We now have definitive proof of why the United States is facing financial collapse. It’s an article by Lew Rockwell at LewRockwell.com titled, “The Greatness of the Market in a Crisis.” The title, alone, contains the logical contradiction that disproves the title and the theme of the article. If the market is so great, how come it created the crisis in the first place?
The logical contradiction in the title is the same as Eric Hoffer wrote about in “The True Believer.” The true believer who has an auto accident resulting in various non-life threatening injuries, says from his hospital bed, “I was fortunate because the good Lord was watching over me,” which ignores the fact that if the true believer actually was fortunate and the good Lord actually was watching over him, he wouldn’t have had the accident in the first place.
This same blind belief produces many logical contradictions in the article, where Rockwell expresses his total faith in his “market economy” as the infallible, omniscient controller of all things economic. At the same time, Rockwell mentions in passing “the economic challenges of our day: recession, inflation, unemployment, bank runs, etc,” as if they are insignificant side effects, and how the market economy will straighten all this out, not to worry, everything is just peachy, without ever realizing that the market economy he’s so proud of is what created these catastrophes.
In mind-boggling oblivion to reality, Rockwell says that production in some sectors is increasing in the midst of an economic slowdown, citing cars as an example, while at the same time there are reports that Ford and GM are facing bankruptcy and could possibly go out of business.
Rockwell explains this away with, “This complex activity - a signal of bad economic times but a praiseworthy response to massive shifts in the investment environment.” It might be praiseworthy for those who have the money to invest in something else, but it’s not so praiseworthy for ordinary working folks who lose their jobs because of the euphemistic “complex activity.”
Rockwell says of the InBev takeover of Anheuser-Busch, “Consider that the foreigners are doing us a favor: taking over one line of production to free up domestic resources to help dig our of recession.” The freeing up of domestic resources is another euphemism for the 1,185 positions that are already scheduled to be eliminated. Yep, that’s a real big favor they’ve done us.
Of the Royal Bank of Canada taking over 10 banks in the US, Rockwell says, “Canadian banks are far more prudent than their US competition, so as a customer, I can only say” Hooray!” Rockwell ignores the fact that the US banks are not so prudent because of the market economy with no regulation or interference that is the basis of his economic beliefs, and yet he prefers to do business with a bank that does not practice his market economy.
In another mind-boggling example of ignoring the obvious, Rockwell says, “The prices at the pump reflect not only existing supply and demand conditions,” and, “they also serve to bring about the best possible conditions for economizing.”
The fact is that the prices at the pump have nothing to do with supply and demand. There is no shortage of supply, no matter what the demand. I have no trouble at all buying all the gas I want, but only at the price the oil companies set. And the exorbitant gas prices certainly do bring about the conditions for economizing, when you have to decide how much money not to spend on gas, groceries, or rent.
Of the mortgage crisis, Rockwell says, “The markets became wise to the fact that loose credit led to a fantastic bubble and that trillions in traded mortgages might not be serviceable.” Not serviceable is another euphemism for Rockwell’s free market practice by the guys at the mortgage companies bundling what they knew to be worthless loans and selling them as securities. This is the definition of fraud, as practiced in the free market. Of this, Rockwell says, “It is not even regrettable from an economic point of view.”
Rockwell might want to consult some of the people who have lost their homes and are facing bankruptcy because of his free market economy and see if they think it’s not regrettable.
Here are just a few of the effects of Rockwell’s free market economy that he thinks is so great, as outlined by Paul Craig Roberts in an article on Counterpunch:
The dollar has lost 60% of its value against the euro, the price of oil and gold up by 400%, inflation in double digits, employment falling, deregulation brought about fraud in mortgage lending and dangerous financial instruments which have collapsed the housing market, leaving a million or more homeowners facing foreclosure, the financial system is in disarray and might collapse from insolvency, the US trade deficit is larger than the combined trade deficits of every deficit country in the world, and, the US can no longer finance its wars or its own government and relies on foreign loans to function day to day.
Roberts was an Assistant Secretary of the Treasury, and is not a true believer or an ideologue, having had practical experience with the economy, while Rockwell’s qualifications are only as an ideologue and true believer, spouting his failed ideology.
What does Rockwell propose as his solution to all of the financial problems caused by increased deregulation and the completely unfettered, unregulated free market that has caused this mess? I’m quoting verbatim here, “What can the State contribute to this cause? It can get out of the way. The only positive contribution that the politicians can make is to make the market a freer environment for resources to travel to their most profitable production lines.”
In other words, the only solution to problems caused by deregulation is no regulation at all.
Free markets means freedom for business owners to charge as much as they want, pay the workers as little as they want, fire any worker for any reason, freedom to sell harmful or unsafe products, freedom for business owners to lie to consumers about their products, freedom to break contracts or the law with little or no penalty, freedom for businesses to finance political parties and politicians political campaigns, freedom for businesses to lobby the government, freedom for businesses to control regulatory agencies, freedom for businesses to create political action committees, freedom for businesses to create phony charities to reduce their tax burden, freedom to receive corporate welfare, freedom to violate individual rights, freedom from liability, freedom to harm the environment, freedom to hide their finances, freedom to genetically modify food, freedom for banks to charge as much interest on loans as they want, freedom to loan money without having full reserves, freedom to print as much money as they want to devalue the currency and to encourage massive deficit spending by the government, freedom to engage in market speculation, and freedom to create their own fascist world government of, by, and for the elites.
by
Ty (0 articles, 0 quicklinks, 0 diaries, 703 comments)
on Thursday, July 24, 2008 at 4:02:54 PM
It amazes me that the author of this article thinks we have been living in a "Free Market Economy".
There is only talk of the symptoms and not of the disease. Government has given unfair advantage to large corporation for decades and has "band-aided" the system for so long that only now; as the debt ceiling approaches; we finally see what has been wrought without wisdom.
Humans Will Be Humans. Regulation is necessary; We have had all the regulation instilled after the Great Depression removed starting with Nixon and finally ending with Clinton. However, with the way the Tax code has developed; We are not in a free market economy.
Do not be deluded as to think that Capitalism is to blame for what we have today. The opposite is true; Debt Manufacture Is The Disease.
Well Written Article About How We Got Where We Are Today. Focus on Fannie Mae and Freddie Mac.
CAPITALISTS WILL INEVITABLY REPEAL NECESSARY REGULATIONS
So you're arguing that the necessary regulations instituted after the depression would have prevented capitalism from collapsing if they had not been repealed. But what you fail to realize is that in any system in which there are large concentrations of private wealth, those who have that wealth will be able to, and will, successfully lobby the government to repeal the regulations restraining their behavior. How can you expect otherwise when candidates can only get the money needed to run SUCCESSFULLY for office is to go to those who have that money? The only other alternative is to be a member of that wealthy and ruling class yourself. And the possessors of the great wealth needed to contribute to your campaign are not just doing it for their health, you know. They will not contribute the money necessary for you to win unless you are willing to legislate as they wish.
Robert Halfhill
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rhalfhill (3 articles, 0 quicklinks, 0 diaries, 270 comments)
on Friday, July 25, 2008 at 10:40:56 AM
And there would be not bail-outs of company's if a free market was practiced.
Without regulation, you have all the problems that have arisen from deregulation with endless examples of corruption and cronyism. With the S & L scam, junk bonds, CDO's and sub-prime debacles allowing a few to reap billions while the rest hold an empty bag of promises.
These acts are just as Treasonous and Terroristic as a person who has actively pursued an agenda against the interest of their home country, whose prosecution and punishment should be just as severe.
by
Stanimal (0 articles, 0 quicklinks, 15 diaries, 437 comments)
on Thursday, July 24, 2008 at 5:42:38 PM
work for all only when there is competition. Markets that are controlled by monopolies and cartels work only for the monopolies and cartels, as they become the price makers and consumers become price takers. True capitalists hate competition because market forces control prices, and lower profits. Little regulation is needed in competitive markets because those providing inferior quality and higher prices lose market share. There is an incentive to increase quality and minimize price in order to increase market share. Increased profits are volume driven as opposed to price driven. Regulation is required to ensure there is no unfair pricing, where larger companies may price product or services below cost to drive out their competitors, or to prevent collusion among these companies to fix prices and/or quality and allows an industry to evolve into a cartel. When cartels or monoplies do evolve, they must be broken up. In some cases, a monopoly may be desirable and even run by the government. The military is a good example.
A government that promotes monopolies and cartels under the pretense that free markets under these conditions are the equal of competitive free markets, is fascist. Quality of product and service drop while cost relative to quality increases due to manufacturing tight supplies. The consumer and worker gets wacked.
The Federal Reserve System is a private monopoly on money creation. The repeal of the Glass Steagall Act essentially allowed the entire Financial System. including investment banking to operate as a cartel, as it did before the last depression. Instead of going back to Glass Steagall and seriously questioning the Feds role in the sub-prime and various other scandels, Paulson and Bernanke are asking to put the entire financial system under Fed control, thereby creating a bigger monopoly than it is already.
Break up monopolies and the cartels, and the madness may end. Unfortunately, many of these are global institutions now, so it must be done globally. However, momentum is in the other direction.
by
pft (0 articles, 0 quicklinks, 0 diaries, 332 comments)
on Thursday, July 24, 2008 at 8:35:25 PM
You're completely misrepresenting the free market point of view. Lew is trying to say that the workings of the market are what will get us out of the mess the government created.
People should read the article for themselves then decide:
If the market is so great, how come it created the crisis in the first place?
What is great about a FREE market is the fact that there are FREE MARKET forces that will correct problems.Now, I am going to take your statements point by point, so you understand what Lew Rockwell was saying, CLEARLY.
This same blind belief produces many logical contradictions in the article, where Rockwell expresses his total faith in his “market economy” as the infallible, omniscient controller of all things economic. At the same time, Rockwell mentions in passing “the economic challenges of our day: recession, inflation, unemployment, bank runs, etc,” as if they are insignificant side effects, and how the market economy will straighten all this out, not to worry, everything is just peachy, without ever realizing that the market economy he’s so proud of is what created these catastrophes.
Actually it was not the free market that created the problem, it was government interference in said market that allowed for these problems to occur.For example, corruption in DC has made it possible for Corporate America to name the terms and even write their own government policies that are satisfactory to Corporate America.However, these policies are NOT good for the people, nor are they good for the nation’s economy as a whole.
In the mean time, Corporate America has silenced most people through the use of 401K’s.Essentially, the person with the retirement fund has been bought off by Big Business, because he/she is a stock holder in Corporate America.When a parson’s retirement is at stake, he/she is less likely to complain about the bad business practices of the companies their investments are dependent on.Chances are VERY good that YOU own stock in a BIG OIL COMPANY whether you know it or not..
In mind-boggling oblivion to reality, Rockwell says that production in some sectors is increasing in the midst of an economic slowdown, citing cars as an example, while at the same time there are reports that Ford and GM are facing bankruptcy and could possibly go out of business.
GM and Ford’s Truck lines are crashing due to the high fuel costs, CAUSED by government interference in the FREE MARKET.If the US had a real energy policy where it allowed the oil companies to build new infrastructure in the form of refineries, and IF the government had allowed Big Oil to drill and pump out new supplies within our nation’s borders, AND IF the federal government did not have so many ludicrous standards for refinement/where/how the oil companies were PERMITTED to conduct their business, Ford and GM would NOT be in Bankruptcy…
However, this being said…Automobiles with greater fuel economy standards are doing well with regard to sales.Honda, whose lines have greater fuel economy than most of the ford and GM lines, is selling cars as if there were no economic issues at all.A FREE market would have forced GM and Ford to create new lines to compete, decades ago, however, due to government interference, in the form of tax payer funded bail outs, ford and gm are in the mess they are in today.
Rockwell explains this away with, “This complex activity - a signal of bad economic times but a praiseworthy response to massive shifts in the investment environment.” It might be praiseworthy for those who have the money to invest in something else, but it’s not so praiseworthy for ordinary working folks who lose their jobs because of the euphemistic “complex activity.”
Again, those ordinary working folks have 401K’s, and their 401k’s are doing well due to “complex activity.
Rockwell says of the InBev takeover of Anheuser-Busch, “Consider that the foreigners are doing us a favor: taking over one line of production to free up domestic resources to help dig our of recession.” The freeing up of domestic resources is another euphemism for the 1,185 positions that are already scheduled to be eliminated. Yep, that’s a real big favor they’ve done us.
This is really insulting.This is a fraction of the number of jobs that would have been lost due to the fact that Anheuser-Bush’s poor business choices.However, foreign investors have enabled the corporation to remain solvent and enable others to keep their jobs….Maybe you should be complain about Anheuser-Bush’s practices as opposed to the InBev BAILOUT….
Of the Royal Bank of Canada taking over 10 banks in the US, Rockwell says, “Canadian banks are far more prudent than their US competition, so as a customer, I can only say” Hooray!” Rockwell ignores the fact that the US banks are not so prudent because of the market economy with no regulation or interference that is the basis of his economic beliefs, and yet he prefers to do business with a bank that does not practice his market economy.
Actually it is people like you that ignore the fact that Government enabled this, and then, instead of allowing the market to adjust itself, the government BAILED OUT the US banks.In a true free market economy, a NON CORRUPT government would not have been allowed to bail out the banks, and with the threat of going under, the banks would have regulated themselves by NOT participating in the ludicrous lending practices that brought about this current problem….BEAR IN MIND, this happened before in our nation’s history, yet, for some reason, there was no learning from the past mistakes.
In another mind-boggling example of ignoring the obvious, Rockwell says, “The prices at the pump reflect not only existing supply and demand conditions,” and, “they also serve to bring about the best possible conditions for economizing.”
The fact is that the prices at the pump have nothing to do with supply and demand. There is no shortage of supply, no matter what the demand. I have no trouble at all buying all the gas I want, but only at the price the oil companies set. And the exorbitant gas prices certainly do bring about the conditions for economizing, when you have to decide how much money not to spend on gas, groceries, or rent.
The Big Oil companies make roughly $.08 per gallon of Gasoline, GROSS. your limited understanding of economics speaks for itself.I don’t need to comment further on supply issues, because you have made no point at all.Rockwell’s point is valid.When people can not afford to buy gas, they will conserve gas taking far fewer trips by car that are essentially unnecessary.That is common sense, it is logical, it is economics 101, and it is reality.
Rockwell’s qualifications are only as an ideologue and true believer, spouting his failed ideology.
It is really fascinating that you can say that Rockwell’s Ideology has failed when it has not even been tried.
What does Rockwell propose as his solution to all of the financial problems caused by increased deregulation and the completely unfettered, unregulated free market that has caused this mess? I’m quoting verbatim here, “What can the State contribute to this cause? It can get out of the way. The only positive contribution that the politicians can make is to make the market a freer environment for resources to travel to their most profitable production lines.”
In other words, the only solution to problems caused by deregulation is no regulation at all.
Again, this is not a problem of de-regulation…It is a problem of government interference..Rockwell is correct.If the government got out of the way by allowing telling the banks, during the de-regulation, that there would be NO bail outs if the banks made bad business decisions.. If government had a realistic energy policy that has not been in existence for 30 years…An energy policy that actually called for the building of infrastructure to support new refineries, and new power plants, none of which have been built for over 30 years.If government allowed GM and Ford to operate without a safety net, GM and Ford would have had cars that compete with Honda and Toyota whose sales have not been affected by the gas prices.
In other words, if the FREE MARKET was actually applied, the way it is supposed to be, it would correct itself.
Ciao, CZ
by
steve scheetz (1 articles, 0 quicklinks, 1 diaries, 509 comments)
on Thursday, July 24, 2008 at 11:14:01 PM
Of course, you do know Big Oil wants to minimize their taxable profits. The profits are in the oil. Most of those oil profits likely get booked in the tax havens (thats from Michael Hudson, an oil insider who was a consultant to Exxon, why do you think the tankers are registered in Panama and Liberia). Thats why Big Oil really does not want to drill in the US, imported oil is so much more profitable. Big Oil does not pay market price for oil, but they charge their oil refineries market price. For domestic oil, it might cost them 20 dollars a barrel to get, and 100 dollars is profit. However, like many MNC's, its easy to transfer some of your overseas costs from overseas to US HQ to reduce these profits.
What follows is from a Consumer Unions article (lost the link)
"Documents from the mid-1990s indicate industry officials and corporate officers were concerned about how to reduce capacity, with observations such as "if the U.S.petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refinery profits" This came from a Chevron Corporation document written in November 1995. A Texaco official, in a March 1996 memorandum, said refinery overcapacity was "the most critical factor" facing the industry and was responsible for "very poor refining financial results."
Anyways, thats a good reason not to build new refineries, keep supplies tight, prices high. Make sure you do not have too much inventory so you have to buy more oil when it is priced high.
It's interesting, refinery utilization was 95% in 2005 despite Katrina, and this dropped to 90% in 2007, reducing inventories. Had a lot of shut-downs they said. How convenient.
"The oil company executives like to point to profit as a percentage of sales because in a commodity business, where raw materials are a large part of costs, profits will look small. In a capitalist economy, however, it is return on equity that matters, since this is the return that attracts capital investment. By this standard, the oil company profits have been skyrocketing. Profitability – a measure of a company’s or an industry’s net income relative to the equity or capital provided by investors – rose to 22.1 percent, surpassing the previous peak of 21.1 percent in 1980.... In 2005, ExxonMobil reported Return on average capital employed increased to 31 percent."
Nice. If only they had Free Markets, it might even be higher. They have my sympathies
As for Ford and GM. Of course, you do realize that in 1999 oil was 13 dollars a barrel for a short time before rebounding back to 20 dollars in 2000, and for much of the 90's we had cheap oil. So its hard to blame them. SUV's were a hot item. They just need to convert more of their factories to the smaller cars. That costs money of course, and lost sales during the conversion. Competitive world markets have hurt in the auto industry, since high taxes in the US as well as HC insurance make them uncompetitive. Thats why capitalists hate competition. Of course, before WTO, we could have provided some subsidies and help them out and protect American jobs. Thats not allowed today.
You would have thought they could have anticipated us running out of oil, thats the reason for the high oil prices. Right? Wrong. And they knew that, they just had no idea Bush would allow the price to be bumped up as high as it has. Perhaps they even see the hand writing on the wall with carbon caps and trading, and just want a good excuse to move out. Why invest in manufacturing small cars in the US when you are going to be subjected to carbon caps driving up your costs, and making your potential buyers too poor to buy a new car at profitable prices.
The reason we had cheap oil was because Big Oil wanted to crush the competition in the oil business in the US, consolidate it's global cartel with mergers and acquisitions, and crush the competition from nuclear, setting the stage for the current price boom under GWB where oil has went from 20 dollars to almost 150 dollars. Some free market.
Like I said, lack of competition is the problem in certain industries, and WTO preventing us from protecting our industries subject to competitive world markets where they exist , is another problem. And of course, government tax incentives providing companies with a good reason to move their operations to greener pastures makes us all poorer.
by
pft (0 articles, 0 quicklinks, 0 diaries, 332 comments)
on Friday, July 25, 2008 at 4:05:46 AM
...if free market failed, it's because it was never really applied--according to you.
Did it ever occur to you that, if it was never really applied, it's because it can't be applied in the real world? Companies don't want free markets, they want to control the market, and as long as no regulation or authority keeps them from doing so, they usually succeed. So, theoretically, free market can only exists if a political authority protected free market against corporations. And of course, this is purely theoretical, since governments are highly susceptible to corruption by big business.
In the real world, free market is at best a temporary phase before one or two big companies take over and become monopolistic.
by
francine (0 articles, 0 quicklinks, 0 diaries, 299 comments)
on Friday, July 25, 2008 at 1:14:53 PM
Steve is perhaps a little unclear when he says that free markets have never been tried. Perfection doesn't exist, so in a sense he's right that a perfectly free market has never existed. However, what history shows us is that the closer to the ideal that we get the better the results are.
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Darren Wolfe (4 articles, 125 quicklinks, 79 diaries, 598 comments)
on Friday, July 25, 2008 at 2:04:28 PM
No ideology can survive massive corruption. The Soviet Union died not so much because of the US, but because of internal corruptions. Chinese communism did not die a good death because the Chinese government, even though it's a authoritarian regime, went out of its way to stamp out corruption. High officials guilty of corruption are put to the death quickly. Corruption punishments are harsh and effective. This saves the country and its unique brand of communism.
Now we get to the US. The US prospered well for decades under a reasonably well-managed, rational, balanced and sensible blend of democracy and capitalism. Both have been utterly corrupted. Corrupted to the core, initiated and controlled by those in power. The corruptors are seldom prosecuted, less so punished. And you know what, the people went along. THE PEOPLE WENT ALONG!! No ideology can survive that. The country deservedly blows up.
by
TomK (0 articles, 0 quicklinks, 0 diaries, 207 comments)
on Friday, July 25, 2008 at 12:07:23 AM
You make some good points here. I would argue that any powerful government is going to be corrupt. It's the nature of the beast. That's why the US did well in the begining, it hardly had any government, comparatively speaking.
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Darren Wolfe (4 articles, 125 quicklinks, 79 diaries, 598 comments)
on Friday, July 25, 2008 at 5:33:08 AM
With this recitation of the horrors of a free market,...
we, and indeed corporatists and Libertarians can thank their lucky stars that they've never seen one. The pseudo-free market that has engendered the dislocations that we have seen and those that are to come is certainly as bad as we can tolerate.
Of course, we know the the Corporatist's Prayer. It goes like this, "Holy Mammon, please protect us from free markets and alert taxpayers."
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John Sanchez Jr. (4 articles, 0 quicklinks, 8 diaries, 1055 comments)
on Friday, July 25, 2008 at 8:47:51 AM
People say it's not the best but only that it is the best we have; communism failed,capitalism lives. The car companies are failing because the market has changed just like the horse & carriage market. Oh oh, you bought a 3 legged horse !!!Whose problem is that ?
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Markageloo Breza (0 articles, 0 quicklinks, 1 diaries, 4 comments)
on Friday, July 25, 2008 at 9:31:21 AM
The free market is fine for such things as cell phones ,refrigerators and TVs. But for things that people need - like, food, healthcare, energy, the market should be highly controlled. Anthing else is just letting the wolves having the lambs by the throat.
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Levon (0 articles, 0 quicklinks, 0 diaries, 28 comments)
on Friday, July 25, 2008 at 12:14:06 PM
Free Markets have NEVER BEEN TRIED... Yet they work, in your estimation, in the cell phone industry... (not sure that is a free market, but whatever..)
your position is unjustifiable
Ciao, CZ
by
steve scheetz (1 articles, 0 quicklinks, 1 diaries, 509 comments)
on Friday, July 25, 2008 at 12:39:36 PM
