surprise that we reinterpret any information we receive through the lens we have crafted with our political beliefs and other biases. I also do not find it surprising that most Republicans are now opposing Obama’s policy proposals; they are only doing what is smart to do politically.

Posted by: Warped Reality at March 14, 2009 2:25 PM
Comment #277665

Eric Simonson-
I know you might be trying to be funny, but seriously, man, do you understand what this is really about?

Let me tell you something basic that your party has forgotten: economics is based on scarcity. The best way to beat scarcity is sustainable productivity. That is, you think up ways to create a system that works in delivering goods and services people need and want to the most people for the least cost in the best way, and you make sure that the system won’t hit a brick wall, or a slope off in productivity as something necessary gets ridden into the ground.

You’ve created a system that can’t sustain itself, that poisons itself with obscurity and deception, that makes people reliant on fuels whose supply will soon dwindle, and whose side effects are already causing problems for sustaining other parts of the economy for the long term.

You tell yourself, this is necessary for capitalism to work best, but you forget scarcity is the problem to be solved, not the concern to be ignored until the last minute.

American companies are endangering people’s health with their chemicals and contaminants, with their bean-counting healthcare bureacracies that fail to deliver good healthcare, even at its extravagant prices. These are not sustainable behaviors. Wall Street, though, was more concerned with companies perpetually maintaining profits and avoiding costs and avoiding government’s heavy hand.

And what do we get for going along with all this, which we did? We get screwed. Worse than that, the economy itself, the very thing that was supposed to be preserved by this lack of constricting regulation, has gotten screwed, and in a major way. We are essentially back where we started with the Republican Party, back to early eighties negative growth and unemployment, back to the mid-nineties in terms of the Stock Market’s value.

Why should we be surprised?

I never said that free markets caused the Great Depression. The generally accepted causes among liberals are deceptive financial practices, overleveraging, and a damaging run on the banks that essentially destroyed the basis for much of the economic activity in the world. It was a failure of the markets, not a failure of market economics themselves. Those still held, and in fact determined the outcome.

Do I agree that the interventions applied by Hoover were inappropriate? Indeed they were. Protectionism started a trade war. Interest rate hikes took money out of an economy already starving for its lost capital. Hoovers tax cuts didn’t do **** for the economy, and neither did the tax hikes he tried at the end. He did intervene some, but only tentatively, and with a most decidedly conservative emphasis on voluntary charities and the like.

The problem, though, doesn’t lie in the notion that Hoover’s actions were not free market, but rather that they neither identified the problem well nor responded to them appropriately.

If the problem was that his actions didn’t meet your Right Wing, Post-Cold War definition of Free Markets, then why did FDR’s New Deal not continue the upwards trend of debt to GDP that began under Hoover? Why didn’t his regulations and restrictions, his programs continue the economic slide? I’ll conceded that the Great Depression did not end with the New Deal, but I wonder whether you’re capable of acknowledging that things got better?

Unregulated markets were the environment that the Depression occured within. But the real problem was that laissez faire systems were set up that simply were not up to the challenge of preventing deceptive practices, and discouraging the kind of profitable short-term churning of value that brokers then and now undertook with the market’s blessing.

A Market Economy is a component of society, not some magic thing set to the side, free from all the frailties of human weakness. We have laws to answer human moral weaknesses, our less than helpful impulses. Why should Wall Street and the Economy be exempt? They certainly haven’t demonstrated how responsible they are here.

Lee Jamison-
Added regulations don’t necessarily strengthen or toughen the regulatory regime in question. A regulation can be friendly to special interests, replacing one that put certain obligations those interests didn’t want on them.

Additionally, a regulation doesn’t mean much unless it’s enforced, enacted. What was enforced? What was enacted?

You’re arguing by talking point. Simplistic, indigestible arguments that force opponents to backpedal and rationalize. But I know what your argument doesn’t say, what makes it an all too convenient claim.

I invite you to go down through the news sources, through what Republicans were saying. I invite you to go see what the agencies were actually doing, to read what Bush’s regulation changes actually meant, because Bush wasn’t cracking down on big business, on Wall Street in any meaningful way.

I’ll tell you what the likely reason is for what Bush did: Simply put, Bush was using his executive power to bypass Congress to enact his laissez faire agenda. He’d put new regulations in that gutted the old system. He wouldn’t have to push a bill through Congress that could gain a whole lot of attention he didn’t want for rule changes he didn’t feel would stand up to public scrutiny.

This theory is better than yours on these counts: First, we know Bush to be a fairly secretive president; Second, we know he was very “business-friendly”, as the term goes; and Third, there’s a significant record of Bush changing regulations to benefit polluters, fossil fuel industries, and other special interests. Finally, we know Bush’s attitude on executive power ran broad and deep, similar to Nixon’s.

I don’t think Bush was wimpy or conflicted. That doesn’t describe the man who held his party in lockstep, who pushed his agenda relentlessly at every point in his presidency. There’s an argument that he wasn’t truly conservative, an argument that Bush wasn’t truly a deregulator in the literal sense of the word. But what does that matter in terms of your party’s responsibility here?

I think these were once the arguments you would have vociferously denied, or that at least many Republicans did, if not you. While Bush was in office, Republicans seemed no less dedicated to defending and rationalizing his actions, than he was to pushing them through to their ultimate conclusions.

That’s what really annoys me to no end about current Republican rhetoric. The Republicans seem intent on being contrarian about EVERYTHING. It feels like the GOP’s dwelling in some parallel world of its own, like Superman’s Bizarro world, or that wierd world in the Star Trek series where Kirk’s an evil barbarian.

I can understand the frustration of the others on the Blue column as they deal with Republicans on these issues. Black is White, Up is Down. All I can seem to conclude is that the Republicans want to justify taking a position other than what the Liberals are taking, and making that, no matter how poor an idea, no matter how discredited, the stance on the argument from which they won’t budge. Republicans won’t even acknowledge that this stubborn, contrarian ideology is what got them in trouble in the first place.

FDR improved the economy from where it was. His stimulus worked. You can tell because GDP maintained good pace with the debt level. If his spending had been as economically foolish as you thought, the pattern under Hoover would have continued. FDR’s main problem was filling in the hole that Harding, Coolidge, and Hoover’s policies dug.

Speaking of which, you do know that the isolationism that constituted the “magnificent failure” of foreign policy for Roosevelt, in your view, was essentially the popular foreign policy that those same three gentlemen left behind. Isolationism was their cause, their reaction to Woodrow Wilson’s internationalism.

By the time Roosevelt was in office, Hitler had already been named Chancellor of Germany, or was close to it. Mussolini was already in power, and Japan had already invaded Manchuria. Roosevelt did well enough trying to move an initially unwilling country into a position from which it could wage war, not only in light of the Great Depression, but in terms of the general sentiments of isolationism.

The Great Depression was made worse by some policies, better by some others. But it was FDR and not some Republican who lead us out of the Great Depression. It was a massive spending program that did the job. It was regulatory programs that helped salvage what little trust people had in business at that time.

As it is, I’ve had enough revisionist history for today. Good day, sir.

Posted by: Stephen Daugherty at March 14, 2009 3:11 PM
Comment #277690


I think we have found the core of our disagreement here in this paragraph:

Let me tell you something basic that your party has forgotten: economics is based on scarcity. The best way to beat scarcity is sustainable productivity. That is, you think up ways to create a system that works in delivering goods and services people need and want to the most people for the least cost in the best way, and you make sure that the system won’t hit a brick wall, or a slope off in productivity as something necessary gets ridden into the ground.

Markets are based on supply and demand. I suspect that the use of the term scarcity may hint at a different philosophical meaning.

Here is the heart of your error, I think. Markets, that is, the people who participate in the economy are the ones who make decisions. Not some theoretical ‘brightest minds’ of government who are constantly adjusting and tweaking in order to achieve ‘sustainable productivity’.

Do you see how this is not compatible with sound markets? Who is doing the ‘thinking’ in creating new systems of markets? Who is constantly adjusting in order to achieve maximum productivity?

On another point, I think we are working off of separate definitions, but you are explicitly saying that the setting up of ‘laissez faire systems’ caused the great depression. Laissez faire and free market are general terms for exactly the same thing.

TO continue, you seem to be creating a strawman argument here when you talk about the current ‘system’ that conservatives have supposedly created???

You’ve created a system that can’t sustain itself, that poisons itself with obscurity and deception, that makes people reliant on fuels whose supply will soon dwindle, and whose side effects are already causing problems for sustaining other parts of the economy for the long term.

I beg you to consider that the current system is not what I, or any free market advocate are arguing for. In fact, have I not been arguing against the present ‘mixed-economy model’ that exists as it is now? Hasn’t that been my consistent complaint? An economy that is twisted and distorted too much by quasi-socialist policies already.

This is where I think you are trying to have your cake and eat it too. On the one hand we must make continuous changes and alterations to the economic functions on an adhoc basis (as we have been doing for decades) and then when it breaks you (not just you… but you in a broad sense for the sake of argument) say that it is the conservative economy that has failed. Yet we have been pointing out the flaws in the economic structure for as long as I can remember.

The subprime mortgage is not a laissez-faire failure— is it? This seems to be what you are arguing but I can’t see how you could not recognize that this cannot be correct.

Posted by: eric simonson at March 14, 2009 10:29 PM
Comment #277691

Wikipedia entry for Free Market:

“A free market is a market that is free of government intervention and regulation, besides the minimal function of maintaining the legal system and protecting property rights[1], and is also free of private force and fraud.”

…and Laissez Faire:

“Laissez-faire is a term used to describe a policy of allowing events to take their own course. The term is a French phrase literally meaning “let do”. It is a doctrine that states that government generally should not intervene in the marketplace.

The term is often used to refer to various economic philosophies and political philosophies which seek to minimize or eliminate government intervention in most or all aspects of society.”

Posted by: eric simonson at March 14, 2009 10:32 PM
Comment #277694

“You will say that Free markets caused the great depression and new dealism fixed them. I say that this is liberal dogma.”

“The depression came about during a time of greatly restricting global trade. Protectionism is generally held to be one of the primary factors leading to economic decline. Another big factor was the Federal Reserve actions with the interest rate.
Further most of Hoover’s efforts were not free market at all but were in fact more along the lines you advocate.
Remember Hoover was elected in 1928 just as Obama was elected in 2008 and came into office in 1929. The slide began just as he took office.All his efforts to fix it failed. Sounds like someone we know perhaps?”

Eric I agree that Hoover took the blame for the great depression yet he wasn’t responsible for causing it. The culprits responsible for the crash of ‘29 were the laissez-faire presidents Harding and Coolidge. Hoover had many ideas but did not act on them because he wanted to give the market a chance to correct on it’s own. That is why Hoover took the brunt of the blame, he did nothing to contain the problem. Many of his ideas were acted upon by FDR who received credit, and rightfully so, for allowing many to survive that would not have during the ‘30’s. We can disagree on when the country actually came out of the depression but for many we came out of it before WWII.

What we all need to remember is that when FDR took office we still had a strong conservative influence in this Country. They insisted upon many things that slowed the recovery, Wow that does sound familiar doesn’t it. The push to cut spending and balance the budget in ‘34-35 was due to conservative influence which of course led to a recession in ‘37. Much like today we also had a wealth disparity that was at or near crisis level prior to and during the great depression. We also had a large number of wealthy families that naysayed FDR’s new deal as they did not see the benefit for themselves and refused to do their share as they were accustomed to making the rules for years before the new deal. Today it is the lapdogs for the wealthy doing this dirty work, people such as Santelli and his ilk, but the problem remains the same. Just prior to the great depression we saw tax cuts for most Americans that ended up causing government deficits that in turn caused tax increases during Hoover’s term.

Obama has yet another problem to deal with that FDR didn’t and that is massive debt ran up during the past 8 years but he does have the anchor around his neck that we call conservatism attempting to drag him down.

Posted by: j2t2 at March 14, 2009 10:57 PM
Comment #277722

Eric Simonson-
Supply and Demand don’t make sense unless people want more than they can, or can make more than people might want. Scarcity is not theoretical or philsophical, it is real.

More real than a lot of the financial trickery that Wall Street was engaging in. Which is why, eventually Wall Street and the rest of us lost. Financial exchanges can rise and rise in the air like a pair of Dragonball Z Anime characters duking it out, but at some point, those exchanges have to come back down to Earth.

The question is, when? By failing to regulate the market properly, these exchanges grew in number and in size until they constituted a large part of our economy.

Laissez Faire Policy tends to unfortunately let a lot of this kind of out of control speculation and leveraging do just that, with the idea being that permitting it brings growth to the economy. At some point, though, What goes up in the air must come back down. When financing and accounting is allowed to get too creative, the danger increases that the economy that goes up doesn’t have a light landing when the corrections inevitably occur.

The Economy is not some fairytale world by itself. The companies involved in the market aren’t perfect gatherers much less perfect distributors of information, especially when they know that letting certain knowledge get out might harm their company’s bottom line.

And what is America getting out of this? A society that increasingly fears that things are out of control, that the things that could be done in our interests, that most people know should be done, should be dealt with, aren’t being dealt with. Why? Because the government, to appease the corporations out there, is giving them a pass on all kinds of harmful behavior. People are wondering how, even whether a society like ours can be set right, with a market driven capitalist economy.

And that’s not healthy, not for the economy, not for society. The submission of corporate America to regulation and rules isn’t about top-down rule of the economy. It’s about creating a market alternative to a system where impatience has grown to the point where socialism is seen as the only means of solving the country’s problems.

By restraining dangerous and harmful behavior, government protects participants in the market from the backlash and the inevitable calls for greater control that come in the wake of different controversies. America needs to know that it can have a market system and a relationship with corporate America that isn’t painfully one-sided in terms of whose interests are served. But your side would rather just try people’s patience eternally, with government always covering for the folks screwing things up. Well, that’s a good way for governments to lose elections and corporations to lose freedoms.

It’s all about motivation. If you guys wreck enough people’s lives, folks are going to rebel against the status quo. Send enough pension funds bankrupt, and you’ll hear from it from the folks whose finances you just ruined.

The naivete of current Republican economic ideology is the thought that people will just stand by and let their interests get run over by the institutions of this country. They won’t. They never will. This system is built with feedbacks, and if the captains of industry or our elected officials are unwilling to act responsibly, People will exercise those feedbacks in their own interests. The market will not see investments rise until folks are certain they won’t get trampled. The Parties who back, who rationalize this kind of dangerous environment won’t find themselves keeping their majorities.

If you continue to ignore the sentiments of most Americans, if you succeed in stifling reform, you’re only succeeding in elevating the tensions, which when released will power the backlashes against the interests in question.

Posted by: Stephen Daugherty at March 15, 2009 1:04 PM
Comment #277753

getting in this late, but when i read “it took 2 presidents to get us in this mess” from above, yes, you are right the one who stole the election in 2000, and the one who won in 2004. you need to look no further for fault than that time frame. craig, you really do have a knack for twisting and turning things around. too bad you just can’t cop to what your party has done to the working class. funny, repubs really want accountability now. too bad your blinders are just now getting taken off. the country needed them off 5 years ago. and for the record, 2 years. dems had been in control for 2 years of the bush fiasco. the first 6 (six) were all repubs. things were pretty peachy then huh? truly america’s golden years. right!

Posted by: bluebuss at March 15, 2009 11:15 PM
Comment #277777


The policy of deregulation is conservative Republican. It is part of Republican psychology. Some (many?) Democrats have gone too far in that direction, even against the Democratic political philosophy, but most of the ones who went that direction did so, not because they thought it was a good idea, but rather because they were in the pockets of lobbyists. Sometimes money speaks louder than principle…even to Democrats.

You present a good argument that Democrats were just as much at fault for GLB as Republicans…I say we were more responsible because we were involved in it for the wrong reasons, not because we believed in it. Clinton signed, but whether he wanted to or not, his veto would have been overridden and he’d have lost political capital.

Posted by: Marysdude at March 16, 2009 2:47 PM
Comment #277817


And, it depends a lot on what the meaning of ‘is’ is…Clinton, like many in public, hates to admit any mistake in judgment. His ego keeps getting in the way. I was not in his shoes, so won’t even try to say if he was for the bill or against it, as his signing of it did great harm to our nation. But, no matter whether he wanted to or not, his veto would have gained him nothing. It was a time of ‘damned-if-you-do’…damned-if-you-don’t’. I would like to think, that as a Democrat, and reasonably intelligent man, he would have been against the bill at the time of its signing. Whether he was or wasn’t is moot…the damage is done.

Posted by: Marysdude at March 17, 2009 1:31 AM
Comment #279724

Is it possible all the myths of systemic risk, corruption, and fragility are all the results of government intervention into the free market, namely through the central bank using fiat currency, deposit insurance, prior bailouts, government-sponsored enterprises, and credit regulation to unqualified buyers?

Posted by: bob at April 7, 2009 9:22 PM
Comment #279725

I was just looking at some of the comments. I lol’ed at the comment that Hoover was laissez faire. I lol’ed even more at the notion that the interest rates of the 20’s were due to laissez faire. HAHAHHAHAAH

www . nolanchart . com/article5995 . html

Posted by: bob at April 7, 2009 9:27 PM
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