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[erikjamesmusic]

Jon Hodgson wrote on Wed, 25 March 2009 18:22

erikjamesmusic wrote on Wed, 25 March 2009 22:16 The recession of 1921 disproved Keynes' theory before his theories were even on paper. The government had almost NO intervention in 1921, and the economy rebounded in a year The free market working once is not proof that the free market will work every time. .

Conceded. Can we agree that the free market has become so distorted by our federal government in the past 100 years that blaming the "Free market" for the current recession is, at best, illogical?

[Jon Hodgson]

erikjamesmusic wrote on Thu, 26 March 2009 00:02

Jon Hodgson wrote on Wed, 25 March 2009 18:22 erikjamesmusic wrote on Wed, 25 March 2009 22:16 The recession of 1921 disproved Keynes' theory before his theories were even on paper. The government had almost NO intervention in 1921, and the economy rebounded in a year The free market working once is not proof that the free market will work every time. . Conceded. Can we agree that the free market has become so distorted by our federal government in the past 100 years that blaming the "Free market" for the current recession is, at best, illogical?

I don't think a free market in the pure sense that you envisage it can exist. Whether it is companies with money (and therefore power) or governments, someone is always going to manipulate things outside of the idealistic view.

The "free market" where everyone acts rationally and dispassionately and things balance out to an optimized state is about as viable as the true communist state where everyone gives of their abilities in exchange for their needs regardless of what theur neighbour receives in return for their contributions.

[stephenfdavis]

Hello, Erik told me about this discussion because we frequently discuss these matters and I wanted to chime in. I am a musician with a home recording studio so I can say that I do belong here in some sense. I put responses to 5 comments all in this post.

--

"As an example, some people might value freedom enough to die for it, but also believe that an unregulated market allows a disproportionate aquisition of power by certain groups or individuals which could be used to curtail the freedoms of others in unacceptable ways."

This is the most dangerous fallacy existing regarding the free market. A unregulated free market provides the strongest possible checks on the disproportionate acquisition of power by certain groups or individuals. It is through grants of government privilege that power is centralized in the hands of the few and that they exert control over the many.

A prime example of this is tariffs. Say an industry in the United States now sells a product for $20, and the same industry in another country is able to sell the same quality product for $15. Concerned that they will be put out of business, the U.S. industry approaches the government and asks for a duty of $5 to be added to imports on that product. The industry is not thinking of itself, of course, but of the workers it employs, and the economic damage that will spread in ever-widening circles if they are forced out of business. The government imposes a tariff, keeping the industry in business. This is great for America, right?

Wrong. In the absence of a tariff, people would be free to buy the product that formerly cost $20 for $15. Not only do they get the product cheaper, but they also have $5 that they would not have had to buy something else; to support another industry. Buying the foreign product also means that the other country has more money to buy products from the U.S. As a result of letting in more foreign goods, we must export more American goods. Though fewer people are now employed in one particular industry, more people are employed - more efficiently employed - in another industry. Net employment has not gone down, but the production of both countries has gone up. Labor in each country is more fully employed doing what it does best, and consumers in both countries are better off.

The free market is nothing more than individuals freely exchanging with one another. Government interference subsidizes a small group at the expense of everyone else. Look around and you will see that government interference in housing, transportation, healthcare, education, mining, agriculture, labor, commerce, etc. tramples the economic freedom of the individual, lowers the quality of goods and services, raises prices, and discourages production.

--

"The fed is already audited, HR1207 seeks to change certain aspects of how that audit is done, notably an elemination of certain exclusions (I don't know the reasoning behind the exclusions, so I can't judge whether that's a good idea or not). It was only introduced on February 26th and has been referred to committee... in other words Obama hasn't refused it yet, he hasn't even had it on his desk."

Yes, the Fed has been "audited," if by audited you mean the audits are not allowed to include, according to the Accounting and Auditing Act of 1950 as amended by Public Law 95-320 (31 U.S.C.

[organica]

nicely played stephendavis .

[Careful Collapse]

Quote:

...in 1913. Our nation ever since has operated on debt...

I disagree with this - the deficit-heavy US (what Joseph Stiglitz calls "the consumer of last resort") really only took off as soon as the Asian markets began using US dollars as reserves, a system which is now falling apart. (I am not counting WWII because it was, well, a World War.  That is not an ordinary circumstance.)

Quote:

...tariffs...

 If there is anything that the failures of IMF and the World Bank have taught us about globalization, it is that rapid liberalization of markets disproportionately benefits the wealthy, and very often hurts the poor.  There may be narrative and rhetoric suggesting otherwise, but the results are very, very lopsided.  And in any case, those who lose their jobs in your hypothetical 20$ country may not have access to training in a new skill in a completely free market.  They are likely to be either unemployed or working for a lower wage, while the benefits of the trade liberalization will be benefiting those already wealthy.  While prices may be lower for this product, it is inaccurate to assume there is no re-distributional effect on complete trade liberalization.

Quote:

Keynesian economics claims that economies are based on consumption and debt, as opposed to production and savings. It also says that the basic laws of supply and demand go out the window when you are looking at the economy as a whole, and therefore the all-knowing hand of government is needed to control the macroeconomy's fluctuations through fiscal and monetary policy.

 This is a silly caricature of Keynesian economics and you know it.

Quote:

...supposed superiority of ABC...

In Paul Krugman's words, "nobody has managed to explain why bad investments in the past require the unemployment of good workers in the present."  

Anyway, there are holes in both merits you suggest -     http://www.gmu.edu/departments/economics/bcaplan/whyaust.htm

Quote:

If you want to talk about having an effect on the economy, how about his $3.6 trillion budget?

"The House and Senate plans both call for spending less than Obama's $3.7 trillion proposal for next year..."  Like I said, he's not a dictator.  You're overestimating his power.

Quote:

Or his cap-and-trade plan? Almost every activity in the U.S. emits carbon dioxide, and his carbon tax would levy $65 billion per year on current activities. Who do you think is going to foot the bill for that?

 Good.  The free market does not and has never taken global environmental costs into consideration - there is no incentive to.  It is simply another failure of completely free markets that is being myopically spun into a government-hungry attack on efficiency.       http://gregmankiw.blogspot.com/2006/10/pigou-club-manifesto. html

Quote:

John Maynard Keynes didn't create any new theories.

 ???  He created plenty of theories, the most notably spawning from discrediting Say's law.

[Jon Hodgson]

Careful Collapse wrote on Thu, 26 March 2009 22:50

Quote: ...tariffs...  If there is anything that the failures of IMF and the World Bank have taught us about globalization, it is that rapid liberalization of markets disproportionately benefits the wealthy, and very often hurts the poor.  There may be narrative and rhetoric suggesting otherwise, but the results are very, very lopsided.  And in any case, those who lose their jobs in your hypothetical 20$ country may not have access to training in a new skill in a completely free market.  They are likely to be either unemployed or working for a lower wage, while the benefits of the trade liberalization will be benefiting those already wealthy.  While prices may be lower for this product, it is inaccurate to assume there is no re-distributional effect on complete trade liberalization.

I think there are two problems with the idealized image of a self regulating free market.

The first is to think that you can have it in the first place, someone's going to have more power than someone else and use that power to manipulate the market, the only way you can prevent that is to bring in laws and policing, but then you're interfering in the market anyway.. basically human nature makes the theoretical ideal impossible.

The second is to assume that if you could achieve a true interference free market that reach an optimum state, that that optimum state of the market is going comprise of acceptable states for everyone and everything in that market. The optimum state for the market might for example involve a group of people working in coal mines form the age of ten till they drop dead at 35... but is that acceptable?

Or the current optimum state for the market might create unacceptable pollution, exchanging the short term health of the economy for the long term health of the planet. (something which careful collapse has alluded to)

So basically you'll never get a "perfect" free market, and if you did there's a good chance it would be bad news for a lot of people, maybe even all of us in the long term.

[PookyNMR]

Jon Hodgson wrote on Thu, 26 March 2009 19:42

I think there are two problems with the idealized image of a self regulating free market. The first is to think that you can have it in the first place, someone's going to have more power than someone else and use that power to manipulate the market, the only way you can prevent that is to bring in laws and policing, but then you're interfering in the market anyway.. basically human nature makes the theoretical ideal impossible.

I agree.

[Edvaard]

erikjamesmusic wrote on Wed, 25 March 2009 18:16

Careful Collapse, It is my opinion that you are misinformed about free markets.

Well then, let's just inform ourselves about free markets, shall we?

Jon Hodgson wrote on Thu, 26 March 2009 21:42

The optimum state for the market might for example involve a group of people working in coal mines form the age of ten till they drop dead at 35... but is that acceptable?

You mean, e.g., like what actually happened during the first many decades of industrialism? What Jon describes is in fact exactly what ocurred during those halcyon 'unfettered market' times.

Of course, the industrialists preferred that the governments keep hands off; unless, that is, the workers got too uppity and tried to find relief from non-existent worker safety related disasters and/or intolerable working hours and conditions by organizing. In that case they called (often times successfully) for government intervention, occassionaly of a violent sort.

Read up on the Ludlow massacre, e.g., to make sure that we are not misinformed about free markets.


And as poined out also, unregulated markets and industries actually militate against competitive markets. Witness Standard Oil, back in the good old days. How competitive was that industry prior to 1911 vs. afterwards?

Right.

People are not blaming this latest fiasco on "free markets", but on insufficient or imprecise regulation, viz., no capital requirements for 'mortgage default swaps' as is required for any other type of insurance.

The surety in this case was the soundess of the insurer, to the extent of the assets being insured. So, ironically, when the  value of these assets declined, the holders of the assets demanded greater capital requirements, or "put up" money, from the company they were paying the premiums to to insure the asset holder's ill-chosen assets. When the value of the underlying assets went deeply south, there was no way that amount of backing could be raised by the insurers, and the house of cards collapsed.  


Imagine taking a 'gambling insurer' with you into a casino, and the more ridiculous bets you made (all with other people's money), and the more you bet wrong , the more "put up" money you demanded from your insurer.

Ludicrous, no?

With some modicum of regulation, there would have been set standards of capital requirements (being that this involved other people's money), and the gamblers and their insurers would have more realistically 'self-regulated' their bets.


I do understand the consternation of many folks resulting from undue governmental imposition upon personal affairs, and the most ridiculous of pretenses for military aggression, and that the two party system so expertly perpetuates all that. I'm definately in that camp. But to me, the biggest problem is all the idealism in both parties that seems to make reality irrelevant. And, I could be missing something here, but all I see from the Libertarian platform is, if anything, even more idealism. No thanks.

Quote:

The capitalism experiment died with fiat money (the Fed) in 1913. Our nation ever since has operated on debt, and debt will never be capitol.

What existed from long before 1913 up until 1971 was currency tied to various commodities, in differing proportions, at various times. Fiat money is what we've had since 1971.

All money, at all times, has always been a 'promise to pay', specie money confining this payment to a specific commodity, and fiat money bypassing the outdated middle procedure and directly applying to whatever good or service (or asset) one actually wishes to obtain.

Under gold or silver standards there were episodes of inflation, deflation, economic booms and busts, just like today. Not to mention lots of profits from currency speculation, just like today.

Other than in times of war, there were, in fact, somewhat longer periods of stability, punctuated by the occassional disaster, but all that was prior to the full installment of industrialization and then technological innovation. Technology brings about greater productivity, so greater standard of living, and more investment (whith capital, that is, debt) so then a greater demand for money.

In all of history, only 161,000 tons of gold have been mined (about 2 olympic swimming pools worth), and current mining is causing great environmental degredation as it is. The only way to fit the value of current and future increases in technological and industrial capacity, investment demands, and standard of living to what is essentially a fixed amount of gold, is through constant deflation. Ask any bonafide economist how desirable that would be.

Today we have an enormous amount of "things" (and services) that did not exist 100 years ago, so comparing how currencies accommodate the situation now vs. then with out taking that into account (along with the fixed amount of gold) is meaningless.


A less idealistic/ more realistic view of contemporary economics can be found here, among other places;

      http://www.moslereconomics.com/mandatory-readings/soft-curre ncy-economics/

for those interested.

[MDM,]

exploitation of people has NOTHING TO DO with free markets..

that is a human-rights issue, a local government one..

those countries are heavily indebted to IMF-type loans  and the country is set-up to be exploited... that and nutty exchange rates which make our money worth much more than theirs.

in BALI a person I knew had a factory which built furniture.

they did not bother buying power tools because workers only cost 1 dollar a day anyway.

[MDM,]

if you look at HISTORY, bankers slowly but surely have bought out most countries, kingdoms etc. by lending them HUGE sums of money for wars etc. and with the government not being able to pay them back(which they CAN do because of reserve banking but WE CAN NOT because it's called counterfeiting)


the USA is HEAVILY indebted to the fed

it was NOT indebted before the fed caused the roaring 20's boom which caused the USA to go bankrupt a decade later..

so yes the FED, and the international bankers who own it run the USA.. they have been progressively increasing their meddling and power as the government has SLOWLY BEEN DISMANTLED before the eyes of americans..

but not only... the international bankers work with many governments, who owe the bankers stratospheric amounts of money.

the IMF is going to be producing GLOBAL CURRENCY.

once that happens, there will only be ONE central bank, run by private bankers... the implications are that power will be in the hands of these people, because they will be able to inflate and deflate the whole world's currency.


I find it absolutely ABSURD that ANYONE would not want to see the FED audited on a regular basis..

and if money is to be generated it should be DIRECTLY by the government, with no interest...

certainly not by a bunch of mafia-bankers acting in SECRECY and destroying the well-being of millions of families at will.

[Edvaard]

Agreed that the exploitation, past or present, is a human rights issue, but the whole mindset of 'free markets' in the industrial age said otherwise.

[Edvaard]

You are talking about too many different issues all at once. Whoah!

My long winded post (which I slowly edited while you posted your two responses, to make it even more long ... ) dealt mainly with just economic issues, and various thoughts and perceptions thereof.


Yes, I know what harm the IMF has done concerning poor countries. A racketeering enterprise, to be sure.


The Fed is another matter, and I can't disagree entirely with what you say in that regard but, as has been pointed out, there always has been and always will be a 'power group' of some sort insinuating itself into the scheme of things, manipulating, string-pulling, etc. to affect things to their liking. Not that this excuses any of the current shennanigans, but it's not as though the fed is some newfound, never-happened-before phenomenon either. Remember though, that the fed itself is not THE power, but just an instrument of ONE power group.


For myself, I'm even more concerned about companies like Monsanto, Archer Daniels Midland, et. al. (yet another 'power group') who are attempting to genetically monopolize the food supply, doing who-knows-what sort of potentially irrevokable damage to nature beyond just our food crops, with the verified damages recorded thusfar not at all encouraging. Now that's a market that most definately needs to be 'fettered'.


PS

I do wish that both Ron Paul and Ralph Nader were allowed in the presidential debates, whether I'd actually want either of them as president or not, so I could watch the Dem. and Rep. candidates' faces crack as they attempt to address any real issues that the approved media are too chicken feathered to ask about.

[Jon Hodgson]

MDM, wrote on Fri, 27 March 2009 10:56

exploitation of people has NOTHING TO DO with free markets.. that is a human-rights issue, a local government one..

If a government introduces a law which says that all air in a coal mine must be filtered to a safe level of contaminants for the good of the workers then they are affecting the cost of the coal from mines that fall under their jurisdiction.

The "free" market will then favour coal from those mines that are not subject to those laws, and thus less costly, the actions of the government for human rights have directly affected the machinations of the market.

If you don't interfere in the market, then people WILL be abused and suffer, if you interfere in the market to prevent this, then the market is no longer truly free.

[MDM,]

Edvaard wrote on Fri, 27 March 2009 07:34

Agreed that the exploitation, past or present, is a human rights issue, but the whole mindset of 'free markets' in the industrial age said otherwise.

not really, because the industrial age was coming straight out of colonialism, aristocracy etc. ... nothing to do with free market per se.

they were called robber BARONS.

the free market is not responsible for injustice, human rights etc... it's just a mechanism.

having children who work for free is something which has been going on for millennia.

slavery exists even if there is no market to speak of.

romans used to make opponents into slaves to be bought and sold.. free market??  not!

gypsies here in europe get their kids to steal for them.. is that free market?

[Jon Hodgson]

MDM, wrote on Fri, 27 March 2009 11:09

if you look at HISTORY, bankers slowly but surely have bought out most countries, kingdoms etc. by lending them HUGE sums of money for wars etc. and with the government not being able to pay them back(which they CAN do because of reserve banking but WE CAN NOT because it's called counterfeiting)

No it's not, for god's sake Max, have you STILL not learned how fractional reserve banking works?

That you have a problem with banks is one thing (I have big problems with a lot of them myself), but that you can't be bothered to even learn to know your enemy, is another completely.

Quote:

the USA is HEAVILY indebted to the fed

If you're talking about the US government, then no it's not. The Fed holds only a small percentage of Treasury Securities at any time and since all profits of the Fed (bar a small fixed dividend to member banks) are paid directly to the Treasury, anything the government owes to the Fed, it actally owes to itself, the more of the national debt the fed holds, the better.

Quote:

so yes the FED, and the international bankers who own it run the USA..

Why do you keep repeating this lie?

The "ownership" of "The Fed" (which is not one entity, but 12 banks and a board of governors) is a matter of public record and statute. It's not "owned" in any normal sense of the word, and the member banks have severely limited powets.

(that doesn't mean that big banks and bankers don't have influence on the fed and government, but really only in pretty much the same way as any other lobbying group).

Quote:

they have been progressively increasing their meddling and power as the government has SLOWLY BEEN DISMANTLED before the eyes of americans.. but not only... the international bankers work with many governments, who owe the bankers stratospheric amounts of money. the IMF is going to be producing GLOBAL CURRENCY.

Betcha that one turns out to be total bollocks too.