Wijze citaten in tijden van economische waanzin (Vincent De Roeck)

"You’re gonna find a different system of regulation. The real problem when the financial world changed, the system of regulation didn’t. That will change. There will be a strong, quiet, hopefully more unified federal regulator. And he’s gonna be tough. But they’re gonna be quiet. So like when Bear Stearns began to run into trouble, they’re gonna call the heads of Bear Stearns in and say, “All right fellas, you’re getting rid of those two hedge funds; you’re gonna raise more capital. We’re not gonna tell anyone you’re doing this, but you do it or we’re gonna take sanctions against you.” You need a tough, strong regulator, unified, who sees the problem ahead of time, so they have complete transparency, they know exactly what’s going on."

Dit citaat vorige week komt van Democratisch senator Charles Schumer van New York in de MSNBC-talkshow "Morning Joe" en toont op exemplaire wijze de heersende Nirvana-fallacy bij de Amerikaanse politici aan. Zij geloven geheel onterecht dat de Staat beter geplaatst is dan bedrijven en individuen om de financiële wereld te controleren en de recente crisis te beletten. Schumer dwaalt, en zijn waanideeën zijn zelfs gevaarlijk, zoals Sheldon Richman in de nieuwsbrief van de "Future of Freedom Foundation" meesterlijk wist te omschrijven.

Now ask yourself what Schumer apparently has not asked himself: How will the regulators “know exactly what’s going on”? Spotting Bear Stearns’ specific hedge-fund problems “ahead of time” (!) would have required insights and hunches that only entrepreneurs with money at risk could be expected to have — and even those might not have been enough. Fortune-telling is not a widely distributed skill. It’s not a matter of toughness or access to Bear’s books. At the very least, it’s a matter of entrepreneurship (not to mention luck), which is profit-driven. Bureaucratic regulators bring no such talent to their jobs. More likely, they’d enforcing formal (possibly outdated and irrelevant) rules, looking for a repeat of the last problem, while missing the next one entirely. As Nassim Nicholas Taleb might say, it’s the next black swan, not the last one, that bites you.

Larry Reed, de erevoorzitter van het "Mackinac Center for Public Policy Research", lanceerde dan weer een warme oproep op de blog "For Freedom's Sake" voor waakzaamheid en actie bij libertariërs om het totalitaire zwaard boven onze hoofden alsnog af te weren.

Lovers of liberty need a little morale boost today in the face of all the pain around us. It seems at times that the world has gone mad. Companies that lose billions are being bailed out by a government that loses trillions. The same federal Leviathan that outlaws competition in first-class mail delivery but still can’t deliver letters at a profit now supposedly knows how to run auto companies, banks, and insurance firms. Debt, deficits, bureaucracy, regulation, government spending—the depressing stuff already in frightful superabundance pre-financial crisis—now threaten our diminishing liberties more than ever before. The cover of the March 15 issue of Newsweek proclaimed,“We Are All Socialists Now.”

Een andere interessante insteek komt van Robert Murphy, de auteur van "The Politically Incorrect Guide to the Great Depression and the New Deal" en een onderzoeker aan het "Mises Institute" in Auburn. Op zijn blog "Free Advice" reageerde hij op een editoriaal van Hernando De Soto in de "Wall Street Journal" van enkele weken geleden. De Soto stelde daarin dat de overheid de financiële derivaten beter had moeten reglementeren. Murphy is het daar natuurlijk niet met eens.

But the market critics and de Soto go wrong in concluding that only governments can fix the problem. These advocates of increased regulation fail to realize that the case for the free market does not rely on omniscient entrepreneurs. Fans of the market should not be embarrassed to admit that sometimes even well-established companies screw up royally and lose billions of dollars.

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Or at least, that’s what would happen in a true profit-and-loss system. The self-regulation of the market only works when profits and losses are allowed. When trying to make sense of why so many large firms were so careless with their investments, we can’t ignore the perverse incentives the government had created in a multitude of ways.

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Had the government minded its own business, the private financial sector would have learned from its mistakes during the housing boom. There is no reason to suppose that Geithner or anyone else employed by the government can come up with a solution that private analysts couldn’t discover. Quite the contrary. In fact, every move the government has taken during the crisis has expanded its power over the private sector and its ability to shower literally trillions of dollars on powerful beneficiaries. Doesn’t de Soto see the immense scope for corruption if the government gains more discretionary power over financial transactions?

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Ironically, it is the government’s response to the initial crisis that has led to less transparency not more. Had the troubled firms been allowed to fail, bankruptcy proceedings would have ascertained which companies were holding which assets and how they should be valued. But at least since December 2007, the Federal Reserve has artificially propped up insolvent firms by accepting their “toxic” assets as collateral on short-term loans. In this environment, of course the most leveraged firms will string their investors along and carry derivatives on their books at inflated values.

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Regardless of what caused the crisis, government efforts to regulate derivatives will only lock in undesirable aspects of the current market and ensure that politically connected players reap artificial gains. It is absurd to ask politicians to promote financial integrity and sound accounting. They are the worst violators of these principles on the planet.

Een ander interessant artikel is van de hand van Jim Powell, senior fellow bij het "Cato Institute" en de auteur van het meesterwerk "FDR's Folly" over de Grote Depressie. Powell wijt het aureool van Franklin D. Roosevelt aan "lucky timing" en schetst op intrigerende wijze hoe FDR's New Deal van de depressie, die bij zijn aantreden al over haar dieptepunt heen was, een "Grote Depressie" gemaakt heeft. Ook haalt Powell een feit aan dat mij niet bekend was, met name de confiscatie van goud in privé-handen... Onaanvaardbaar gewoon!

On his New York Times blog page, Paul Krugman displayed a graph showing that the post-1929 U.S. economy began to expand before Franklin Roosevelt took office. Certainly the economy was recovering before any of FDR’s policies had time to play out through the large and complex U.S. economy. During 1933, Roosevelt’s first year in office, GDP increased about 17 percent. What would have accounted for that? Not FDR’s 1933 decision to seize privately owned gold and devalue the dollar from $20 per ounce of gold to $35. This increased the value of gold held by the U.S. Treasury and entitled it to print an additional $3 billion of greenbacks. The Thomas Amendment to the Agricultural Adjustment Act (AAA) authorized the Treasury to print $3 billion more. Nonetheless, the total amount of currency held by the public didn’t increase until 1934. The Fed wasn’t very active during this period.

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The most sweeping pieces of legislation passed in 1933 — the climax of the Hundred Days — were the National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act, but both promoted contraction, not expansion. The NIRA authorized FDR to establish cartels fixing wages, prices, and output. The AAA aimed to reduce agricultural acreage.

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It’s not clear how any of FDR’s 1933 policies could have accounted for a 17 percent increase in GDP, even if they promoted expansion, because they wouldn’t have had time to ripple through the economy. It seems more likely that FDR had the good fortune to come into office near the bottom of the Depression, and enough adjustments in wages, prices, and other factors had occurred that the economy was ready to recover. The economy had recovered from previous panics, crashes, and depressions without a big-government program.

En tenslotte was er ook nog Larissa Price van de "Foundation for Economic Education" die F.D. Roosevelt en opvolger B.H. Obama hun saus gaf over hun economisch én historisch analfabetisme.

Roosevelt is still celebrated for his job-creating measures because the people who gained employment were easily seen. However, what wasn’t (and isn’t) so easily recognized is that to pay for his public-works experiments, the government sucked up much of the available capital by selling bonds and collecting taxes, including a 5 percent withholding tax on corporate dividends and ever-rising income taxes. The top income tax rate hit a staggering 90 percent. Thus the New Deal had the unintended consequence of prolonging the Great Depression by diverting resources that could have been used to create wealth.

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Barack Obama and his advisers should take a lesson from history. The New Deal and its public-works projects were a disaster, and it would be remiss to think they should be given another try. As Bastiat explained, government doesn’t create wealth; it only diverts it. When government controls wealth it inevitably tends to serve political ends rather than consumers. FDR’s New Deal policies are a testament to that, and if they are repeated in response to our current economic crisis, it will only hinder the recovery.