What degree of responsibility does the free market have for current U.S. economic woes?

[mardi gras skin]

and that's why they continue to get away with it... whether you call them Enron or Lehman Brothers, or AIG, or Fannie and Freddie or Bank of America or Target, etc. etc. etc.

We decide to give them a pass because they're either too big to grapple with or we don't want to mess with the cheap stuff... or because we're trying to go along for the same ride. Everyone is a part of this and our captains of industry have been robber barons of late.

Nope, not a pass. If they've done anything illegal, they should be prosecuted. If companies within an industry acted legally but the results worked against the economy, congress has the responsibility to regulate. Create laws that change the way companies do business.

Robber barons exist because government fails to regulate.

[Burgold]

Nope, not a pass. If they've done anything illegal, they should be prosecuted. If companies within an industry acted legally but the results worked against the economy, congress has the responsibility to regulate. Create laws that change the way companies do business.

Robber barons exist because government fails to regulate.

And/Or because they've bought off the local establishment.

But I do believe that regulation and the lack of enforced regulation (whether due to agency defunding or worse) is a major part of the failure too.

[DRSmith]

I think making the market was too free definantly contributed to the meltdown, if investment banking had been kept seperate from regular banking and banks knew they were going to hold the mortgages they were giving out this whole mess would not have happened.

[Tulane Skins Fan]

Right after we bailed them out, there is no free market as a single entity and to try to assign blame to a whole is foolishness

You want degree of blame for individual units?...start naming names,it's a long list

I agree with Mardi

Huh? We actually let Lehman brothers fail, totally let the free market do it's thing, and the entire economy nearly collapsed in a day. It was going to totally collapse without bailouts for the rest of them.

The free market allowed these banks to take unnecessary risks for short term gain.

[twa]

The free market allowed these banks to take unnecessary risks for short term gain.

the market is far from free,then or now....bad regulating is not freedom,nor is risk w/o consequence

add

my simple point is generalities like the free market, govt,the public are worthless when assigning blame and nothing but a feel good exercise.

---------- Post added August-7th-2011 at 09:58 AM ----------

I blame Obama, socialized medicine, and the national debt.

Well,not just those...but you are close

If we are to survive the looming catastrophe, we need to face the truth

The idea that a capitalist economy can support a socialist welfare state is collapsing before our eyes, says Janet Daley.

http://www.telegraph.co.uk/comment/columnists/janetdaley/8685945/If-we-are-to-survive-the-looming-catastrophe-we-need-to-face-the-truth.html

The truly fundamental question that is at the heart of the disaster toward which we are racing is being debated only in America: is it possible for a free market economy to support a democratic socialist society?

[mardi gras skin]

The free market allowed these banks to take unnecessary risks for short term gain.

Several people in this thread keep using the term free market, but I don't understand what you guys mean. In what way was the banking industry, for instance, controlled by a free market? What power does the free market have over banking decisions that congress is not allowed to regulate?

If congress has the power to determine the freedoms and limitations of the banking industry through regulations and taxation, how can the meltdown be the fault of a free market? I'm sure I'm totally missing something here but if no one is breaking laws and bad things still happen, it seems reasonable that fault lies with authorities responsible for creating ineffective laws.

[Prosperity]

Several people in this thread keep using the term free market, but I don't understand what you guys mean. In what way was the banking industry, for instance, controlled by a free market? What power does the free market have over banking decisions that congress is not allowed to regulate?

These are strange questions. How could a "free" market "control" anything?

[mardi gras skin]

These are strange questions. How could a "free" market "control" anything?

I agree, it does sound strange. But if a free market can't control anything, how can it be responsible for anything? When people say, "the free market is partly responsible" I think, "the free market must be partly in control, otherwise it isn't responsible."

Does that make sense?

[Prosperity]

yeah I know what you are saying... the confusion stems from the idea of the free market basically being two things conflated into one thing... 1) the invisible hand theory and 2) lack of regulation... some people will add in 3) legal system w/ fair property laws

#2 by itself can't really control anything by definition

#1 and #3 sort of can be responsible

[Burgold]

Mardi,

It's no more confusing than when people speak of the media as one entity rather than hundreds or thousands of distinct entities that don't interrelate.

[Riggo-toni]

America has the highest cost of living (presumably). Why, in a global economy, would a company want to hire an American worker when they could hire an equally skilled worker overseas that works for pennies on the dollar. The only reason is that job can only be performed locally.

Germany and Japan have much higher labor costs than the US (especially in Germany when you factor in payroll taxes), and yet they still export much more per capita (although I suppose Japan's figures have changed since the tsunami). The US will certainly never be competitive again in labor-intensive industries like textiles, but more of the problem lies with the shrinking supply of skilled labor in this country.

The market is probably between 60 and 70% to blame for our current economic woes. Even in the 19th century so admired as a golden age of capitalism by the likes of Ayn Rand and her objectivists, there were a number of severe financial collapses and waves of bank failures. Some oversight and regulation will always be necessary, just as many regulations will be overly burdensome and create self-perpetuating bureaucracies - the sticking point is finding the correct balance, and not letting the pendulum swing too far away from market forces in overreaction to such calamities.

[SnyderShrugged]

There is a free market?

[Thiebear]

What degree do the gunshops near the border have when the U.S. Justice Department's 'Encouragd' the Operation Fast and Furious?

Same question, different program.

[Springfield]

If congress has the power to determine the freedoms and limitations of the banking industry through regulations and taxation, how can the meltdown be the fault of a free market? I'm sure I'm totally missing something here but if no one is breaking laws and bad things still happen, it seems reasonable that fault lies with authorities responsible for creating ineffective laws.

That' exactly what I was getting at. For the purposes of this thread, I have been using the term "free market" interchangeably with "world economy" in this thread. As I stated in my first post, I'm no economist. I could be completely wrong by drawing that connection.

Now back to what I was getting at. You seemed to draw the conclusion that I was hinting at. Your conclusion seemed to be that the authorities created ineffective laws. We are and have always been a very reactionary country, as far as laws are concerned. The Declaration of Independence was a reaction to unwanted British control. The Constitution was created to affirm laws central to this country, laws that are a direct result of our founding fathers experiences fighting for independence. The Emancipation Proclamation was a direct reaction to slavery. On down the line.

The fact is, when the dot coms and the housing market were booming, nary a soul was crying foul. Why? Because there wasn't a foul. Those companies were playing by the rules and taking advantage of everything that they could to make a dollar. We like people making money in this country and that is why all of the companies who have long since perished were allowed to thrive. That's not to say that everyone was hoodwinked... just most people. People much smarter than myself were saying that both the dot com bubble and the housing bubble would fail. Wise people were pointing out that [sheyster].com didn't actually exist and therefore shouldn't be worth $2B. Wise people were pointing out that [Car Salesman Bill's] Mortgage company was signing mortgages to people who couldn't afford them only to sell them to a bank to exonerate themselves of any risk. Everyone was loving it when stocks were on the rise and only a few loony tunes questioned the reasons why.

There you are. If we would have regulated these things correctly, we probably wouldn't have had either of these bubbles. However, we likely wouldn't have prevent them because we are and have always been reactionary. Now that we've gotten to the bottom of what happened, we won't let it happen again... that's after both of those bubbles sent our economy into a nice little dip.

The problem that I feel is that (of course) we have a divided government. Half of the government isn't against regulation, but usually only regulates things out of a negative reaction. The other half is against regulation. A small part of that latter half is willing to cause major economic harm to show strongly they feel for a subject. As we've all been told, regulation is socialism... correct?

---------- Post added August-7th-2011 at 05:09 PM ----------

Germany and Japan have much higher labor costs than the US (especially in Germany when you factor in payroll taxes), and yet they still export much more per capita (although I suppose Japan's figures have changed since the tsunami). The US will certainly never be competitive again in labor-intensive industries like textiles, but more of the problem lies with the shrinking supply of skilled labor in this country.

The market is probably between 60 and 70% to blame for our current economic woes. Even in the 19th century so admired as a golden age of capitalism by the likes of Ayn Rand and her objectivists, there were a number of severe financial collapses and waves of bank failures. Some oversight and regulation will always be necessary, just as many regulations will be overly burdensome and create self-perpetuating bureaucracies - the sticking point is finding the correct balance, and not letting the pendulum swing too far away from market forces in overreaction to such calamities.

I agree with you that the market is a strong part of our woes.

However, I believe that our supply of skilled labor has dried up because we don't pay people to be skilled laborers. We don't encourage it even is spots where it does pay. We are a nation that loves to sublet. Nobody wants to send their kids to school to be master technicians, carpenters, electricians or plumbers. In fact, all of those jobs are looked down upon even though many of them pay well over $100K per year. It's a damn shame in my opinion.

[mardi gras skin]

It's no more confusing than when people speak of the media as one entity rather than hundreds or thousands of distinct entities that don't interrelate.

When conservatives talk about the "liberal mainstream media" they're talking about TV and newspaper outlets. All of them. They see all of the news organizations as liberal...and the information I've seen does say that an overwhelming number of journalists and reports are liberal. That's different than saying that the media they produce is liberal, but when conservatives talk about "news media" they're talking about all TV and and newspaper outlets everywhere.

When you're making that comparison (and you might not be making that comparison) I guess "free market" would mean "all the businesses everywhere". If you're asking if all the businesses everywhere are responsible for the current US economic woes, I'd say, no way. Of the 10s of millions of businesses operating in the United States, I'd put the percentages of businesses that participated in the crisis far closer to "commie go home" than 10%.

Additionally, the federal government is not supposed to regulate the ideology of news outlets. They are supposed to regulate the negative economic impact of many business decisions. Ultimately, newspapers and TV stations are responsible for the balance of their newscasts. But the government is responsible for the minimum wage, child labor laws, monopoly regulations, lending regulations, etc. that protect our economy and citizens from business decisions.

---------- Post added August-7th-2011 at 05:40 PM ----------

yeah I know what you are saying... the confusion stems from the idea of the free market basically being two things conflated into one thing... 1) the invisible hand theory and 2) lack of regulation... some people will add in 3) legal system w/ fair property laws

#2 by itself can't really control anything by definition

#1 and #3 sort of can be responsible

Prosperity, this post sounds like it has everything in it that I appreciate. Respectfulness, simplicity, brevity, clarity...a number system. But I think I'm too stupid to understand what you're saying.

Can you try it again with more words or more numbers or something?

[Burgold]

Springfieldskins,

You're right. Our laws and actions are almost always reactionary and that means that there is something occuring in our environment, some problem the government is reacting to. For that reason alone, it's clear that the market has contributed its share. Afterall, if the market didn't make a mess, the government would not be able to fail to clean it up.

[Chicken Fried]

High taxes are the reason businesses aren't hiring and homes aren't being built. There is no incentive.

[Springfield]

Springfieldskins,

You're right. Our laws and actions are almost always reactionary and that means that there is something occuring in our environment, some problem the government is reacting to. For that reason alone, it's clear that the market has contributed its share. Afterall, if the market didn't make a mess, the government would not be able to fail to clean it up.

Well, in all fairness, the government isn't all that prepared to clean up a mess that the free market made. The free market has to clean up its own mess by itself. You can only lower interest rates so much and you can only pump so much cash into the free market. In my opinion, the government is much more capable of preventing prior mistakes from being made again. It's not good at preventing these mistakes from happening in the first place.

---------- Post added August-7th-2011 at 11:19 PM ----------

High taxes are the reason businesses aren't hiring and homes aren't being built. There is no incentive.

If I'm not mistaken, aren't taxes at a historic low right now? And you want lower taxes?

We'll incentivize ourselves out of a country using this plan. But hey, at least we'll have 0% unemployment and a house for every man, woman and child.

[DRSmith]

High taxes are the reason businesses aren't hiring and homes aren't being built. There is no incentive.

one could believe that if countries with higher taxes are stilling having new homes built and lower unemployment

[mojobo]

I would put the majority of the blame on the federal reserve and the idea of central banking in general. The whole idea of having a credit market based on how much the interest rate should be based on one guy or groups faulty calculation instead of the supply and demand of saving, liquidity risk, etc. When interest rates are lower than what the market would dictate then you end up borrowing more funds than you have available. You should go through a market correction to fix this but the federal reserve has been stepping in to prevent the correction over and over again. It only digs the debt hole deeper and deeper. If you want to blame government for pushing it to keep interest rates low so they could meet the promises they made to the public fine. If you want to blame wall street for pushing them to do it to profit off of inflated investments fine. Private industry and public institutions both wanted cheap credit and now they are both overly indebted. At the heart of the problem is the federal reserve and the fact that they are there takes away our ability to function properly democratically and as a capitalist country. We aren't the first or only nation to have this problem but we are in a huge hole right now.

[December90]

The Free Market in the U.S. has contributed the same amount to the U.S. economic woes as The Loch Ness Monster and Big-Foot as all three are non-existent. We don't have Free markets in the U.S. (at least legal ones)

[GibbsFactor]

The only thing free market is responsible for is having more power than Congress.

Congress does as bigCorp says. It's called American Corporate Capitalism.

But, they only have 10% or less of the blame. After all, isn't it Congress' job to make sure we are all playing fair. Isn't it Congress' job to handle the monetary policy? Isn't it Congress' job to decrease the influence of K street?

No, it's not Congress' fault, or BigCorps fault.

It's OUR fault.

[Tulane Skins Fan]

the market is far from free,then or now....bad regulating is not freedom,nor is risk w/o consequence

add

my simple point is generalities like the free market, govt,the public are worthless when assigning blame and nothing but a feel good exercise.

Well, you're just changing the topic. The question was about assigning blame to the "free market." You are saying its not possible to assign blame to such an amorphous thing. Great.

[PeterMP]

The Free Market in the U.S. has contributed the same amount to the U.S. economic woes as The Loch Ness Monster and Big-Foot as all three are non-existent. We don't have Free markets in the U.S. (at least legal ones)

Has anybody ever had a free market?

[mcsluggo]

it is not a problem with the "free market" is a misunderstanding of the strengths and limitations of the market. Market solutions (with healthy and functioning regulation and oversight) is the optimal situation in MOST cases. It is not the optimal situation in ALL cases.

for instance::: Finance is a CLEAR situation where asymetric information, rapid swings in "confidence", and huge spillover costs and benefits to other industries dictate a higher level of market oversight and regulation... but it STILL needs a market to make the day-to-day decisions and to efficiently allocate capital. idealogues on one side will call this "failure of teh markets" and idealogues on the other side will call this "failure to empower the markets sufficiently..." and both camps are totally and completely wrong.

---------- Post added August-8th-2011 at 05:59 PM ----------

The Free Market in the U.S. has contributed the same amount to the U.S. economic woes as The Loch Ness Monster and Big-Foot as all three are non-existent. We don't have Free markets in the U.S. (at least legal ones)

exhibit A on one side of the ideologue spectrum.