Saturday, May 1, 2010

Thoughts On Laissez-faire Economy

Before I start this I just want to say I love the free market. Having read how Soviet style Socialism operated the free market is good in that it allows people to operate in the way that is best for them. But it can't do everything.

Now I saw yesterday's Fox and Friends. They were trying to tell us that President Obama is, somehow, against the American dream.

That is a ridiculous accusation against President Obama.

Thankfully others have noted the outrageous nature of that accusation.

I would also like to comment about Gretchen Carlton's interview with Anne C. Heller, a biographer of the free market thinker, Ayn Rand.

CARLSON: So is this the world that Rand was trying to warn us about, Anne?

HELLER: Absolutely, it is. For her, enough money was a contradiction in terms, because money was productivity and creativity and honorable enterprise.

It is possible not to be productive with money.

It is possible not to be creative with money.

It is possible for money to be gained outside of an honorable enterprise. Illegal drugs for instance.

Recklessly giving mortgages to people who cannot pay them off is not an honorable enterprise.

The most creative solution Wall Street could devise out of the Lehman Brothers crisis was to be bailed out by the government. That is not capitalism, that is Socialism for the rich.

The attempted reforms being undertaken in Congress is an attempt to make it impossible for a Lehman Brothers-like situation to emerge.

CARLSON: Would [Ayn Rand] have been in favor of what's being proposed now on Capitol Hill as far as financial overhaul?

HELLER: Absolutely not. She was against government regulation from beginning to end. She was for a purely laissez-faire government.

No regulation? That is what has caused the world economy to nearly die the way it did in 2008. Banks were allowed to just give loans to anyone without checking that they could actually repay it all. Then when people began to foreclose on mortgages, so many that those who owned these mortgages were unable to recoup their losses and so this horrible money hole began to grew until the crisis of 2008.

A purely laissez-faire government? As far as I can see that is a mere abstraction that cannot conform to reality. Government is a part of society. The economy is a part of society. It is natural that they will interact with each. They cannot be neatly separated.

In a healthy economy money flows around freely. The transfer of money is the blood flow of the economy. When money stop flowing that is when we have a recession.

If the government stops spending as well during a recession there is even less money circulating in the economy than before. This makes the situation even worse than before. The blood pressure of the economy has dropped even more.

There is even less spending now. Blood circulation has just stopped.

That is why governments have to spend in a recession. It spends money and the blood pressure of the economy goes up. More money is flowing around now. That is good.

When there is enough money being spent, being actively used, then the healthy economy is restored.

So we see that there is a beneficial place for the government in the economy.

It should also be noted that before the Great Depression orthodox wisdom said that in a recession the government must cut spending and not get involved in the economy. As explained above that is the worse thing a government can do in a recession.

That is like having a patient who has dangerously low blood pressure, and then decreasing it even more, making the patient even more sick.

That is what Hoover did. The Depression only got worse.

Rooselvelt did the opposite and did what he could bring the economy back to health.

The government is not like a private household that can run out of money. The government prints the money. The government is the source of money. Therefore the government can spend more during hard times.

Therefore this dogmatic view of laissez-faire market does not impress me. I do think that help the toiling people who are within this crisis of the Great Recession.

5 comments:

  1. Way off track on the economics post. Learn the truth as to why the market crashed.
    http://tinyurl.com/yeqpax8

    The logical move for a government to do in these times is to put cash into the hands of those who toil for it. Stop spending and promote tax cuts. Also cut the taxes of the wealthy if they create jobs. This is what Reagan did. Also the printing of money is the creation of debt. Money is debt. Printing more dilutes the supply causing it to be less in value.

    >President Obama is, somehow, against the American dream<

    Socialism works until you run out of other peoples money. There was another community organizer from Chicago that Barack learned from. Saul David Alinsky. A man that never even joined one of his own groups he created due to his desire to be free and independent.

    Rules for Radicals is written for the have-nots. The means of achievement is through the Cloward Pivan Strategy.
    "Endless and impossible demands on government will create an economic collapse."

    What your seeing now is a president that is going to make Alinsky's dream come true. The printing of enormous amounts of worthless currency will do to us as what printing money has done to other nations in the past.

    "The best way to destroy the capitalist system is to debauch the currency"
    Vladimir Lenin

    Stick to religion, your better at that.

    ReplyDelete
  2. Way off track on the economics post. Learn the truth as to why the market crashed.
    http://tinyurl.com/yeqpax8

    The logical move for a government to do in these times is to put cash into the hands of those who toil for it.

    I agree. That is a good idea. Would have been better than the Bush era bailout. As you will see later the Obama Administration is doing exactly that.

    Stop spending

    The government stopping spending during a recession is a bad idea. Money like the human body must be used. If money is being saved by everyone no one's spending. That makes recessions worse, not better.

    Keynesianism calls for governments to be counter-cyclinal, to do the opposite of what everyone else is doing. When the economy is good, when people are spending money, then the government should save money. When the economy is bad, when people are spending not money, then the government should spend money.

    and promote tax cuts.

    The Obama Administration is promoting tax cuts.

    "The American people need to be reminded that 98 percent of Americans got a tax cut last year," Senate Majority Leader Harry Reid said Wednesday.

    "Reid was referring to the impact of the American Recovery and Reinvestment Act, otherwise known as the stimulus -- essentially, the only Obama policy to really impact people's 2009 tax returns. In fact, tax refunds reached an all-time high this year in part because of the stimulus, the president said in his weekly address on Saturday. Meanwhile, taxes are at their lowest levels in 60 years, according to William Gale, co-director of the Tax Policy Center and director of the Retirement Security Project at the Brookings Institution."

    ReplyDelete
  3. Also cut the taxes of the wealthy if they create jobs.

    Many of them don't pay taxes anyway.

    The very wealthy often use accounting tricks to avoid paying taxes. Some big corporations don't pay any tax because they hold their money in tax havens like the Cayman Islands. Because of this the rich leave the middle class to pick up the tab they should be paying.

    This is what Reagan did.

    I can't comment on that I'm afraid.

    Also the printing of money is the creation of debt. Money is debt. Printing more dilutes the supply causing it to be less in value.

    If too much money is printed that is what happens. Of course when printing money financial balances must be maintained. When I argue that the US government can print more money I say this on the asumption that they paying attention to such matters and will act to avoid catastrophic inflation. But I don't believe the US government is trying to do that.

    Actually a little bit of inflation for the US currency would actually help US exports be more competitive.

    ReplyDelete
  4. >President Obama is, somehow, against the American dream<

    Socialism works until you run out of other peoples money.

    I'm not sure I understand you here. The US government prints money. It is their money.

    Also I don't think the US government is trying bankrupt big businesses to get their money. They are trying to save them as far as I can see and make sure they can't steer themselves into a 2008-like crisis again.

    There was another community organizer from Chicago that Barack learned from. Saul David Alinsky. A man that never even joined one of his own groups he created due to his desire to be free and independent.

    Rules for Radicals is written for the have-nots. The means of achievement is through the Cloward Pivan Strategy.
    "Endless and impossible demands on government will create an economic collapse."

    Maybe you don't mean it this way but the economic crisis was caused by the greed and immoral practices of big business, subprime mortgage lenders, etc.

    On the Cloward Pivan theory I would like to share these words from another source:

    "According to David Horowitz ... Cloward-Piven is "the strategy of forcing political change through orchestrated crisis." Named after sociologists and antipoverty and voting rights activists Richard Cloward and Frances Fox Piven, who first elucidated it in a May 2, 1966, article for The Nation called "The Weight of the Poor: A Strategy to End Poverty," the Cloward-Piven strategy, in Horowitz's words, "seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse." Like a [reverse] version of Naomi Klein's Shock Doctrine theory, the Cloward-Piven strategy dictates that the left will exploit that crisis to push through unpopular, socialist policies in a totalitarian manner. ...

    "[Horowitz's] description is a crude and false account of what Cloward and Piven argued. For example, the words "capital" and "capitalism" never appear in their article. The piece is about precipitating a crisis in the welfare system by legally enrolling masses of eligible recipients, which the welfare bureaucracy could not handle, thus creating a demand for more radical reforms, like a guaranteed minimum income--a proposal that Nixon, of all people, floated in 1969 and that, in fact, Democratic-majority Congresses voted down through 1972 ... Moreover, as Piven recently explained to me, although the article was written as a strategic thought experiment, in many ways it described and reacted to changes already sweeping the nation, chief among them the civil rights and welfare rights movements, which created newly politicized constituencies to which the Democratic Party had to respond. "The mainstream," Piven says, "was responsive to the idea that we could end poverty because of these movements." In short, the stresses placed on the welfare system were caused by a confluence of factors, of which an article published in The Nation, it is safe to say, was but one, and most likely a minor one at that."

    I will share the source here later.

    What your seeing now is a president that is going to make Alinsky's dream come true. The printing of enormous amounts of worthless currency will do to us as what printing money has done to other nations in the past.

    "The best way to destroy the capitalist system is to debauch the currency"
    Vladimir Lenin

    With all due respect I do not believe that President Obama is trying to debauch the currency. I do not believe President Obama is trying to make the US currency worthless.

    Stick to religion, your better at that.

    Thank you for that compliment. I'm not trying to be sarcastic or anything but it is good for me to know that you appreciate what I have written here and that you find it worth reading. Thank you.

    ReplyDelete
  5. Also take a look at this article if you have not seen it already.

    ReplyDelete