The Four-Paragraph White Flag

As I watched the following section of President Bush's speech tonight, I had that dislocating sensation that we are crossing the threshold into some kind of new epoch. Remember when Bill Clinton declared "the era of big government is over"? This was more like "the era of big confidence in markets is over."

I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There's been a widespread loss of confidence. And major sectors of America's financial system are at risk of shutting down.

The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold:

More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.

Fellow citizens: We must not let this happen.


That sound you're hearing is the last free-market politician leaving the building. Come back, Mahatir, all is forgiven!

More seriously, we're in for a fight, people. These will never again soon be "normal circumstances," at least from the perspective of Washington (which is to "circumstances" what a hammer is to a nail). When the allegedly (and at this point, inaccurately termed) free-market party sees bubble-deflation as "the market...not functioning properly," employs exaggerated nightmare scenarios as a justification for nationalizing whole chunks of the finance industry, and considers it a federal priority to keep credit markets as flush with cash as they were when they got into this risky-loan mess in the first place, then we have truly crossed some rubicon.

No matter how many times you'll hear it said over the next several awful days in Washington, this is not a binary choice between Henry Paulson's re-regulatory bailout and Great Depression 2.0. The 1930s will never happen again, thanks to a whole host of innovations and insights over the past seven decades. And even though the current mortgage-backed securities crisis is undeniably beginning to leak out from Wall Street, I'll reserve the kind of panic Bush seems eager to foment until maybe the economy actually stops growing, unemployment actually gets within shouting distance of Reagan-era levels, and the stock market does something scarier than fluctuate a whole lot.

As the participants in our June 2008 roundtable on the economy (including Donald Boudreaux, Ron Paul, and Megan McArdle) repeatedly pointed out, the one thing that may speed and deepen a so-far-nonexistent recession into something worse is the same kind federal overreaction that put the "great" in the Great Depression in the first place. I would have thought we'd all learned our lessons since then, but tonight's speech really hit home that it's no longer safe to take for granted any market literacy whatsoever.

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  • johnl||

    This is not a white flag. It's a last minute money grab from guys who have made careers out of converting public property into personal assets.

  • fortyouncer||

    One last f.u. to the american people.

  • Derrick||

    The only hope I see in this is that the American people seem overwhelmingly opposed to the bailout. Everyone I talk to is pissed about it. There's gotta be some way to channel that energy.

  • MAX HATS||

    This is so fucked. Those who made wise economic choices - choosing to forgo purchases of overpriced properties and not undertake too much debt - are going to be punished, while those who made bad decisions both on Cherry Lane and on Wall Street are going to be rewarded. All the overcheap credit will stay flowing long enough to make things worse. What is left of the housing bubble must be propped up at all costs. This is basically a conspiracy against the propertyless. It would be enough to drive one to Lenninism, were that not already the consensus opinion of the propertied class.

  • ktc2||

    Somehow most of that 700 billion will end up in the pockets of the wall street fat cats and the market will then collapse anyway. Meanwhile those same fat cats will be out of the country with the money.

  • ||

    you know what i wanna see come out of all of this ... a new political party. Fuck the Libertarian party ... it's been around for damned near 40 years and hasn't got within spitting distance of relevance.
    Time to form a new freedom party ... composed of disenchanted republicans, libertarians that want to win, and independents that are libertarian but don't know it.
    I am convinced that libertarianism can be sold to the American public ... so long as the UFO-bots and Truthers are kept at bay.

  • gmatts||

    I've always laughed whenever I've heard people say that "I'll move out of the country" if so-and-so wins. This time? It's not exactly a person being elected that has me wanting to make sure my passport is up to date, but the massive bill coming for shit that I had nothing to do with.
    The situation we're in now would be like if I had gone to the grocery store, paid for some food with cash, and went home and cooked those things for dinner. Then, some asshole breaks into my house, kidnapps me and drops me off at some restaurant where he just ate an expensive surf & turf dinner, ran out on the check, and now just dropped me in his seat to pay the bill. And to listen to those in favor of this bill, I'd be a fool if I wasted even a second to reach into my wallet and pull out my Visa card to pay for the surf & turf instead of maybe taking a deep breath and asking to talk to the manager.

  • ||

    Wow, Mahathir Mohammed.

    "Democracy confers a stamp of legitimacy that reforms must have in order to be effective. And so, among nations suffering economic crises, we continue to hear calls for democracy, calls for reform, in many languages - People Power, doi moi, reformasi. We hear them today - right here, right now - among the brave people of Malaysia." - Al Gore, APEC, 1998.

  • Don the libertarian Democrat||

    The one silver lining is that people don't trust the Bush administration, so the bailout has at least been slowed down. However, crises like these breed overreaction. It could be a long road back, but I'm in this for the long run. In truth, we always had a long and tough road ahead to get to a much smaller government.

  • ||

    joe ... what are you trying to say? Really ... do you view this massive bailout as the necessary "reform" to the present situation? Enlighten me ... how does any of this square with our Constitution?

  • ||

    There is no hope Derrick, they're gonna do it anyway, they've got their interns slamming the polls as we speak making it look like the american people are for this. Let's say they came in wanting $200 mil. How would they get this? By asking for $700 mil. Then they're the good guys for compromising. If it fails, and they've already admitted it might, it's our fault. Let the market finish adjusting itself w/o govt intervention!

  • ||

    Let's flee to New Zealand, stage a coup and live happily ever after.

  • ||

    Tim ... better yet, let's do what has long been in the hearts and minds of so many people in this country ... create a Second American Revolution. There ... I said it. Anybody else?

  • gmatts||

    "People Power, doi moi, reformasi"

    Does "doi moi" mean "sorry, you can't have all that money"?

  • ktc2||

    Sorry Bundt,

    Libertarianism will never be sold en masse to the public here. They absolutely will not give up their "right" to force others to live as they see fit.

  • Nick||

    I'm trying myself to cope with my own doubts. At first, I said "to hell with this" and thought that it was the biggest threat to capitalism possible. Then I listened to a bunch of economists who were trying to take a realistic solution. Now I've found myself in the position where I have to temper my libertarian orthodoxy with realism.

    The collapse of the financial markets does zero good for laissez-faireists. No matter how much we argue that laissez faire is the ideal, that bad corporations should fail and that the government is likely what got us into this situation - we won't satiate the American people, who have never regained full trust in free markets since the Great Depression.

    - If we do nothing and the market collapses, capitalism will become the black sheep of American economics. Not only that, but the Democrats will argue for a new New Deal to get us out of it, which should be more fearful to libertarians than state corporatism via loans that can get repaid down the road.

    - If we have a chance to stop the market from collapsing, we should take it and use the opportunity to correct the market distortions that caused it to prevent us from getting here again. We should also ensure that the government follows through on reprivatization and work to fight regulation that hurts responsible companies as well as irresponsible ones.

    - If the government bails out the corporations, and as many of us libertarians believe, can't manage a corporation any better than it can manage itself, we can use the painful fallout to argue against state corporatism and for unfettered free markets.

    Frankly, to choose between action and inaction, I think we're going to get statism either way but with action we at least have a chance to prevent a financial collapse. Again, I'm setting my orthodoxy aside for temporary realism. I just have yet to see a real alternative solution from free marketers besides inaction. If we place strict conditions on the repayment of the loans, avert overregulation and correct the market distortions, I don't think this would really be the deathknell of capitalism. I loathe the plan and the fact that we have to do it; and I'm all ears for another plan to get out of this that doesn't involve spending money we don't have. But until I hear one that corrects the short-term and long-term problems that will, as the President said, affect all of us, I'm afraid I don't see any alternative to the loan bailout that will be preferable.

    Our choices are either to bend over, not fight and possibly walk away with a loss of self-respect and a pain in our ass, or to fight back, still get raped and then killed afterwards. Sorry to be gruesome, but that's how I see this thing right now.

  • ||

    ktc2 ... I have flirted with that opinion myself. On my darker days, I may believe that to be true. But hopefully without sounding too naive or deterministic, I believe that the principles upon which this country was founded live on ... Reason and this board are evidence of that. Liberty lovers still exist in this country ... all that is needed is action.

  • johnl||

    Remember when GWB was engineering sales of bogus assets to hide losses so he could cash out himself? Ah, the good old days, when GWB stole by the million and Krugman wrote about economics.
    http://query.nytimes.com/gst/fullpage.html?res=940DE7DB1631F931A35754C0A9649C8B63

  • Paul||

    Did anyone catch George Bush's "democratic capitalism" remark? A new epoch is a freakin' understatement.

    The gloom hand of government is to be laid upon us. I suggest we start taking precautions.

    Matt Welch, stay with this. You're a beacon of light in all of this.

    create a Second American Revolution. There ... I said it. Anybody else?

    Where do we start?

  • ||

    Paul ... we start here. As with any other revolution, we start with like-minded people with a common interest. Here we are ...

  • Kolohe||

    As the participants in our June 2008 roundtable on the economy (including Donald Boudreaux, Ron Paul, and Megan McArdle) repeatedly pointed out, the one thing that may speed and deepen a so-far-nonexistent recession into something worse is the same kind federal overreaction that put the "great" in the Great Depression in the first place.



    McArdle has said "you can add me to the list of libertarians standing athwart history shouting "stop!!!" but has mostly been on a "We're dooomed, DOOOOOOMED I tell you if we do nothing" kick this last week. And is in favor of a massive, but ill-defined (she likes neither the Paulson nor Dodd plans entirely) intervention. "I am in favor of some form of government bailout, and I am also in favor of some major changes in the way that we regulate the banks"

    Has ideas like:

    It occurred to me, while I was listening to the congressional hearings, that the government could stop most of this by just seizing houses in default and continuing to make the mortgage payments.

    And doesn't mind socializing the costs for her own personal benefit.

    A friend writes to ask if I've "gone native". Exquisitely attuned as I am to the effect that severe recessions have on advertising revenue, and the balance sheets of people who fund money-losing magazines--well, no, I certainly haven't. I'd rather let Wall Street off scott free than sacrifice my job to "teach them a lesson".

    (to be fair, I can't figure out if this last bit is satire or not.)

  • The Wine Commonsewer||

    The only hope I see in this is that the American people seem overwhelmingly opposed to the bailout.

    I would hope you're right, but I don't know those people. Pissed? yes. Against? No.

    Chant with me now: It's a necessary evil to save the rest of us.

  • ||

    Which radical libertarian wing is going to firebomb washington? Because I'm ready to join them right about now.

  • ||

    The market is not functioning properly. There's been a widespread loss of confidence.

    He can say that again - the "marks" are getting wise to the "con."

  • ||

    The Second American Revolution starts online ... the old adage that "the revolution will be televised" is only several steps behind the technological curve. Think about it, and it will become clear ... the necessary end of all of this - the Patriot Act, the thousands of Ryan Frederick's, the now openly socialistic power-grabs, is a reaction - and the only thing that is stopping us is physical fear.
    Fear for your body, possessions, and social standing. Sooner or later, that fear will dissipate ... and organization of libertarian interests will take place.

  • miche||

    I learned about shell games on Bourbon Street when I was 14 and I certainly don't trust these Ivy educucated thimbleriggers.

  • miche||

    oops- educated

  • ||

    It is clear that there is an ever growing community of unbelievers in Statist America - what is needed is a body of truly brave men and women that will sacrifice their positions, livelihood and physical safety to protest Big Brother. The codex of disobedience is written in the American DNA - we need to coax it out of dormancy.

  • Paul||

    Which radical libertarian wing is going to firebomb washington? Because I'm ready to join them right about now.

    The normal wing of the libertarian...wing is about to firebomb washington. When regular workin' folk with kids and a 9-5 start fondling the firearms over this crap, I can tell you that's a sign these crazier notions are becoming mainstream.

    what is needed is a body of truly brave men and women that will sacrifice their positions,

    My 401k is with AIG, I told friends and family over the weekend that I'd rather see it go up in smoke than have this bailout plan go through. I meant it, and I still mean it.

  • ||

    Ok Paul ... how prepared are you to fight all of this? It's good that you are willing to kiss your money goodbye ... but when push comes to shove, where are you?

  • ||

    Until many of us here are willing to act as the Founders did ... bravely in the face of a Leviathan power, risking all in the name of freedom - we will face continued abuses upon our persons, property and liberty. I applaud Reason and the few other outlets that encourage freedom - but at some point, conversation must translate into a tangible form of disobedience.

  • SIV||

    it's no longer safe to take for granted any market literacy whatsoever.

    Well said Matt, good to see somebody besides Sulllum earing his paycheck 'round these parts.

  • M. Simon||

    I see that other than Nick not many of you have studied the financial and political history of the Great Depression.

    A dose of Milton Friedman on the subject would do most of you a lot of good.

  • Paul||

    Whelp, I started by writing my first ever letter to my Congressman. Jim McDermott. Super, hyper leftie extraordinaire. I gotta start somewhere. I'm crafting another to Maria Cantwell (see a patter anyone). Here's what I wrote to Baghdad Jim:

    I cannot stress my level of concern over not only the Bush administration's response to this so-called economic crisis, but Washington's general response, including that from both houses of Congress. There should be no, repeat no bailout of any kind from our federal government. This issue is so profoundly misunderstood by both politicians and journalists, that the ensuing damage from government intervention could prove catastrophic. I need not detail the midnight rule changes and last-minute knee-jerk responses which themselves threatened to destabilise the entire banking industry and thus had to be changed, repealed or amended. Make no mistake, there should be no response from government whatsoever regarding the failure of these large financial firms. I am counting on you to show restraint by not rewarding those who have acted with hubris and greed. The market should be allowed to weed out the incompetent Wall Street firms which caused this. The result will be a stronger market, a stronger country, and a better financial system. Evolution must abide by extinction. Our market cannot and will not thrive with Washington's "intelligent market design" theories. I trust you'll do the right thing.



    I suspect Mcdermott is salivating over government control over the economy. But I want to make sure he at least hears someone who has a differing opinion.

  • miche||

    Have you guys seen this? Excerpt:

    In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

    "It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."


  • Nick M.||

    anyone got a cheytac they wanna loan me?

  • ||

    "As the participants in our June 2008 roundtable on the economy (including Donald Boudreaux, Ron Paul, and Megan McArdle) repeatedly pointed out, the one thing that may speed and deepen a so-far-nonexistent recession into something worse is the same kind federal overreaction that put the "great" in the Great Depression in the first place. I would have thought we'd all learned our lessons since then, but tonight's speech really hit home that it's no longer safe to take for granted any market literacy whatsoever."

    Uh, Matt. Beleive it or not, not all economists agree with Shales or Rothbard that "statism" was the cause of the Great Depression. Those who disagree with them in fact are the great majority of the economics profession. They may be right or wrong but they are not ignorant, and indeed know a great deal more about ecomomics than you or even Ron Paul. Do get out of your libertarian coccoon sometime and realize that disagreement with the views expressed in *Reason* roundtables is not necessarilly a sign of ignorance.

  • Paul||

    M. Simon, you mean this Milton Friedman?

    1) Here are several key examples of these bad policies: In response to a sharp decrease in tax revenues in 1930 and 1931 (caused by a slowdown of economic activities), the federal government passed the largest peacetime tax increase in the history of the United States, which clearly applied the brakes on any recovery that could have taken place;
    2) the federal government also passed the Smoot-Hawley Tariff Act in 1930, substantially increasing tariffs and leading to retaliatory restrictions by trading partners, which resulted in a considerable decrease in demand for U.S. exports and a further slowdown in production (not to mention a loss of mutually advantageous division of labor);
    3) the federal government also instituted all sorts of "public works" programs, beginning under Herbert Hoover and increasing dramatically under FDR; the programs removed hundreds of thousands of people from the labor market and engaged them in economically wasteful activities, such as carving faces of dead presidents into the sides of a mountain, preventing or delaying necessary labor-market adjustments;
    4) another federal policy that prevented (labor and other) market adjustments was the price and wage controls enacted under the National Recovery Administration and in effect from 1933 until 1935 (when ruled unconstitutional); this policy massively distorted relative market prices, impairing their ability to function as guides to entrepreneurs;
    5) the Fed was not blameless after 1933 either. It increased bank-reserve requirements in three steps in 1936 and 1937, leading to another significant decrease in the money supply. The result was the 1937-38 recession within the Depression, adding insult to injury.

  • Ebeneezer Scrooge||

    bundt,

    I am convinced that libertarianism can be sold to the American public ... so long as the UFO-bots and Truthers are kept at bay.

    I'd like to believe you. But the socialists (we call them "liberals" in this country) have been running the whole educational system for so long, that they've co-opted at least half the population, and brain warped most of what's left.

    Look at what you can convince the American people they should be willing to "do now". Lots of them would hamstring the economy in the name of Mother Earth. That's just Exhibit A.


    Don the libertarian Democrat, er, DLD,

    In truth, we always had a long and tough road ahead to get to a much smaller government.

    The only way you're going to see this government get much smaller is by it going absolutely completely bankrupt (which means We The People are bankrupt). Or else it gets wiped out by some barbarian horde.

    The Libertarian Hordes? Well, we can dream anyway.

    I said on another post a few days ago, the only way you're going to make this country Libertarian in any real sense, is at the point of a gun. A fact of life as it now is, which causes the average libertarian to undergo spontaneous intellectual self destruction.

  • ||

    There is no reason to believe this bailout will help the economy in any way. It's just a corrupt wealth transfer, the biggest in history, from the people to the powerful.

  • Ebeneezer Scrooge||

    Not that I'm up for anybody's revolution, btw. There aren't enough people left in this country that can think straight, that I believe anything good could come out of it. Assuming a) anyone tried it and b) it succeeded.

    OTOH, if you're talking about invading and taking over some place like New Zeland, that might be interesting. But with the UN, you have to figure that success depends on making it clean and quick. It's got to be a fiat accompli before anybody can do anything about it.

  • ||

    Ebeneezer ... you make a plethora of good points. And I share your sense of despair ... however, where does that leave us? We are no more than ineffectual big mouths in the scenario that you present. Yes, better to raise your voice in protest than to wallow silently in the muck ... but, would you not agree that in 1776 that the majority in America was either silent or Tory?

  • ||

    The majority be damned! There are enough of us around to raise the necessary hell ... we only need to organize and plan to upset the status quo.

  • Spelling Frenchie||

    It's got to be a fiat accompli before anybody can do anything about it.

    Uh...I think perhaps you mean fait accompli.
    ;-)

  • Famous Mortimer||

    Jesus, listen to you wackos talking about an online revolution. You're just bitching.

    Calm the fuck down.

  • Paul||

    Uh...I think perhaps you mean fait accompli.

    I dunno, what the government is doing could be called a fiat accompli. Just sayin'.

  • M. Simon||

    Paul says:

    5) the Fed was not blameless after 1933 either. It increased bank-reserve requirements in three steps in 1936 and 1937, leading to another significant decrease in the money supply. The result was the 1937-38 recession within the Depression, adding insult to injury.

    Exactly. We are currently in a liquidity crisis because banks are raising their reserves to cover defaults. That takes money out of the economy.

    Friedman's prescription for such a situation is exactly what P&B are trying to accomplish. Buying debt (home loans of uncertain value) to increase the money supply.

    It is ugly. And inflationary. The alternative is system collapse. A system collapse would cost in the neighborhood of $25 to $50 trillion and probably usher in more socialist policies than the $1 trillion bail out.

    So a small dose of foul medicine now or a much bigger dose of really ugly medicine later. Take your pick.

  • Nick||

    To add to what M. Simon is saying, half of the equation is market confidence. If keeping these companies from going bankrupt prevents market confidence from going haywire which prevents the economy from collapsing on the burden of millions of people acting irrationally, that alone could prevent higher costs in the future followed by more extreme socialism and regulation. A collapse will be more expensive, and more statism will be expected to reverse it.

    It pains me to be on "this side of the fence" but the pragmatic answer is to go with the crappy ass bailout, require 100% accountability and sell off the companies once the market has stabilized, while fighting overregulation and fixing the market distortions that got us here in the first place. I'm still waiting for an alternative to "do nothing" and am still perfectly willing to change my mind, but first you have to prove that inaction won't result in more statism in the long-term.

  • miche||

    So a small dose of foul medicine now or a much bigger dose of really ugly medicine later.



    Jeez, I wish I were a fortune teller like you. Instead I can only see what is plainly in front of me and I was taught theft was bad.

    Perhaps I should go bitch slap my parents for teaching me not to trust the experts.

  • voxpo||

    The alternative is system collapse. A system collapse would cost in the neighborhood of $25 to $50 trillion...

    What is your evidence that the alternative is a $25-50 trillion collapse?

  • nonPaulogist||

    The roof! the roof! the roof is on fire!

    Why the hell should we want to save the system? Is there anything about it that is even recognizably free-market or constitutional anymore? 700 billion just buys the assholes time. I actually agree with fucktard Welch on this. Let the correction run it's course. If the system survives, we save a trillion or two. If the system fails, we can replace it with a real market economy.

    Burn, motherfucker. Burn.

  • Ebeneezer Scrooge||

    but, would you not agree that in 1776 that the majority in America was either silent or Tory?

    Good point.

    Some days I feel more like you're talking. Other days.....it's like the bad guys have already pulled of a fait accompli. Or a Fiat. Or something.

    You know there are some days that I simply cannot speel aneetheeng right omeego.

    How about, "Wa la musheer we have taken over your country, it is ours now."

  • Ebeneezer Scrooge||

    Nah, get rid of that french crap. The more I think about it, the more I like the idea of an invading horde.

    bundt, have you considered starting up a horde? I read somewhere or other that you can start a small horde in your very own back yard.

  • ||

    So a small dose of foul medicine now or a much bigger dose of really ugly medicine later.

    There is a third denouement: a small dose of foul medicine now and ...continued small doses of foul medicine indefinitely and ad infinitum. Would you like to lay odds on which it will be? This won't be the last time the taxpayers will be harvested.

  • Spelling Frenchie and his Ital||

    You know there are some days that I simply cannot speel aneetheeng right omeego.

    There is quite a difference between a fait and a fiat. If they weren't both legitimate words, we could assume that you simply mis-spelled it. As it is we aren't sure what you meant to say.

    Fait Accompli as in a feat or something already accomplished? Or fiat accompli as in a decree or order already accomplished?

  • Ebeneezer Scrooge||

    Well above I meant that the world would have to wake up one morning and learn that New Zealand was already under new management effective immediately. Like mission accomplished, the deed is done, too late 'cause we already shot and buried the old management and btw how are you today, etc.

    I didn't know that fiat and fait were both words.

  • jtuf||

    The list of things wrong with this bailout and with the rationales for it is just too long to type out. The Greatest generation stood up for economic freedom when the USSR shipped missiles to Cuba. This batch of politicians chickens out at the prospect of needing cash up front for a new car.

  • Anonymous||

    Government's purpose is to protect us from corporate greed:

    "The era of greed and irresponsibility on Wall Street and in Washington has created a financial crisis..."

    Top Recipients of Fannie Mae and Freddie Mac
    Campaign Contributions, 1989-2008


    1. Dodd, Christopher (D-CT) $133,900
    2. Kerry, John (D-MA) $111,000
    3. Obama, Barack (D-IL) $105,849
    4. Clinton, Hillary (D-NY) $75,550

    That's not fascism.

  • Ebeneezer Scrooge||

    Yup yup yup.

  • ||

    Ah, politicians. "We must do something. This is something. Therefore, we must do this".

    Also on politicians: "Politicians like to panic, they need activity. It is their substitute for achievement".

    Both lines are courtesy of the inimitable Sir Humphrey, from the TV series "Yes, Minister" / "Yes, Prime Minister". Dang, but I love that show.

  • ||

    then we have truly crossed some rubicon

    1. You really should capitalize the name of a river.
    2. It is a more appropriate euphemism for Posse Comitatus situations.
    3. You failed to include alea iacta est as part of your reference, which is unforgivable, though Bush is no Caesar. More of a Sulla.

    Sorry, Rome pedant.

  • ||

    ..."freedom's just another word for nothin' left to lose"...

  • ||

    Easy there, fellas. Just an anecdote that came to mind about Mahathir Mohammed, because you don't see his name brought up very often.

  • ||

    The 1930s will never happen again, thanks to a whole host of innovations and insights over the past seven decades.

    Keep telling yourself that.

  • ||

    Don't worry, guys, when I make an argument, you'll know it.

    Like this:

    Top five recipients of campaign donations from Fannie Mae's PAC:

    Blunt, Roy R $78,500
    Bennett, Robert R $71,499
    Bachus, Spencer R $70,500
    Bond, Christopher S R $64,000
    Boehner, John R $60,500
    Reid, Harry S D $60,500 (tie)

    Wait a second, where are Barack Obama, John Kerry, and Hillary Clinton?

    Kerry, John D $2,000
    Clinton, Hillary D $8,000
    Obama, Barack D $6,000

    I guess you could say donations from Fannie Mae's office drones are "from Fannie Mae." Just like you could say that Ron Paul and Barack Obama's big lead in donations from military personnel show they're getting money "from the Pentagon."

  • Ebeneezer Scrooge||

    Ah, politicians.

    You could substitute "managers" for "politicians" in many modern corporations, and it wouldn't be too far off.

  • I\'m joe.||

    I don't know how to link to things because the government comes and does it for me.

    I'm on the waiting list.

  • ||

    Oh, it's not even half a screen. Why would I bother linking?

  • Fluffy||

    Those who disagree with them in fact are the great majority of the economics profession. They may be right or wrong but they are not ignorant, and indeed know a great deal more about ecomomics than you or even Ron Paul.

    Actually, there is a lot of uniformity on the causes of the Great Depression. The bursting of the stock market bubble, the collapse of the international system of finance, massive deflation brought about by the collapse of the banking system, a sudden and severe trade war.

    The question of whether one can say that the root cause of the Great Depression was "statism" becomes a question of whether or not these events are more properly viewed as the result of state action or market action.

    Was the Wall Street bubble of the 20's a purely market-driven event, or not? Was the system of international finance built up after 1919 a market system, or not? If the answer to these two questions is "not", then the banking system collapse was not a market event, either. And the trade war was obviously not a market event.

    If there's disagreement among economists and historians, it's based on the fact that some economists and historians can look at events with a large state element and still see "capitalism", and others look at the same state/market mixture and see statism.

    The same thing is happening now. If people can point to the Bush administration and, with a straight face, assert that W represents laissez-faire and limited government, then those people are telegraphing that I shouldn't trust their evaluation of the events of the 20's, either. Because if W is a free marketeer so was Diocletian.

  • ||

    Because if W is a free marketeer so was Diocletian.

    Ohh, excellent reference. Four emperors? What the fuck?

  • Fluffy||

    I was thinking more of Diocletian's immense expansion of the Roman bureaucracy, his despotism [notable even for a Roman emperor] and his elevation of his office into near-deification.

    I expect W's decree binding us all to our occupations on a hereditary basis, and fixing taxes permanently to a level commensurate with 2005 incomes, to come any day now.

  • ||

    The alternative is system collapse. A system collapse would cost in the neighborhood of $25 to $50 trillion...

    What is your evidence that the alternative is a $25-50 trillion collapse?

    The economic geniuses that support government intervention, of course. You know, the intellectual descendents of those who turned the 1929 recession into a depression.

  • ||

    Oh crap! I screwed up the blockquotes. Y'all are smart enough to figger it out.

  • ||

    If people can point to the Bush administration and, with a straight face, assert that W represents laissez-faire and limited government

    And yet they do, over and over again. It would be like Michael Moore (no political intention necessary - I was just trying to think of a whale) going out and declaring he's a proponent of healthy eating. Then when children get fat from following Michael Moore's example, the anti-healthy-eating groups declare that healthy eating makes you fat.

  • ||

    I was thinking more of Diocletian's immense expansion of the Roman bureaucracy, his despotism [notable even for a Roman emperor] and his elevation of his office into near-deification.

    I realize that. It's just that I don't often get to mention one of my pet peeves, which was his division of the empire under four emperors. And therefore setting the stage for Constantine to mop up later.

  • Fluffy||

    Well, maybe we can have W and Cheney as the two Augusti, and Chertoff and Paulson as the two Caesars.

    I know that Cheney's position in the line of succession makes him look like a Caesar, but he has too much power for that.

  • ||

    I guess you could say donations from Fannie Mae's office drones are "from Fannie Mae." Just like you could say that Ron Paul and Barack Obama's big lead in donations from military personnel show they're getting money "from the Pentagon."

    C'mon joe. You know about campaign donation bundling. It's completely legal even after the McCain-Feingold Free Speech Suppression Act. You also should have known that somebody would call you on it.

  • Fluffy||

    BTW, the cartoon up at Rockwell with W as Brezhnev smacks my Diocletian analogy around and takes its lunch money. Very funny cartoon.

  • ||

    Long live the tetrarchy!

  • Anonymous||

    If people can point to the Bush administration and, with a straight face, assert that W represents laissez-faire and limited government

    And yet they do, over and over again.


    It can't be socialism or statism. Those things are for the good of the people. It must be fascism, which doesn't look anything at all like socialism, or capitalism, which (in a zero-sum economy) is equivalent to taking food out of your mouth or downloading 900kB of a digital copyrighted audio track.

  • ||

    J sub D,

    C'mon joe. You know about campaign donation bundling.

    That's a plausible theory, but for the fact that the PAC donations are so skewed the other way. If the people running Fannie wanted to steer money in a certain direction, they wouldn't have almost all of their PAC money going the other way.

    If you look at other big companies that have PACs, like ExxonMobil and the various political front groups they run, the employee and PAC donations line up quite closely.

  • ||

    If people can point to the Bush administration and, with a straight face, assert that W represents laissez-faire and limited government

  • ||

    If people can point to the Bush administration and, with a straight face, assert that W represents laissez-faire and limited government

    There is a difference between deregulation and laissez-faire capitalism.

    This point is often made on these threads, and it remains true even when someone criticizes deregulation.

    It seems to me that this fact gets conveniently forgotten and remembered. For example, whenever there is a push for a deregulatory agenda, we see all sorts of commentary about how wonderful it is that they're going to unlease free-market capitalism. But then, when we see a problem in that economic sector, the same people are quick to point out that it isn't TRUE free market capitalism.

  • Fluffy||

    Joe,

    That is true and it's a fair point. I think it's closely related to the debate we had the other day about whether there are times when an increase in regulation can lead to a decrease in statism.

    Partial deregulations are highly dangerous and we need to remember that from here on in.

    If you devise, say, the California energy deregulation scheme, where the producers of energy are free to price where they want, but where the intermediary consumers of energy [the utilities] are compelled by law to buy, you have created a situation where the producers are empowered to violently rape those intermediary consumers. This poorly-devised deregulation scheme was worse than the regulations it replaced.

    A poorly-designed partial deregulation can potentially be the worst of all possible worlds: it can both deliver the punishment of a market-distorting government intervention, AND it can discredit the idea of deregulation in general.

    I know you think that is what happened in the current case, but I still have not been able to identify the cause-and-effect relationship between a particular deregulation and the current crisis. Lots of long-standing government policies helped bring us here.

  • ||

    "Those who disagree with them in fact are the great majority of the economics profession. They may be right or wrong but they are not ignorant, and indeed know a great deal more about ecomomics than you or even Ron Paul."

    Disagree with what, exactly? I can't think of a single noteworthy economist who still clings to the scapegoating of laissez-faire alone for the Great Depression, libertarian or otherwise. Most theories are nuanced enough to blame the fed and reactionary policies at least in part.

    Also, I take issue with your framing this as a contention between Murray Rothbard and mainstream economics. Ben Bernanke, for example, is quite mainstream, but would still agree with the general sentiment that the crash of 1929 had little to do with Laissez-Faire and a lot to do with bad monetary policy.

  • ||

    "We are currently in a liquidity crisis because banks are raising their reserves to cover defaults. That takes money out of the economy."

    Not exactly. Investment banks are primarily driving this, not commercial banks. Commercial banks are where mom and pop keep the savings and checking account. The vast majority of Americans do not use investment banks and are largely unaffected by this "crisis" and will largely not be affected by it in any large way.

    Quoting John Allison, the chairman of BB&T :

    "There is no panic on Main Street and in sound financial institutions. The problems are in high-risk financial institutions and on Wall Street."

    He also propsed are far more sensible rescue than the nonsense being shoved down our throats:

    "A significant and immediate tax credit for purchasing homes would be a far less expensive and more effective cure for the mortgage market and financial system than the proposed "rescue" plan."

  • ||

    Well put, Fluffy.

    I think it's notable that Ron Paul talks a lot more about the Fed and the FDIC and Fannie Mae creating conditions that encourage irresponsible behavior than about the regulations that restrain actors from taking those risks.

    Let's say this: many regulations replace market discipline that was removed from the system through backstopping. Deregulation that eliminates that replacement-discipline is very dangerous.

    I still have not been able to identify the cause-and-effect relationship between a particular deregulation and the current crisis.

    I'm starting to think that the issue here is the dog that didn't bark. There were all sorts of "novel, innovative" products and practices created that brought us to this mess, and the regulatory state didn't keep up.

    When you've got a few thousand boy geniuses constantly looking for a new way to game the system, with a potential payout in the eight or nine figures, they're going to get creative. The regulatory state in a case like this needs to function more like trash collection, and less like building a bridge. You can complete a bridge.

  • ||

    Rubbadub,

    Disagree with what, exactly?? Disagree with the assertion that the New Deal, and not the crash of a highly-regulated stock market, caused the Great Depression. Disagree with the assertion that there would have been no depression absent FDR. Disagree with the pretense that we were not in a depression in 1932, before FDR took office.

  • ||

    I'ms sorry, that should be "...a highly-leveraged stock market..."

    Just about all economists and economic historians agree that the stock market crash and the cascade of financial collapses it set off caused the Great Depression. There is, as you say, disagreement about how that collapse and cascade came to be, but it is well outside mainstream opinion to argue that the depression only stated after, and because of, FDR's policies.

  • Anonymous||

  • TallDave||

    Free marketers really can't win here: free market principles say let the markets work, but if Repubs block a bailout the media, being both left-wing and alarmist, will jump at the chance to crucify them over the "crisis" and in November we'll get the most anti-free-market government in recent memory.

    Die a little today, or a lot tomorrow.

  • ||

    TallDave-

    Republicans are not advocates of the free market. They are the vey antithesis of free enterprise. One who supports free markets never supports socialism for the rich including this wall street bailout.

    CRONY CAPITALISM IS NOT FREE ENTERPRISE!

  • ||

    Joe-9:56 AM

    I am not one of those people. True free enterprise is incompatible with crony capitalism, the lifeblood of the republican party.

    I agree with Fluffy that partial deregulation can be the source of some problems, witness the airlines.

  • ||

    Why not give each an every American $2500 to spend, save or invest any way they see fit? Same price tag - real results?

  • Paul||

    This tit-for-tat on Fannie's campaign contributions have gone on far too long. Let me sum it up for you:

    Top recipients of Fannie Mae's political contributions:

    Politicians

    Group most wanting to bail out Fannie Mae:

    Politicians.

    Do we get it now? Do we get it?

  • Russ 2000||

    The 1930s will never happen again, thanks to a whole host of innovations and insights over the past seven decades.

    I used to be that naiive.

    The fact is we will still have financial companies going bankrupt, and we will still have frozen assets because of it. The living hell of the 1930's was frozen assets and there is NO innovation or insight that prevents such things - in fact increased regulation practically guarantees more of it. There absolutely can be a run on the FDIC. Your landlord won't care about your paper solvency if he's not getting paid with liquid cash; you'll be out on your ass. And if you want to sure your landlord you'd better have liquid assets to pay your lawyer.

    A few years ago I lived through a nightmare of frozen assets when I sold a condo and the title insurance company was shut down by state regulators two days later. Sixty thousand dollars held in limbo for more than 3 months. Fortunately I do not put all my eggs in one basket so I was able to cope while waiting for the outcome of the shutdown (I recouped about 53 grand when all was said and done, lawyers' fees on both ends took the rest, they made a nice chunk of change on the couple hundred people stuck in limbo like me). But I had a real estate agent coming after me for the commission she didn't get (sorry the title company check bounced, but that's between you and them, not me) and having to cut daily expenses to the bone. I lived through my own personal Depression but everyone around me was blissfully unaware.

    I read stories of people in the same title company mess who used the proceeds of a sale for the purchase of another property only to have the whole deal go down in flames and lose their new house. Between the time the assets were frozen and the time they were made 90% whole, they were essentially homeless and had to find relatives to live with, had huge red flags on their credit ratings so they couldn't pass credit checks to get an apartment.... and they never ever borrowed beyond their income stream! You don't have to be financially reckless to get caught up in a financial mess.

    There are NO innovations and NO insights. All there are is insurance plans, which can go insolvent when either a regulator shuts them down or when the market discovers financial risk beyond reasonable. You do your own due diligence and shit for yourself. "Innovations and insights" are nothing but faith-based mumbo-jumbo of a different stripe.

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