Again, we get the reference to the mythical "Free Market!", this time from from mAdMaLuDaWg.
Governments always interfere in markets, to one degree or another, and have done so since before history was recorded. Markets wouldn't exist w/o the protection of govt. That's square one reality- get used to it. One can argue the merits of different degrees and kinds of market management by govt, but "Free Markets!" exist only in the abstract, in the realm of ideas, not in reality.
mAdMaLuDaWg is correct when asserting that today's situation is the result of crony capitalism, however, with those crowing the most about "Free Markets!" being the first and foremost in exploiting and manipulating govt involvement to their own advantage. It's what happens when the fox, the republicans, are tasked with guarding the henhouse. Their whole ideology is incapable of reasonable market oversight, quite by design. And they've shown themselves to be quite amenable to promoting market excesses in a variety of ways. When real estate prices explode unreasonably, they exploit it to get re-elected. When the GSE's couldn't loan money fast enough, the admin forced them to act as a conduit and guarantor of other people's liars' loans. when unregulated derivatives go wild, they gratefully accept the campaign contributions of the participants, pretend there's no problem, pretend that counterparty risk isn't an issue. When bond rating agencies create models that ignore the possibility of negative valuation increases, they ignore that, too, and when FRB giveaway rates pour fuel on the fire, that's no problem, either. When huge balance of payments deficits threaten the value of the dollar, threatening the profits of offshoring capitalists, they soak up those dollars by borrowing them back at a governmental level and by flimflamming the foreign owners into fraudulent investments. Until some event triggers the inevitable Minsky moment... and then it all tumbles down.
Of course the market will correct itself- it always does. the Crashes of 1873 and 1929 are examples of how it does that when preceding events got way, way out of hand. My countrymen set us up for another such event when they listened to the shuck and jive of so-called "Free Market!" advocates over the last 30 years or so, culminating in the Bush presidency and a Republican congress.
Current efforts by the FRB and Treasury won't prevent a decline, at all- that's not the intention. They will provide for a more orderly unwinding of the overleveraged positions of many lenders, however, changing the slope of the decline and hopefully reducing the depth of it. It's actually one of a very few semi-responsible things done by those who've held power over the last 8 years. Will it cause inflation down the road? obviously. That sure as hell beats the kind of debt-deflation liquidity trap experienced in the early 1930's, when potential investors had no reason to take any risks at all- the value of their money increased strongly when it was basically packed into their mattresses. When they did part with it, they did so only by cherry-picking the best deals at firesale prices, much to the detriment of the vast majority, those who didn't and still don't actually have capital...
Governments always interfere in markets, to one degree or another, and have done so since before history was recorded. Markets wouldn't exist w/o the protection of govt. That's square one reality- get used to it. One can argue the merits of different degrees and kinds of market management by govt, but "Free Markets!" exist only in the abstract, in the realm of ideas, not in reality.
mAdMaLuDaWg is correct when asserting that today's situation is the result of crony capitalism, however, with those crowing the most about "Free Markets!" being the first and foremost in exploiting and manipulating govt involvement to their own advantage. It's what happens when the fox, the republicans, are tasked with guarding the henhouse. Their whole ideology is incapable of reasonable market oversight, quite by design. And they've shown themselves to be quite amenable to promoting market excesses in a variety of ways. When real estate prices explode unreasonably, they exploit it to get re-elected. When the GSE's couldn't loan money fast enough, the admin forced them to act as a conduit and guarantor of other people's liars' loans. when unregulated derivatives go wild, they gratefully accept the campaign contributions of the participants, pretend there's no problem, pretend that counterparty risk isn't an issue. When bond rating agencies create models that ignore the possibility of negative valuation increases, they ignore that, too, and when FRB giveaway rates pour fuel on the fire, that's no problem, either. When huge balance of payments deficits threaten the value of the dollar, threatening the profits of offshoring capitalists, they soak up those dollars by borrowing them back at a governmental level and by flimflamming the foreign owners into fraudulent investments. Until some event triggers the inevitable Minsky moment... and then it all tumbles down.
Of course the market will correct itself- it always does. the Crashes of 1873 and 1929 are examples of how it does that when preceding events got way, way out of hand. My countrymen set us up for another such event when they listened to the shuck and jive of so-called "Free Market!" advocates over the last 30 years or so, culminating in the Bush presidency and a Republican congress.
Current efforts by the FRB and Treasury won't prevent a decline, at all- that's not the intention. They will provide for a more orderly unwinding of the overleveraged positions of many lenders, however, changing the slope of the decline and hopefully reducing the depth of it. It's actually one of a very few semi-responsible things done by those who've held power over the last 8 years. Will it cause inflation down the road? obviously. That sure as hell beats the kind of debt-deflation liquidity trap experienced in the early 1930's, when potential investors had no reason to take any risks at all- the value of their money increased strongly when it was basically packed into their mattresses. When they did part with it, they did so only by cherry-picking the best deals at firesale prices, much to the detriment of the vast majority, those who didn't and still don't actually have capital...
Facebook
Twitter