Home

Tales of the invisible hand by ECHIDNE OF THE SNAKES

Submitted by Y on Thu, 25/09/2008 - 10:26

Once Upon A Time: Free Market Fairy Tales 






Once upon a time all markets were unregulated and we lived in paradise. Any dairy farmer could sell you milk without horrible government regulations. If the milk had some water added to it, well, the farmer needed to make a living, and watered milk went much further. So did flour with sand added to it to make it heavier when the price for flour was by pound. And of course the scales the sellers used to weigh their products were their scales.

Now why did I call all this a paradise? Because there were very few markets in those days, most people grew what they ate on their own land, and those who did not learned over time to tell the honest farmers from the dishonest ones and the latter couldn't make a living from adulterated produce for very long. Their names were known to everybody and people soon learned not to buy from strangers who passed through the villages on market days.

Or perhaps I called it a paradise because the people got together pretty fast and decided that unregulated markets were not a very good thing, after all, that at least the scales used for measuring should be provided by some unbiased party, that their accuracy should be measured and maintained, and that those who watered the milk they sold or added sand to the flour they sold should then be tarred and feathered themselves?

So it goes. Over time the nature of markets changed, but those early lessons about the dangers of completely unregulated markets were not totally forgotten, and when they were deaths here and there reminded us of the need for some oversight and some rules. Indeed, it was pretty obvious to most thinking people that the widening distance between the seller and the buyer and the increasing complexity of the products that were being traded required regulation and oversight more than ye-olde-worlde village market days. The latter had more information about the sellers, the buyers and the products, after all, and less scope for a truly callous criminal to harm people.

Such a nice and soothing fairy tale I'm telling here. Boring enough to put you all to sleep. Sadly, such boringness was not to be for ever. One day the forces of free market capitalism rose up again, full of injured fury over the lost opportunities that millstone of regulations around their necks had caused, and this time people HAD forgotten about the reasons for oversight and rules. Or enough people had forgotten about them, because the rules and oversight had worked to make the markets relatively safe places to trade in.






So here they ride to war, the free marketeers. It is about thirty years ago, and you can read about the reasons for markets to be free, everywhere. Chile, Argentina and so on, all are going to be saved from the evil grasp of the government. Later Ronald Reagan rises as the leader of the troops, so fatherly and handsome, ready to squash the evil government before it has had time to "help" you. And Americans listen to him and look around and don't see adulterated pet food or fish with mercury or any other great hazard to their daily lives and they decide that Reagan is right. Who needs a disgusting government, anyway?

Not the financial markets, that's for sure. They're the ones who are taking all the big risks and they deserve the rewards, too. Time for some personal responsibility, my friends! Time for an ownership economy!

What comes next? The Bubble Eras, my charming and discerning readers. First the high tech bubble, then the housing bubble and the war bubble. They were like soap bubbles, so beautiful and iridescent in the affluent and calm sunlight of the nineties. No government dared to breathe too hard on them, of course, because they would burst and the trick was to make them burst only with the next administration. But the markets were mostly free! Just for you and me! Mmm.

And here we are again: Once upon a time (now) the markets are free and unregulated again, luxuriating in all that space to make things better for one and for all. Sure, infant formulas have melamine in them in China (because melamine registers as nitrogen in measuring devices and nitrogen is used as a cheaper proxy measure of protein and infant formulas must have protein to give a good price for the makers). Sure, the financial markets are largely trading in the big shitpile. Sure, various food items recently on the markets gave people salmonella or killed pets. But all that is just an obvious and necessary by-product of the important jobs unregulated markets do. Besides, don't the markets self-correct once enough deaths take place? They do.






So what is the moral of this little fairy tale?

Comments (6) | Trackback (0)
Posted by: echidne / 9/24/2008 04:27:00 PM
#1Submitted by Y on Fri, 26/09/2008 - 01:26.

More grist for the mill,

More grist for the mill, McCain's economics advisor is for Senator Phil Gramm. 

 

Why Paulson shouldn't lead Wall Street bailout

Robert Scheer, Creators Syndicate, Inc.

Thursday, September 25, 2008 Does it really matter which party is in charge when it comes to bailing out the Wall Street hustlers whose shenanigans have bankrupted so many ordinary folks? Not if the Democrats roll over and cede power to the former head of Goldman Sachs, an investment bank at the center of our economic meltdown. What arrogance for Treasury Secretary Henry Paulson - who was paid $16.4 million the year before President Bush appointed him Treasury secretary for heading this company that did as much as any to engineer this financial travesty - to now insist we must blindly trust him to solve the problem. Paulson is demanding the power to act with "absolute impunity," as Sen. Christopher Dodd put, admonishing Paulson that "after reading this proposal, it is not only our economy that is at risk, Mr. Secretary, but our Constitution as well."Clearly, it's a vast improvement to have Dodd in the chairman's seat of the Senate Banking Committee, asking the right questions, rather than his predecessor, Texas Republican Phil Gramm, who presided over the committee in the years when the American economy, long the envy of the world, was viciously sabotaged by radical deregulation legislation. Gramm, whom Sen. John McCain backed for president in 1996, pushed through the financial market deregulation that has brought the American economy to its knees. Maybe this time Congress won't give the financial moguls everything they want, including the bailout for foreign-owned banks such as Swiss-based UBS, where Gramm now hangs out as a very well-paid executive when he is not advising the presidential campaign of Sen. John McCain, his old buddy and partner in crime. Oops, sorry, no crimes were committed because the deregulation laws Gramm pursued and McCain faithfully supported decriminalized the financial scams that have proved so costly. Just check out the language of Gramm's pet projects, the Gramm-Leach-Bliley Act of 1999 and the Commodity Futures Modernization Act of 2000. The former reversed the basic Depression-era legislation to prevent the sort of meltdown we are now experiencing that prevented mergers between the various branches of Wall Street, and the latter legitimized the "swap agreements" and other "hybrid instruments" that are at the core of the meltdown. Referred to in the 2000 legislation as the "Legal Certainty for Bank Products Act of 2000," Title IV of the new law that Gramm snuck into legislation without hearings hours before the Christmas recess provided Wall Street with an unbridled license to steal. It made certain financiers could legally get away with a whole new arsenal of financial rip-off schemes. One of those provisions, summarized by the headline of Title III, ensured the "Legal Certainty for Swap Agreements," which successfully divorced the granters of subprime mortgage loans from any obligation to ever collect on them. That provision of Gramm's law is at the very heart of the problem. But the new law went further to prohibit regulation of any of the new financial instruments permitted after the financial industry mergers: "No provision of the Commodity Exchange Act shall apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority with respect to, an identified banking product which had not been commonly offered, entered into, or provided in the United States by any bank on or before December 5, 2000..."Even some Republicans on the Senate committee expressed exasperation Monday with the swindles that they had voted with such enthusiasm to enable in the past as well as with giving Wall Street yet another blank check. Sen. Jim Bunning, R-Ky., condemned Secretary Paulson's proposal as an effort to "take Wall Street's pain and spread it to the taxpayers." He added that, "It's financial socialism and it's un-American." He's wrong on that last point, for what is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as "financial fascism." After all, even Adolf Hitler never nationalized the Mercedes Benz company but rather entered into a very profitable partnership with the corporate ancestor of the current car company that made out quite well until Hitler's bubble burst. Smell a rat if Congress approves the Paulson plan saving Wall Street without severely curtailing CEO pay and putting a freeze on the mortgage foreclosures that are threatening to destroy the homes of millions of Americans.

To comment, e-mail Robert Scheer at Rscheer@truthdig.com.

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/25/EDV1134AG2.DTL

This article appeared on page B - 7 of the San Francisco Chronicle

 

 

In injury to one is an injury to all!

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.