Free Market Talk is Cheap, Action is Hard

“Capitalism without bankruptcy is like Christianity without hell” – Frank Borman, Chief of Eastern Airlines

Greenspan

“Wall Street analysts spoke of the “Greenspan put”-the belief that the Federal Reserve would rescue financial firms with easy money, special lines of credit, and lender-of-last-resort support. …. The Greenspan put is precisely what happened when the crisis hit: the Federal Reserve stepped into the breach, rewarding incompetent incompetent risk taking with monetary largesse-or at least, that is how the Austrians would interpret it.- Roubini, Crisis Economics

That Greenspan presided over the Federal Reserve is ironic. After all, as a young man he became smitten with the power of the free market. In the 1950s he even became ann acolyte of AYn Rand, whose hard-core libertarian beliefs he admired. Yet Greenspan’s growing conviction that the government should stay out of the economy did not prevent him from serving in goverment when the opportunity arose. …. His ambivalence about the government’s role in regulating the free market was evident from the begining. Four months after his appointment, the stock market crashed, and Greenspan immediately rode to the rescue. Out the window went any principled opposition to government intervention.-Crisis Economics- Roubini, Crisis Economics

George W. Bush

Via volokh.com: Bush Continues His Uncanny Imitation of Herbert Hoover:

In this January post, I noted some of the uncanny parallels between George W. Bush and Herbert Hoover: Both were president during a time of economic crisis; both presided over vast expansions of government that helped cause the crisis or at least make it worse than it might have been otherwise; finally both were (inaccurately) portrayed by their political opponents as dogmatic free market advocates, when in fact both were highly statist. After leaving the presidency, Bush is unconsciously imitating Hoover in yet another way — by rhetorically supporting free markets and criticizing the even more interventionist policies of his Democratic successor (which in both cases built on the expansions of government initiated by the Republicans who preceded them)
….

What should Bush now do if he genuinely wants to help the free market cause? The best thing would be to take up economist David Henderson’s half-joking suggestion that he “express his regret at nationalizing airport safety, carrying out illegal surveillance of U.S. citizens, raiding medical marijuana clinics, bailing out General Motors, AIG and other companies, and socializing prescription drugs for the elderly [the biggest new government program from the 1960s until the present financial crisis].” Bush could also point out that he advocated an ideology of “compassionate conservatism” that included vastly expanded government, and an “ownership society” that (in his own words) involved “us[ing] the mighty muscle of the federal government” to incentivize dubious mortgages of the kind that helped cause the financial collapse of 2008. The greatest contribution Bush can now make to free market policies is to dispel the impression that he pursued them while in office.

Herbert Hoover

The talk:

“economic depression can not be cured by legislative action or executive pronouncement” and that “economic wounds must be healed by the action of the cells of the economic body-the producers and consumers themselves.” -Crisis Economics, Roubini

The action:

he proudly reported, national, state, and local governments had deliberately spent money on infrastructure improvements as a counterweight to the Depression. In fact, he bragged that “as a contribution to the situation the Federal Government is engaged upon the greatest program of waterway, harbor, flood control, public building, highway, and airway improvement in all of our history.” Under this “do-nothing” president, the federal government effectively doubled its spending on such projects.-Crisis Economics, Roubini

Sources:
Too big to fail: policies and practices in government bailouts By Benton E. Gup,

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: