Watching History Unfold

Huffington Post, by Jared Bernstein:

Watching History Unfold

You hear that implosion reverberating through financial markets? It’s the sound of decades of conservative ideology collapsing.

The week that just ended revealed the myth of market fundamentalism: the notion associated with mainstream, Milton Freidman’esque economics, and amplified by anti-government conservatives that unfettered markets will provide society with the best outcomes. Such simplicity, such elegance…such nonsense.

Yes. There’s never just a “free market” in a vacuum…it’s not just a miraculous “market” that organically evolves free of government involvement, the government sets up and enforces property laws, the whole set of secured transactions laws, securities laws, financial and banking laws, etc, without which our economic marvels of markets could not exist. The government sets up the underpinnings of the financial and market system…now we’re learning it needs to be there to oversee and regulate more of the system. Because some people are too smart and/or reckless and/or greedy and know how to totally game the system to the detriment of the overall system itself, such as short traders who could potentially have caused the downfall of these big banks (step one, borrow some shares, step two, spread some rumors/get your buddies to all sell, sparking a selloff as share price drops, which sparks more selling and price dropping…step three, profit!!!), greedy companies that got rich off of too many bad mortgages, companies overly pushing mortgage backed securities, etc. And it’s almost like, game over–they pushed the system too far. Wow, some neat invisible hand there! Some great self-regulating free market that is–it killed itself! Well, no, some individuals and institutions killed it–which is why the government needs to step in and regulate the market more. I mean, come on, who ever believed the self-regulating myth anyway? Only greedy people who want to get rid of regulations so they can get rich quick, plunder, and leave the rest of us holding the bag.

As one letter-writer wrote to the NY Times:

With the bailout of Freddie Mac and Fannie Mae, the Reagan revolution has at last realized the robber barons’ dream: privatize the profits and socialize the debt. Nicely done, fellas.
Candida Pugh
Oakland, Calif., Sept. 8, 2008


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