Skip to comments.How to Roll Back the Demonizing of Free Markets
Posted on 12/30/2013 11:47:20 AM PST by 1rudeboy
'Competition' carries a negative connotation, despite its contributions to human happiness.
In a November manifesto, Pope Francis attacked the "tyranny of markets." It's the latest iteration of a mounting distaste for free markets. Here in the United States, we have twice elected a president who is attempting to engineer one-sixth of the economy with a centrally controlled mechanism for health insurance, and regulating as many other markets as he and his regulatory minions can. The people of New York City have elected an extreme anti-market candidate as mayor by an overwhelming margin of those who bothered to vote. France chose an outright socialist to be president. The list could go on.
How can we explain this emporiophobiaa fear of marketsgiven the overwhelming evidence that such institutions provide the greatest wealth, health and happiness for humankind?
Economists like myself deserve a part of the blame: The way we use the term competition instead of cooperation fosters anti-market bias. "Competition" carries a negative connotation because it implies winners and losers, and our minds naturally feel sympathy for the losers. But cooperation evokes a positive response: It's a win-win situation with no losers. And in fact the word competition doesn't depict market activity as aptly as the word cooperation. The "competitive economy" would be better described as the "cooperative economy."
Consider the most basic economic unit, the transaction. A transaction is cooperative because both parties gain from a voluntary exchange. There is competition in markets, but it's actually competition for the right to cooperate. Firms must compete for the privilege of selling to consumersfor the right to cooperate with consumers. Workers compete for the right to cooperate with employers. Competition matters because it ensures that the most efficient players will gain the right to cooperate on the best terms available.
(Excerpt) Read more at online.wsj.com ...
Another good read. Funny how the WSJ saves them for the season that no one reads the WSJ.
Rational discussion is all it takes. The free market economy wins the debate against socialism in the forum of ideas in both theory and practice. No contest really. Slam dunk. Prevention of rational discussion is what has allowed socialism to take hold.
just out of curiosity just when was the last free market?
There is plenty of room for debate and demonizing the current situation.
The last time you paid your neighbor’s kid to rake your leaves.
That is kinda what I thought, There never was a free market.
Well, you could say the writer meant “free(r) market,” but again, semantics.
I was thinking post Boston Tea Party, you know long before IRS and government regulations.
WSJ is full of bullshit. Competition means winners and losers. Make bad financial decisions and you go bankrupt so people with money can come in and buy up the company and reset everything. GEE, WSJ didn’t you scream for US taxpayer bailout of all the Wall Street bankers and firms in 2008!!!???? I know a bunch of regional banks that did the right thing who were in position to buy out those sorry ass Wall Street bankers, LIKE FREE MARKET THEORY STATES!!! Guess what the Wall Street bankers get a bailout and Fed Reserve backed by US Treasury will buy all their toxic assets.
Home owners do dumb things on mortgage and equity loans, they are too small to save, but Wall Street bankers can commit fraud and they get a bailout. This is suppose to be free market capitalism. I rather have Communist take over this country for 30 days so they can line up all those big gov and big business SOB in front of a firing squad. That’s right, I rather risk freedom for 30 days just to see that.
IMO a person would have to be a real milquetoast weenie to find the concept of competition all that frightening.
I think more likely people are turning against markets because anymore they really aren’t about competition on a level playing field. So much about crony capitalism, insider deals, backdoor bailouts, and abusing your ties to the government to kneecap potential competitors.
People inherently recoil against a game they feel is rigged.
Another made-up quote. Here's what he said, and the "tyranny of markets" isn't there.
Your exactly right, and it’s exactly what you describe that puts people like Elizabeth Warren into office. Yes, she’s absolutely horrible on social issues, but she’s generally correct on economics and the abuses of the “free” market as described here. The GOP Senators should have allowed her to chair the Consumer Financial Protection Bureau. That would have kept her out of the Senate, and out of the race to the White House. How typically shortsighted of them.
“You’re”, not “Your.” One day we’ll be able to edit our posts.
Why not set the National minimum hourly wage to be equal to the average hourly wage of a US Senator?
Thus, everybody could earn a living wage, everybody would be equal, Labor Unions would no long be needed, and the responsibility of National Wage Control would rest firmly in the able hands of the US Senate Majority Leader.
Lenin would be soooooooo proud!
It's usually that way on TV, but in real life it doesn't work that way. More often than not, retailers perfer to locate near competition --they open a new clothing store in the mall, or we put a car dealership out on automobile row. Most business transactions happen when two people trade what they got for something they want more than what they got. This is why both traders end up better off.
Usually the real competition is between how you run a business versus how you should have run it.
The rigged game is when 1% win and 99% lose.
In a division of labor capitalist society,competition means a competition in the positive creation of new and additional wealth rather than an animalistic type of competition over the limited nature-given supply of means of subsistence.
Free exchange, free markets or free trade, not capitalism. It’s a Marxist term.
I'm pretty sure that Fannie, Freddie, Bear Stearns, Lehman, Wachovia and Washington Mutual shareholders didn't get bailed out.
What toxic assets do you think the Fed bought?
Home owners do dumb things on mortgage and equity loans, they are too small to save
Well, the TARP lending to banks made the Treasury money and the TARP mortgage modification program cost the Treasury money.
but Wall Street bankers can commit fraud and they get a bailout.
Which ones committed fraud and got a bailout? You have a list?
Let us start with liar loans and pressuring rating agencies to give them AAA ratings so it can be sold to investors, pension funds and etc. Do you know what a liar loan is???!!! Subprime is a marked mortgage. If you want to buy the note at discount you will know the risk. Liar loans are conventional loans where the applicant at the encouragement of the originator lied about his income, assets and even credit score. The game went like this. When Clinton pressured the banks to do more subprime loans, the banks wanted their risk mitigated. Clinton offered to have Freddie Mac/Fannie Mae buy the mortgage notes after the banks held it for six months or more. Problem was the federal gov was incompetent because they brought the mortgage notes from the banks without checking the information on the mortgage notes for accuracy. Once the bankers discovered this gov failed oversight, they exploited this mistake with a vengeance. Washington Mutual was one of the first to build their entire profit on generating as much fees, and points in the six month window before selling the note to FMFM. WaMu basically encourage mortgage applicants to apply for more mortgage and buy a bigger house then they would normally afford. Larger loan amount meant larger fees and points for the banker. Credit scores, income and etc were made up so the applicant can qualify for the larger loan and within six month the liar loan was sold to the FMFM.
WaMu was not the only bank doing this. Once one bank cheats, the others follow. It was widespread. Youtube William Black the former fed regulator on the last Savings and Loans crisis. The next fraud was some banks (JP Morgan, Wells Fargo, etc) brought these mortgages and tried to bundle them into a portfolio and sell it to investors. They discover that it was riddled with liar loans. They needed a rating agency like S&P or Fitch to rate them AAA in order to make them attractive to investors. Problem was these rating agencies were paid a fee based on portfolio size. Larger portfolio larger fee amount. When the analysts attempted to review the mortgage data, the bankers refuse to provide the data. When the rating agency analysts pressed for the info the bankers complained to their management that the analysts were pissing them off and if this did not stop, no future business will come to the rating agencies. The managers of the rating agencies not wanting to lose the large future business from the major Wall Street bankers instructed their analysts to find a way to satisfy the banker or else they are fired. IAW give the bankers their product a AAA or find another job. AAA ratings were given to the mortgage portfolios riddled with liar loans.
All this becomes fraud because these mortgage notes were sold thru a prospectus which must be accurate. When a seller tells the investor via the prospectus that the mortgage notes are AAA rating and all paperwork (like title) are squared away, the investor can sue if it turns out otherwise. The CEO signs off and can be held criminally liable if he knew it was false. When the banks imploded in 2007 and 2008. Many of them committed liar loan fraud, sold them to FMFM and other investors. Like the Savings and Loans in the 1980’s they were all criminally liable for fraud and malpractice. AG Holder summed up the gov attitude, the gov did not want to demoralize the bankers when we needed their expertise and cooperation to untangle the financial mess. Obama admin delayed any investigation and prosecution for 5 years, and the statue of limitation has just been reached. Many of these bankers were bailed out and will not face criminal charges, prison and fines. The last time the US faced something of this scale was the Savings and Loans crisis of 1980’s. Back then, the fed regulators refer over 1000 S&L CEO, CFO, execs, staff etc etc for criminal investigation and 900 of them went to jail, paid fines and had their banking license revoked. How many bankers went to jail since 2007??? Obama used the bankers misdeeds for shake down money to fund liberal czars and projects and in return the charges are settled with sealed records and no acknowledgement of guilt. This means private civil suits are harder to pursue if settlement includes no acknowledgement of guilt and all records are sealed.
The corruption of bankers, big gov and Chicago style Obama admin stinks to high heaven.
I do, do you?
When the analysts attempted to review the mortgage data, the bankers refuse to provide the data.
If bankers refused to provide data, you'd have to be crazy to buy the loans.
All this becomes fraud because these mortgage notes were sold thru a prospectus which must be accurate. When a seller tells the investor via the prospectus that the mortgage notes are AAA rating and all paperwork (like title) are squared away, the investor can sue if it turns out otherwise.
If the prospectus contained lies, the liars should be held liable.
You didn't list the toxic assets you claimed the Fed bought.
Look it up yourself on google. Plenty of info on it. Fed with backing of US Treasury buys 45 billion in mortgage backed securities from all US banks and God knows what deals they did for overseas banks to keep them afloat so they do not cascade collapse US banks. We also guarantee the derivatives and swaps and other shadow banking deals. Official numbers is we buy 85 billion in mortgage securities and T Bills, but some estimate the US backs Fed Reserve to a tune of 85 billion a month and another 35 billion in guarantees to foreign banks. Where do you think a bulk of the underwater mortgages went when the banks got re capitalized with bailout money? Fed Reserve buys them and US Treasury guarantees the Fed Reserves liabilities.
The other problem one is not looking at is the US gov has the FDIC to insure US banks. Since many US banks have leveraged themselves 20x to 30x their net assets (this includes your saving account) if their investment drops by 3 percent, the bank is wiped out. This year the banks sent a letter to all customers that their savings is not their money parked in an account, but the customers accounts are considered unsecured credit to bank liabilities. The last holder of derivatives is first in the line to recoup their losses. You and I are last if our account exceeds 250,000 but if the FDIC runs out of money, then bail in rules set in. The FDIC has enough money to insure only regional bank failure. If any of our six large Wall Street banks fail, the FDIC is overwhelm. Bail in rules are established in EU, Canada, Australia and NZ. US banks are considering adopting it and such moves are happening in Congress and US Treasury. Sad part is all this is occuring without fanfare, IAW when the SHTF many Americans will suffer a financial Pearl Harbor.
Why would the Fed (with a printing press) need the backing of the Treasury ($17 trillion in debt)?
buys 45 billion in mortgage backed securities from all US banks
They aren't buying toxic MBS.
We also guarantee the derivatives and swaps and other shadow banking deals.
We do? Link?
Official numbers is we buy 85 billion in mortgage securities and T Bills, but some estimate the US backs Fed Reserve to a tune of 85 billion a month and another 35 billion in guarantees to foreign banks
Some? Some who?
Where do you think a bulk of the underwater mortgages went when the banks got re capitalized with bailout money?
Written down. To the tune of over $100 billion in bank losses.
This year the banks sent a letter to all customers that their savings is not their money parked in an account, but the customers accounts are considered unsecured credit to bank liabilities.
You got that letter? I didn't.