The false ideology that caused our financial failure

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.”

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