Comments (23)

• low warranty

  Great Article! It reminds me of the continuous mis-use of certain words to describle current events. My favorite example is 'toxic' mortgages or 'toxic' assets. The definition of 'toxic' as written in the dictionary on my desk is; 1. Of or caused by a toxin or poison. 2. A toxic poison or other chemical. Using words like toxic to describe mortgages or debt is just plain wrong and will not help the common layman understand our current economic situation properly.

  Published: April 8, 2009 8:34 AM

• FarSide

  @low warranty:

  I don't think 'toxic' is a mis-use in this case. The assets are indeed problematic to the banks, and too many of them will cause failure.

  I am more perturbed by the fact they (they = the gov't, and now most media outlets have followed suit) are now calling the toxic assets 'legacy' assets.

  This is a much more inappropriate name, and of course is designed to make sure people don't connect them to anything bad.

  Published: April 8, 2009 8:51 AM

• Stephen Grossman

  Milton Friedman advocates socialist money and banking. Since these control the rest of the economy, his advocacy of capitalism in the rest of the economy is a fraud.

  Published: April 8, 2009 9:02 AM

• dewind

  Unfortunately this debate is less of an intellectual battle or a disagreement on reasoning. It is a battle of empty rhetoric with the 'free market' being the convenient straw man.

  However, it is nice to see that mises has the patience to continually respond with meaningful articles without getting dragged into the mud with the rest of them.

  Published: April 8, 2009 9:25 AM

• Barry Loberfeld

  "Part of the problem, I think, lies in people's conflation of free-market capitalism and corporatism"

  
  From "Requiem for the Left":

  Identity Crisis

  While many adherents of the Left made their peace with the poverty and tyranny of the Communist bloc, some did not, which to this day poses the question: How can these people continue to believe socialism a corrective for all the wrongs they denounce -- we can recall Ralph Miliband's classic Marxoid list of exploitation, poverty, war, imperialism, and the "crimes of the ruling classes" -- when these always exist pervasively in those People's Republics where every drop of capitalism, their hypothesized source, has been wrung from the social fabric? It's not so much that they close their eyes as it is that they avert them -- towards a sight in which they believe they find confirmation: the presence of these wrongs in the "capitalist West."
  

  And who can deny it? Who can deny, say, the West's imperialism? But with this and the other stated evils, we must ask: What element of the semi-capitalist West was responsible -- the free market or the coercive state? In Britain, who thundered the loudest against colonialism? The classical liberal advocates of laissez faire, who condemned imperialism long before the birth of the founder of the Soviet Empire. It was the "Tory socialism" of Disraeli, not the free market, that sent British troops overseas.
  

  And the "crimes of the ruling classes"? What were these ever but the deeds, not of truly private businessmen, but of the State? What does Ralph Nader's denunciation of "corporate socialism" concede except that the corporations owe their current privileges, not to laissez faire, but to government intervention? Which leads us to now ask: What exactly is the "capitalism" of these anti-capitalists? Is it "Little England"-ism or mercantilist imperialism? Free trade or protectionism? Laissez faire or interventionism -- A or non-A? Just as theocracy cannot denote both the union and the separation of Church and State, so capitalism cannot be both the union and the separation of Firm and State.
  

  Orthodox Marxism cynically -- amorally -- rejected the possibility of neutrality and equity in political matters. All government was the special interest of one "class" or another. Just as capitalism ushered in the rule of the bourgeoisie, so would socialism bring about the "dictatorship of the proletariat." But how does capitalism -- that is, the free market -- represent the special interest of "capitalists" (i.e., nonmanual laborers)? If respect for property rights favors "capitalists," then why do corporations seek subsidies (each for its own self, mind you, not for the entirety of its purported "class")? If unregulated commerce leads to monopolization by these "capitalists," then why do real-world businessmen turn to government to provide them with monopoly entitlements (optimally, only for their own company, not for all "capitalists" including their competitors)? And if free trade benefits this class and no other, then why do each country's business leaders -- and union members -- lobby for tariffs on imports? We seem to forget that the classical liberals formulated their principles of private property, laissez faire, and free trade -- rejected by the Left and Big Business alike -- not against the graspings of the have-nots, but in opposition to policies that favored the few over the common good. All of the classic Marxoid evils existed before the advent of liberal capitalism, which arose specifically to eliminate them -- and did so most impressively. Social scientist Thomas Sowell sums up capitalism's economic and political contributions by the end of the nineteenth century:

  Science and technology had brought undreamed-of progress to the lives of millions of human beings. Whether in agriculture or industry, output was growing by leaps and bounds. Mass killer diseases like smallpox were being defeated by medical science. The last great war to ravage the whole continent of Europe ended 85 years earlier, at Waterloo -- and such horrors were considered permanently behind us. Advances in the relationships among peoples showed similar signs of progress. Slavery, which had lasted for thousands of years on all continents, was wiped out throughout Western civilization, in a matter of decades.

  
  

  
  He laments: "The high hopes and expectations with which the twentieth century began gave no inkling" of what was to come -- the abandonment of limited government and the adoption, the bloody rise, of unlimited statism, most notably (in various forms) that of Marx, whose attributing of ancient evils to the emergent liberal order (and its "sham-liberty") was as absolutely insane as attributing polio to the Salk vaccine.
  

  Equally mad are those Marxists who point to the very real problems of partial statism ("state capitalism") but then perversely propose a tried-and-false "solution" -- total statism (socialism) -- that would only exacerbate those problems. It's as if having recognized the danger of drinking polluted water but misidentifying the dangerous element, the Left advocated consumption of the undiluted pollutant. The failings of the mixed economy don't confirm but confute the claims of socialism. It is the State, not the free market, that doles out political privileges -- whether to the nomenklatura or the corporations. And it is the State that condemns whole populations to poverty -- as witness activist Russell Means' comparison of Native Americans, our country's most socialized community, to the citizens of the Soviet Empire.
  

  In the conflict between monopoly statism and the many organs of the body social (i.e., of a free people), the Left habitually made the malignant choice.

  Published: April 8, 2009 9:41 AM

• Kevin Hall

  Great analysis! As I watch the flagrant attempts by media and decision-makers to deflect responsibility for this mess on free-markets and capitalist greed gone wrong, it's as if I am living in George Orwell's "1984." The newspeak, double-speak is so blatant that I think that the masses have to be able to sniff it out for what it is; a complete and utter fallacy. But then, I speak with and listen to others and they spew the same garbage. It is at this point I realize the brain-washing has firmly taken root and I question my own personal ability to change the course in my own little world. It is a daunting task, but as the author alludes to, if we make a concerted effort to expel falsehoods and cram truth we can bring a change; a lasting change in truth and certainly a change we can believe in.

  Published: April 8, 2009 10:46 AM

• geoih

  Hoover, right?

  Whenever I hear some doofus "progressive" role together all the names he's read somewhere as being some how associated with laissez-faire, it makes me less concerned when I group Obama, Roosevelt (either one), Truman or Wilson with Mao, Stalin, Musselini or Hitler.
  

  Published: April 8, 2009 10:59 AM

• hz

  geogih said:

  Hoover, right?

  Whenever I hear some doofus "progressive" role together all the names he's read somewhere as being some how associated with laissez-faire, it makes me less concerned when I group Obama, Roosevelt (either one), Truman or Wilson with Mao, Stalin, Musselini or Hitler.

  =======

  that has to be the funniest thing i have read in weeks.

  Published: April 8, 2009 12:11 PM

• A.Viirlaid

  Yes, I agree, great article.

  But please don't be so negative and so certain that future generations will necessarily believe the Keynesian lies they will soon be ‘FED’.

  I foretell instead that the future generations WILL SEE THROUGH the current and coming lies.

  This is because IMO the coming damage that the FED's money-printing actions will do cannot be hidden no matter how clever the euphemisms and how contrived the 'explanations' like Greenspan's famous mea culpa:

  Referring to his free-market ideology, Greenspan said: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

  Rep. Henry Waxman (D-CA) then pressed him to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Waxman said.

  “Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

  Greenspan admitted fault in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected.

  http://en.wikipedia.org/wiki/Alan_Greenspan

  What self-serving drivel (IMO).
  

  Published: April 8, 2009 1:58 PM

• Coury Ditch

  Truly excellent article! Bravo!

  Both of today's pieces were wonderful, keep it up misesorg.

  Published: April 8, 2009 2:39 PM

• Rocco Stanzione

  Excellent analysis, wonderfully written. Where can I find more?

  Published: April 8, 2009 2:42 PM

• Free Markets Rely on Sound Money

  Free market capitalism requires non-intervention of the government. At present, every government in the world is intervening in the free market with legal tender laws and inflationary banking. The US government has absolutely squandered the advantage that came its way as holder of the world's reserve currency. Instead of making wise use of the advantage, it blew everything with promises to everyone of instantaneous riches. Now that the economy is dying, the printing press is all they have to pay off those promises.

  We have not seen the free market operate in our life time. Economic laws exist irrespective of approach. The free market approach works with the law, instead of against it.

  It will take the return of wise men to straighten things out. Until that happen, it will be mistake after mistake after mistake.Fr

  Published: April 8, 2009 3:08 PM

• Austroglide

  This I agree very much with:

  "Part of the problem, I think, lies in people's conflation of free-market capitalism and corporatism (what some in the media unfortunately like to call "crony capitalism"), where government colludes with businesses and provides special benefits and tax provisions, and looks the other way on accounting fraud and other crimes. From there, the further assumption is that people like Ayn Rand, Mises, Hayek, and Friedman were just shilling for large corporations, idolizing businessmen, and glorifying "greed," and thus would have approved of the bailouts and special handouts for the fat-cat bankers. But corporatism is no more free-market oriented than communism is..."

  
  One of my former very close friends is a tried-and-true leftie who would subscribe to this. Hell, once upon a time so did I. I think it's very common. Funny, though sad, is the fact that as I learned more and more about economics and the great value and superiority of free markets, my friend continued to believe in all the left-wing stuff; every time I'd mention a black person, my friend would suspect me of being racist; every time I'd mention a Jewish person, he'd suspect me of being anti-semitic. People on the left think proponents of free markets are nothing but brainwashed, evil, and greedy. Very myopic, very misguided they are.

  
  

  Published: April 8, 2009 3:41 PM

• Sean W. Malone

  Hello Everyone :)

  Thank you for the kind words (and the few emails I've gotten today already) I hope to hear more from everyone as well.

  It is hard to find a true "community" sometimes with supporters of liberty... But I believe that the Mises Institute provides a good foundation for us all. For my part, I am thrilled to make new friends and if anyone feels like emailing me - please do so. If you live in LA - even better!

  Cheers (and thanks again for reading).

  Published: April 8, 2009 7:39 PM

• pbergn

  Good article! Enjoyed reading it...

  Published: April 8, 2009 8:33 PM

• Marco Costa

  Small excerpt from 'Alan Greenspan: Rand, Republicans and Austrian Critics':

  Greenspan was sworn in as head of the CEA on 4 September 1974. In attendance were Ayn Rand, her husband Frank O’Connor, and Greenspan’s mother Rose. When asked if Greenspan’s new political position represented a betrayal of his Objectivist principles, Rand responded with “I’m very proud of Alan. His is a heroic undertaking” (100). According to Tuccille (2002, 116), Rand also said “Alan is my disciple. He’s my man in Washington.” Sadly, these statements by Rand sound rather like a combination of wishful thinking and political naivete.

  Did Rand really kick Greenspan out of the 'club' when he became head of the Fed? Doesn't seem too likely.

  Published: April 8, 2009 9:05 PM

• Sean W. Malone

  Hey Marco - in 1974, when he first joined the Washington crowd, yeah... I think Rand had thought (though I'm not claiming to be a detailed expert in Ayn Rand lore) that Greenspan was going to be something like a good version of Wesley Mouch (the lobbyist Hank Reardon hires in Atlas Shrugged). Of course, he turned out to be more like the real version of Mouch instead... But by some accounts Rand was still close with Greenspan until she died. Though from what I've gathered from ARI & Nathaniel Branden-related sources, Greenspan was never actually that much a part of the "inner" crowd to begin with...

  But I might direct you to: http://www.aynrand.org/site/News2?page=NewsArticle&id=21857 for more of the direct Ayn Rand perspective.

  That said, we are talking about philosophy here, and whether Rand and Greenspan still took each other's calls has little bearing on the clear fact that Greenspan had become her economic antithesis by the 80's. A planner considered to be, "the maestro" can hardly be considered an advocate of laissez-faire as I think most Mises readers are well aware... and since Rand *was* an advocate of laissez-faire, I fail to see any connection between the two.

  On balance, Greenspan also used to say he strongly favored abolishing (or "sunsetting") the Federal Reserve entirely... This may have been his original plan - but I think it's plain to see how well that has worked. At this point though, his statements are disingenuous at best I think.

  ~S

  Published: April 8, 2009 9:28 PM

• Alex Fabijanic

  [quote]The narrative itself is being shaped before our very eyes. Over time, it will come to be generally accepted as historical "fact."[/quote]

  I agree:

  http://www.cato-at-liberty.org/2009/03/12/chuck-schumer-endorses-hoover-plan/

  As for Ayn Rand, the woman had brilliant insights and ideas alongside with a wonderful talent to write clearly about them in a foreign language. Unfortunately, her own real-life implementation, much like Greenspan's, was dismal. As a founder of objectivism, she failed dismally to see the objective reality (e.g. that her husband was not a Galt-like hero or that having an affair with your pupil is not going to go very well with both of your spouses). As a champion of freedom, she failed to let people be free (e.g. accept that Nathaniel wanted out of a horrible relationship with her). I am only aware of her praising Greenspan's achievements in DC (as quoted by Marco Costa), but not of him being kicked from "The Collective". Where did you find that information, Sean?

  Published: April 9, 2009 7:46 AM

• Sean W. Malone

  Alex - as I stated above in my earlier comment, that wording may have been a little hyperbolic, but the research I did on that point found a number of articles from the Ayn Rand Institute and other 1st-hand accounts suggest that Greenspan had little contact with them after he became reserve chairman.

  From Harry Binswanger (http://www.capmag.com/article.asp?ID=5353):

  "I can't say I knew Alan Greenspan, though, being an associate of Ayn Rand, I met him a few times in the 1960s. But by 1970--almost 40 years ago--I and a couple of other Objectivists in that circle already realized that Greenspan was compromising on her philosophy. Little did we know how far his anti-Rand journey would take him. As the years rolled on,"

  Perhaps I should have opted for a stronger statement of Greenspan rejecting her *ideas* rather than implying that Rand might have disliked him. I don't believe she disliked him - I believe as I said above, that she thought he was going to be her "man in Washington", and it seems he really was her Wesley Mouch - but she died in 1982... A little too early to see the full extent of his intellectual betrayal.

  Perhaps I might have noted that for the vast majority of his tenure at the Fed, she wasn't even alive?

  Published: April 9, 2009 9:59 AM

• Alex Fabijanic

  "Perhaps I should have opted for a stronger statement of Greenspan rejecting her *ideas* rather than implying that Rand might have disliked him."

  I agree. There is a very good analysis of Rand, Greenspan and Austrians available from Mises:

  http://mises.org/pdf/sechrest-greenspan.pdf

  Main problem with Ayn Rand (and I write this as a fan of hers) was her arrogance and intolerance which caused her to miss learning many important things from extraordinary contemporaries. E.g. Austrians were her closest natural allies, yet she managed to alienate von Mises only because she refused to see any philosophical basis for economic science. Greenspan, as it turns out, was only vaguely aware of Austrian economic school. Knowing that, one could hardly expect more from him.

  Back to O.T. - what is truly amazing in this whole saga is, that although everyone (including Greenspan, Bernanke and that incarnation of Elsworth Toohey, venerable Nobel laureate Krugman), admits the tenets of the economic policy are wrong, they persistently offer more of the same as the solution. And people buy it.

  Published: April 9, 2009 11:51 AM

• Mr.huh?

  For what it's worth, Thom Hartmann at the Huffington Post has been raked through by bloggers and posters coming to the defense of the Austrian School and pointing out how F.A. Hayek for example was a huge critic of Reagan's deficit spending. Those bloggers have thoroughly trounced Hartmann. Don't for once think that the efforts of the Mises Institute have been in vain. Although Youtube, Ron Paul, and Peter Schiff have been a great help in getting yourselves to the masses as well.

  Published: April 11, 2009 5:48 PM

• GunderDog

  The Republicatns are doing the exact same thing, pushing another version of the story where the "conservative" Republicans like Reagan, Bush, and Newt Gingrich are the fiscally responsible free marketers! And their followers blindly nod and believe it. I just had a great discussion with a person I used to work with otally freaked out about Obama and the bail outs, but when I told her the policy is just the Bush policy on steroids she could not hear it. She honestly did not know how much spending went up during Bush Jr., etc. When I point out that the level of U.S. military spending is a scam like the bail outs, she just will not even entertain the idea. This country is so screwed....

  Published: April 11, 2009 10:02 PM

• Alex Fabijanic

  "When I point out that the level of U.S. military spending is a scam like the bail outs, she just will not even entertain the idea."

  I know the mentality. The problem is that people align themselves with individuals, rather than ideals. I recently talked to a conservative who said Ron Paul was "good, but I do not agree with his position on military issues". When I pointed out that founding fathers strongly opposed military alliances, that military meddling abroad produces likes of bin Laden and Hussein and eventually causes events like 9/11 or menaces like Iran to happen, he said that nowadays it is "impossible for us to be isolationists". Pointing out that isolationism is related to trade, not military activity resulted in hitting a brick wall. Every empire in the history that has overstretched itself has eventually crumbled. Smart people learn from other's mistakes, fools learn from their own.

  Published: April 13, 2009 1:49 PM