To say that the US financial system is a testing ground for libertarian ideas is absolutely ludicrous. There is no sector of the economy that has MORE government involvement than the financial system. The government controls the supply of money. The fact that the Fed so badly mismanaged the money supply and contributed to this crisis proves the libertarian argument about the fallacy of government planning, it doesn’t disprove it.
If libertarianism caused this financial meltdown, then I guess Iceland is the most libertarian country on the planet; who knew?
And of course, I’m not even scratching the surface of the role that Fannie and Freddie played in all of this… oh yeah, and then there’s also the rating agencies (which are basically a government-ensured monopoly because they don’t allow more to exist and thus there’s no competition)…. yeah I could go on all day but I think you get the point. To say that the financial sector was some kind of libertarian utopia that went amok is simply laughable.
I question Matt’s assertion that “there is no sector of the economy that has MORE government involvement than the financial system.” As a farm-state man myself, I’ve had the great honor of promoting and benefiting from federal involvement in ethanol, and I’d argue that the energy sector is just as wonderfully nourished by government’s presence as the financial system.
1. The original post mentioned nothing about the financial crisis.
2. Orthodox libertariansim is just as stupid as orthodox conservatism, communism, environmentalism, (fill in the blank). The shrill and defensive nature in which you attack an innocuous observation makes me feel that you fit into that box.
Random thought: I think that recent history shows that when the market is untethered, libertarianism doesn’t occur, but corporatism. The incestous nature between people running the federal government and people running major corporations is a much bigger obstacle to the mythical libertarian ideal than anything else. The scenerio of a completely independent, powerful market running our economic lives and a limited, frugal federal government directing national security and foreign policy without the former tainting the latter is fucking retarded. Why don’t we just live in candy land.
Matt — Let’s play a logic game. Suppose we want to argue, as you do, the “libertarian argument about the fallacy of government planning” is correct. In that case, wouldn’t we need to show, at minimum, that government involvement in a sector and bad performance are correlated? In other words, as government involvement in a sector goes up, the more likely the sector is to suffer problems? The current financial crisis, I would argue, doesn’t bear this correlation out.
I don’t know any serious person who would look solely at correlation when trying to make a judgment about anything. The most violent countries on Earth (like Colombia) aren’t always the poorest; that doesn’t mean poverty does not generally cause more crime.
But fine, I’ll bite: yes, the financial sector really is that heavily regulated. Your investment decisions are to a great extent impacted by the decisions of our eggheads at the Fed. When those eggheads screw up and keep interest rates too low for too long, bubbles form. When they pop, bad things happen.
Was this also a market failure? Yes, absolutely. But market actors make mistakes all the time. Do market failures become prosperity-threatening crises without significant meddling by government? Nope, I can’t think of any examples, and this crisis is no exception.
To say that the US financial system is a testing ground for libertarian ideas is absolutely ludicrous. There is no sector of the economy that has MORE government involvement than the financial system. The government controls the supply of money. The fact that the Fed so badly mismanaged the money supply and contributed to this crisis proves the libertarian argument about the fallacy of government planning, it doesn’t disprove it.
If libertarianism caused this financial meltdown, then I guess Iceland is the most libertarian country on the planet; who knew?
Here’s good analysis from 2002 about how the Fed basically blew the housing bubble:
http://d-squareddigest.blogspot.com/2002/08/were-forever-blowing-bubbles.html
And here’s some analysis about how too-low capital requirements on banks encouraged the excess securitization that is at the root of the crisis:
http://econlog.econlib.org//archives/2008/10/more_fantasy_te.html
And of course, I’m not even scratching the surface of the role that Fannie and Freddie played in all of this… oh yeah, and then there’s also the rating agencies (which are basically a government-ensured monopoly because they don’t allow more to exist and thus there’s no competition)…. yeah I could go on all day but I think you get the point. To say that the financial sector was some kind of libertarian utopia that went amok is simply laughable.
I question Matt’s assertion that “there is no sector of the economy that has MORE government involvement than the financial system.” As a farm-state man myself, I’ve had the great honor of promoting and benefiting from federal involvement in ethanol, and I’d argue that the energy sector is just as wonderfully nourished by government’s presence as the financial system.
1. The original post mentioned nothing about the financial crisis.
2. Orthodox libertariansim is just as stupid as orthodox conservatism, communism, environmentalism, (fill in the blank). The shrill and defensive nature in which you attack an innocuous observation makes me feel that you fit into that box.
Random thought: I think that recent history shows that when the market is untethered, libertarianism doesn’t occur, but corporatism. The incestous nature between people running the federal government and people running major corporations is a much bigger obstacle to the mythical libertarian ideal than anything else. The scenerio of a completely independent, powerful market running our economic lives and a limited, frugal federal government directing national security and foreign policy without the former tainting the latter is fucking retarded. Why don’t we just live in candy land.
Matt — Let’s play a logic game. Suppose we want to argue, as you do, the “libertarian argument about the fallacy of government planning” is correct. In that case, wouldn’t we need to show, at minimum, that government involvement in a sector and bad performance are correlated? In other words, as government involvement in a sector goes up, the more likely the sector is to suffer problems? The current financial crisis, I would argue, doesn’t bear this correlation out.
i am anonymous.
I don’t know any serious person who would look solely at correlation when trying to make a judgment about anything. The most violent countries on Earth (like Colombia) aren’t always the poorest; that doesn’t mean poverty does not generally cause more crime.
But fine, I’ll bite: yes, the financial sector really is that heavily regulated. Your investment decisions are to a great extent impacted by the decisions of our eggheads at the Fed. When those eggheads screw up and keep interest rates too low for too long, bubbles form. When they pop, bad things happen.
Was this also a market failure? Yes, absolutely. But market actors make mistakes all the time. Do market failures become prosperity-threatening crises without significant meddling by government? Nope, I can’t think of any examples, and this crisis is no exception.
“libertarianism is just like socialism: they both look so good on paper, but in practice, they suck.”
DUH!