John Allison Lecture at Duke

 Posted by on 10 November 2008 at 11:45 am  Announcements, Finance
Nov 102008
 

From John Lewis:

Spread the word, please! Announcing a very special event:

A Lecture by Mr. John Allison, President and CEO of BB&T Corporation: “Financial Trauma: Causes and Possible Cures”

November 19, 2008, 3:30 PM

Griffith Theatre, at the Bryan Center, Duke University (Directions)

As the world struggles with the current financial crisis, we should listen to the executives of successful financial institutions. BB&T is such an institution.

Mr. Allison will outline the causes of today’s financial chaos, including the errors that led to the crisis. He will discuss the broader implications for the economy, including the effects on the housing and mortgage industries, and offer economic and political suggestions for both short-term and long-term cures.

John A. Allison became CEO of BB&T on July 7, 1989. At the end of 1989, BB&T was ranked 96th largest bank in the nation with $4.8 billion in assets. After 60 bank and thrift acquisitions, and the implementation of innovative training and measurement programs, the former eastern North Carolina farm bank has grown to become the nation’s 14th largest financial holding company. Assets have increased from $4.8 billion, when Allison began his tenure as CEO, to $137 billion today.

Sponsor: The Program on Values and Ethics in the Marketplace, Duke University

Contact: John Lewis, john.d.lewis (at) duke.edu

Wow, now that’s a lecture I wish I could attend!

Alan Greenspan Is Not John Galt

 Posted by on 7 November 2008 at 5:23 pm  Activism, Finance
Nov 072008
 

John Lewis published an excellent letter to the editor on Alan Greenspan and Ayn Rand in the News & Observer yesterday:

Wrong Analogy

In Ayn Rand’s novel “Atlas Shrugged,” her hero, John Galt, refuses to accept the position of economic dictator. Alan Greenspan accepted such a position as head of the government’s central bank, and his dictates were enforced over an economy burdened with thousands of pages of regulations.

Greenspan’s own flawed ideas have nothing in common with Rand’s philosophy. Nor was the U.S. economy ever set free of government control. Had Froma Harrop (Other Opinion, Oct. 30) discussed the content of Rand’s philosophy along with the actual state of business regulation, this would have been clear.

John David Lewis, Durham

Great letter, John!

Oct 242008
 

Gun Van Horn gives Alan Greenspan a much-needed ass-kicking for his repudiation of free markets. And here’s the Ayn Rand Institute’s press release on it:

Greenspan Has No Free Market Philosophy
October 24, 2008

Washington, D.C. –Opponents of the free market are giddy at Alan Greenspan’s declaration that the financial crisis has exposed a “flaw” in his “free market ideology.” Greenspan says he is “in a state of shocked disbelief” because he “looked to the self-interest of lending institutions to protect shareholder’s equity”–and it didn’t.

But according to Dr. Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “any belief Greenspan ever had in truly free markets was abandoned long ago. While Greenspan long ago wrote in favor of a truly free market in banking, including the gold standard that such markets always adopt, he then proceeded to work for two decades as leader and chief advocate of the Federal Reserve, which continually inflates the money supply and manipulates interest rates. Advocates of free banking understand that when the government inflates the currency, it artificially increases prices and causes booms in certain sectors of the economy, followed by inevitable busts. But not only did Greenspan lead the inflation behind the .com bubble and the real estate boom, he blamed the market for their treacherous collapses. Greenspan should have recognized that what he wrote in 1966 of the boom preceding the 1929 crash applied here: ‘The excess credit which the Fed pumped into the economy spilled over into the stock market–triggering a fantastic speculative boom.’ Instead, he superficially blamed ‘infectious greed.’

“Should it be any shock that Greenspan now blames the free market for today’s meltdown–rather than the Fed’s policies, which fueled an inflationary housing boom, which rewarded reckless lenders and borrowers from Wall Street to Main Street? Greenspan didn’t mention the word ‘inflation’ once in his testimony.

“Whatever Greenspan’s economic philosophy is, it is not anything resembling a free market.”

I can’t possibly express the depth of my disgust at Alan Greenspan. Well, let me try. By continuing to associate himself with the free market ideas of his former mentor, even while thoroughly contradicting them in word and deed as Fed Chairman, and then publicly repudiating them based on a government-created financial crisis, the man has done more damage to Objectivism than Barbara and Nathaniel Branden.

Way to go, Alan. You’ve done what I thought impossible. Dr. Stadler has nothing on you.

Hey, Did You Know Libertarians Run the Government?

 Posted by on 24 October 2008 at 12:40 pm  Finance, Politics
Oct 242008
 

Yes! It’s true! Libertarians have been running the country for years. How do I know?

I know because Jacob Weisberg, the Chairman and Editor-in-Chief of Slate Group (which publishes the online magazine), has just penned an article describing for us immature Ayn Rand naifs how it is that the financial collapse killed libertarianism.

A source of mild entertainment amid the financial carnage has been watching libertarians scurrying to explain how the global financial crisis is the result of too much government intervention rather than too little…

Utopians of the right, libertarians are… convinced that their ideas have yet to be tried, and that they would work beautifully if we could only just have a do-over of human history. Like all true ideologues, they find a way to interpret mounting evidence of error as proof that they were right all along.

To which the rest of us can only respond, Haven’t you people done enough harm already? We have narrowly avoided a global depression and are mercifully pointed toward merely the worst recession in a long while. This is thanks to a global economic meltdown made possible by libertarian ideas.

[Emphasis in original.]

That’s all by way of introduction. He follows with a bunch of haphazard facts strung together in a string of non sequiturs that I’ve become bored with, they’re so ubiquitously offered as proof the financial crisis was caused by the “free market.” So forgive me if I don’t quote here the “facts” the article supposedly marshals in support of its conclusions (check out the full article if you’re not easily nauseated). Weisberg concludes with slap at, of all people, Ayn Rand:

The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from reading Ayn Rand novels in high school.

This article is yet another gob-smacking exercise in tortured rationalization of the avoidance of uncomfortable facts by someone steeped in the rhetorical method not of thrust-and-parry, but avoid-and-slime. Weisberg first avoids the facts that 1) Libertarians have never run the American government, 2) it’s a non sequitur to declare that financiers and corporate-welfare statists who run to the government for a bailout believe in the free market (!) and 3) Libertarianism has been rejected wholesale, outright, and damn near shrilly by Ayn Rand and the philosophy of Objectivism. Weisberg then slimes principled Objectivists as “immature” and “ideologues,” and by playing on the flat ignorance of most of the public of the tenets of Objectivism. (Not to mention trotting out that tired when-are-you-going-to-grow-out-of-it smear.)

I would label this a serious example of the pot calling the kettle black except that there is no “kettle.” There’s definitely a “pot” — Weisberg’s beloved regulatory state has failed. There is no “kettle”; there has never been a free market upon which to blame the current financial crisis or any so-called “market failure,” and I defy Weisberg and his ilk to identify when that state of affairs has subsisted.

I’m not up for reinventing the wheel this morning, so I’ll just send everyone to the new Repeal The Bailout site for an excellent compilation of Objectivist thought leadership on the current economic situation and offer some closing thoughts on Weisberg’s article.

Perhaps the biggest thing Weisberg evades is that we Objectivists who advocate for a truly free market are entirely principled on this: we hold that if you regulate any aspect of the economy, to any degree, it is not free. (I mean, really — you’d think that someone calling Objectivists “ideologues” would jump at the chance to point out how just how “utopian” we are about what we’re saying.) He seems to pay lip service to this fact but then proceeds brazenly to avoid even the most elementary logical implications of the principled consistency of Objectivism.

If she could, I’m sure Ayn Rand would be rolling over in her grave at the willful ignorance of those who persist in equating Libertarianism, which has rightly been repeatedly discredited, with a philosophy so diametrically opposed to it. But let’s accept for a fleeting moment and for the sake of Weisberg’s “argument” his nonsensical conflation of Objectivism and its true free market principles with Libertarianism. Weisberg must nevertheless be charged with his unapologetic evasion of the fact that he’s celebrating the demise of a Libertarian hegemony that has never existed.

The man is deliriously dancing on an empty grave.

Mackerel Economics

 Posted by on 21 October 2008 at 11:10 pm  Economics, Finance
Oct 212008
 

According to the October 2, 2008 Wall Street Journal, the unofficial prison currency in the US is no longer the cigarette, but rather the mackerel:

There’s been a mackerel economy in federal prisons since about 2004, former inmates and some prison consultants say. That’s when federal prisons prohibited smoking and, by default, the cigarette pack, which was the earlier gold standard.

Prisoners need a proxy for the dollar because they’re not allowed to possess cash. Money they get from prison jobs (which pay a maximum of 40 cents an hour, according to the Federal Bureau of Prisons) or family members goes into commissary accounts that let them buy things such as food and toiletries. After the smokes disappeared, inmates turned to other items on the commissary menu to use as currency.

…[T]he mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few — other than weight-lifters craving protein — want to eat it.

It’s interesting that these prisoners understand the need for a stable objective medium of economic exchange far better than the US government which is incarcerating them, even though few of those prisoners have studied articles such as, “Gold and Economic Freedom” in Capitalism: The Unknown Ideal which explain the importance of a gold standard.

In light of the recent Wall Street bailout inflicted on us by government officials based on bad economic theories, here are a couple of conclusions one might draw:

1) Perhaps it’s the US economy that is based “fishy” premises, not the prison economy.

2) Perhaps more US government officials need to spend some time in a federal penitentiary — they may learn an important lesson about sound money (as well as some well-deserved lessons on other subjects.)

(Via Marginal Revolution.)

Getting Rand Wrong

 Posted by on 19 October 2008 at 11:01 pm  Academia, Economics, Ethics, Finance, Objectivism, Politics
Oct 192008
 

As someone who takes ideas seriously, I’ve always found it frustrating when philosophers take it upon themselves to offer judgments on subjects they haven’t bothered to devote serious time and attention to studying. The charge that philosophers (academic or otherwise) sometimes judge where the epistemically virtuous would fear to comment isn’t new. (For instance, it isn’t rare to hear someone claim that speculation from the philosophical armchair is a poor method of settling some contentious issue.) What makes this phenomenon — the venturing of unwarranted opinions — especially pernicious in the case of philosophers is that philosophers are supposed to be the guardians of rationality, revering the mind by sacrificing hasty conclusions at the altar of the well-formed argument. Philosophers are supposed to love wisdom and shun mere belief; when they make assertions that betray culpable ignorance, they sin against their profession as well as the truth.

I don’t know what it is about Ayn Rand that makes many philosophers think they can get away with saying whatever they damn well please about her without having studied her work carefully and honestly. I suspect that the real explanation has less to do with Rand and more to do with personal biases on the part of her critics. But whatever the cause, the phenomenon is nevertheless real. It isn’t just that many philosophers dislike Rand. We philosophers are an opinionated bunch; we dislike all sorts of things. Rather it’s that many philosophers will attribute all sorts of nonsense to Rand without actually considering what she has to say.

To offer an example, below is a passage from Rosalind Hursthouse’s On Virtue Ethics. This work, published relatively recently by Oxford University Press, is intended to be used as a textbook on, unsurprisingly, virtue ethics.

“We can interpret Thrasymachus, and more obviously Nietzsche and Rand, as saying that, rather like hive bees, human beings fall, by nature, into two distinct groups, the weak and the strong (or the especially clever or talented or ‘chosen by destiny’), whose members must be evaluated differently, as worker bees and the drones or queens are.”

Um… what? Anyone with even a cursory familiarity with Rand’s ideas will realize that she believes no such thing. Rand’s philosophical anthropology — her theory of human nature — does not recognize a distinction between types of human beings. Her ethical theory evaluates individuals on the basis of their choices, not their unchosen attributes, and she appeals to a univocal standard of moral evaluation — not to distinct standards for distinct types.

Hursthouse does not provide any sources that might justify her ‘obvious’ interpretation of Rand’s philosophy. But this totally wrongheaded interpretation of Rand was good enough for her editors and peer reviewers at OUP (as well as the numerous philosophers who gave her editorial comments on the final manuscript). Apparently that group of distinguished professors found nothing objectionable in Hursthouse’s characterization of Rand. Of course, realizing Hursthouse’s error would have required reading Rand.

(On a grimly ironic note, the above passage comes from chapter 11 of On Virtue Ethics. The chapter title? “Objectivity.”)

Hursthouse isn’t the only person who presents Rand’s views incorrectly in a way that betrays ignorance. Chandran Kukathas’s entry on Rand in the otherwise excellent Routledge Encyclopedia of Philosophy is another example. No, Kukathas… Rand didn’t think that integrity was “at the root of the idea of freedom,” her “real concerns” were not “the defence of the value of integrity (to the point of self-sacrifice) in the face of evil and moral despair,” and The Virtue of Selfishness was not a novel.

So far, we’ve seen a philosopher attribute views to Rand that she ‘obviously’ didn’t hold, and we’ve seen another philosopher misunderstand the fundamentals of Rand’s politics and misconstrue her central concerns. But Gerald Dworkin, a professor of philosophy at UC Davis, has recently exemplified yet another way of getting Rand wrong: saying that her ideas lead to catastrophe.

The forum in which Dworkin makes this charge is Leiter Reports: A Philosophy Blog — a blog featuring “news and views about philosophy, the academic profession, academic freedom, intellectual culture… and a bit of poetry.” The blog is run by Brian Leiter, currently John Wilson Professor of Law at the University of Chicago, and Director of Chicago’s Center for Law, Philosophy, and Human Values. Leiter is also the editor of The Philosophical Gourmet, which ranks the top philosophy departments in the English-speaking world. I read Leiter Reports semi-regularly, as it is a good source of professional news related to academic philosophy (faculty hires, moves, deaths, retirements and whatnot). In addition to this valuable material, the blog also features occasional leftist cultural commentary of more dubious value. Of extremely dubious value is Dworkin’s post “Blame it on Ayn Rand” in which he claims Rand is a cause of our economic troubles. Dworkin doesn’t really provide much of an argument for this claim, so I’ll attempt to provide him with a charitable reconstruction (a courtesy I’m not so sure he deserves… but for the sake of argument…).

Dworkin quotes a recent New York Times article on Greenspan’s involvement in the current financial crisis. (That article seems to get Rand wrong too; Rand didn’t have “a resolute faith that those participating in financial markets would act responsibly” but that’s beside the point.) The article implies that Greenspan’s positions on regulation — specifically the regulation of derivatives markets — were causally relevant factors in producing the recent financial crisis. Why did Greenspan hold his positions on regulation? Here, Dworkin invokes Keynes:

“…the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

(I can’t resist noting that Rand held a similar view to Keynes about the importance of philosophy in history, though her insight was deeper than Keynes. Rather than viewing history as being primarily driven by political philosophy, Rand viewed metaphysics and epistemology as being much more influential. For more on Rand’s insights here, consult the title essay of For the New Intellectual, as well as the title essay of Philosophy: Who Needs It. Peikoff develops Rand’s insights on the philosophical motor of history in Ominous Parallels, the epilogue to Objectivism: The Philosophy of Ayn Rand, and in his forthcoming book on how epistemology shapes society.)

Greenspan was a student of Rand, and Rand argued for the principled separation of the state and economics, and thus for an absence of government interference in voluntary economic exchanges. She was a categorical opponent of governmental regulation in financial markets. Greenspan opposed regulation of derivatives markets. The current financial crisis was supposedly brought on by an absence of regulation in these markets. Thus Dworkin claims that Rand is “an important cause of the catastrophe we are in.”

Let us examine this argument.

This argument gets its force from the claim that Greenspan was practicing what Rand preached. In an update to Dworkin’s post, Leiter snarkily remarks that “Greenspan was not only a friend of Rand’s, but a lifelong devotee of her ideas and her ‘philosophy,’ such as it is.” While it is true that Rand and Greenspan were friendly toward one another, it is demonstrably false that Greenspan was “a lifelong devotee of her ideas.” It doesn’t take a hell of a lot of legwork to discover this; thanks to Google, I didn’t even have to leave my armchair.

In The Age of Turbulence, Greenspan’s recent autobiography, Greenspan discusses the important formative influence Rand had on his intellectual development. In his discussion, he talks about how Rand encouraged him to look beyond mere economic data and more deeply into the values and ideas that move history and influence human action (including economic action). She was credited with broadening his perspective on the world and helping him reject logical positivism. He even describes himself as “writing spirited commentary for [Rand's] newsletter with the fervor of a young acolyte…”. But this enthusiasm was not to last; Greenspan’s autobiography claims that Rand’s philosophy has inherent contradictions, and that his “fervor receded.”

So Greenspan isn’t an Objectivist. His policies, as we shall see, reflect this fact.

We’re in the midst of a recession, teetering (some might say) on the precipice of a depression. What were Rand’s views about recessions and depressions? Well, Dworkin doesn’t say. His blog post doesn’t even bother to discuss which of Rand’s ideas were supposed to get us into this mess. He doesn’t explicitly discuss her ideas at all. If one consults Rand’s Capitalism: The Unknown Ideal to discover her views on the causes of recessions and depressions, one is directed to the works of Ludwig von Mises. It is important (for getting Rand right) to recognize that while Rand found Mises’s economic analyses convincing, she had substantial philosophical and methodological disagreements with him. Mises was a Kantian who viewed economics as a primarily deductive enterprise (and thus was inclined toward epistemological rationalism). He also attempted to do economics in an ethical vacuum, divorcing economic analysis from any underlying normative framework. Rand, of course, rejected Kantianism, rationalism, and a strict division between morality and economics. But despite his errors, Rand thought that Mises’s economic theories represented a significant achievement.

At this point, I don’t want to provide a lengthy, detailed summary of Mises’s views on the business cycle. I may write something in the near future about the causes of our current economic woes, but I’ll hold off for now. The following short summary should provide a general indication of the economic views Rand found most convincing.

The most salient aspect of the Austrian theory of the business cycle is that implicates central banks as the fundamental cause of depressions and recessions. Ah! The plot thickens! Wasn’t Greenspan the head of our central bank? He was indeed. How do central banks cause recessions?

In a free market, the interest rate (the price of money) is determined by the law of supply and demand. Roughly, the supply of loanable funds that banks have (our savings) determines the interest rate, when taken in conjunction with the overall demand for money and the riskiness of potential debtors. Central banks, such as the Federal Reserve, distort this market mechanism by setting artificially low interest rates (interest rates below the market rate). What happens next? I defer to Wikipedia:

Low interest rates tend to stimulate borrowing from the banking system. This expansion of credit causes an expansion of the supply of money, through the money creation process in a fractional reserve banking system. This in turn leads to an unsustainable “monetary boom” during which the “artificially stimulated” borrowing seeks out diminishing investment opportunities. This boom results in widespread malinvestments, causing capital resources to be misallocated into areas which would not attract investment if the money supply remained stable. A correction or “credit crunch” — commonly called a “recession” or “bust” — occurs when credit creation cannot be sustained.

Loose monetary policy by central banks leads to people taking on more debt than they otherwise would. Artificially low interest rates allow more credit to be extended to risky borrowers. In our current case this lead to skyrocketing real estate values, since there was an increased demand for houses (made possible by banks extending credit to more and riskier debtors). This effect is obvious enough in the case of commercial banks, which more than doubled the amount of real estate loans they made (thus allocating large amounts of resources into the real estate market — allocations that wouldn’t have occurred in a free market for money and credit.

And then there’s the welfare state. Don’t let’s forget about Fannie and Freddy. The former is a holdover from the New Deal; the latter is a “government sponsored enterprise” created by the Emergency Home Finance Act of 1976, and designed to increase home ownership. Both of which did their part to screw us all by spurring on the housing bubble… and they were able to borrow money at a (de facto, if not de jure) subsidized rate in the marketplace because the public viewed them as being low risk (since the state would presumably bail them out, should the need arise).

All of a sudden, everyone’s in debt and no one wants to lend. Small wonder. Small wonder that risky investors are defaulting on their mortgage payments. Small wonder that the derivatives markets are screwing up (I’d argue that we can only make sense of the kerfuffle in the derivatives market in light of monetary policy). Small wonders that major financial institutions are losing their credit rating because they took on too many risky debtors.

We frequently hear that that the market got drunk. What was it drunk on? Cheap credit. Who was the man behind the bar? You can probably guess.

In May of 2000, the Fed Funds rate was 6.5%. By June of 2003, Greenspan had slashed it to 1%, and it stayed there for more than a year (and remained ridiculously low for much longer). Would Rand have found this type of monetary policy commendable (or even tolerable)? Of course not. She’d read her Mises. Moreover, she regarded central banking as morally repugnant and politically unnecessary.

There’s much more to be said about our current credit crunch and how to evaluate it in light of Rand’s moral and political philosophy. But it should now be evident that Dworkin (and Leiter) are wrong on all counts. They were wrong about Greenspan; they were wrong about Rand. Their errors on these subjects betray a culpable ignorance. One needn’t do much research to figure out Greenspan’s real views on Rand, or Rand’s views on economics. Twenty minutes with Google and Wikipedia would probably have gotten the job done. If a philosopher is going to assert, in a public forum, that another philosopher’s ideas lead to disaster, then they have an obligation to carefully consider that thinker’s ideas, to understand them, and to show how (in practice) they would result in catastrophe. When a philosopher fails to do that, they do a disservice not only to the thinker they criticize, but also to the truth, to their profession, and to themselves.

Academic philosophers often get Rand wrong. They often have only themselves to blame.

New Web Site: Repeal the Bailout

 Posted by on 16 October 2008 at 12:17 pm  Activism, Economics, Finance, Politics
Oct 162008
 

A most welcome message from Tony Donadio, posted to OActivists last week:

In response to last week’s passage of the financial bailout legislation, I’ve taken the liberty of acquiring the domain name repealthebailout.net and creating a rudimentary website. It can be found here:

www.repealthebailout.net

Right now, it’s more or less just a skeleton, consisting mainly of links to various articles on the subject. However, I have a strong suspicion that last week’s bailout isn’t the last one we’re going to be facing, and that the website may continue to be relevant for some time to come. I plan to try to update it steadily as my (unfortunately limited) time allows, both with original material and with new and timely links.

I’m interested in feedback and thoughts on what I’ve (hastily) thrown together so far, so please feel free to respond to me (preferably directly, so as not to clutter the list) if you have any. I’m also interested in new and useful links as well as original contributions if you have any to offer or suggest.

Thanks — Tony Donadio

Tony has done a fantastic job with Repeal the Bailout. Kudos to him! Please do point people to it in any writing you do about the financial crisis, e.g. in e-mail discussions, comments on news stories, comments on blogs, and the like.

Such small sites focused on some current issue — like my even smaller Vote No on 59 — are relatively easy to create, maintain, and promote. They can get a steady stream of search traffic, as shown by the stats of No on 59. (See the visits and referrals.) They’re an effective and enduring form of activism for just a few hours of your time.

Notably, because of Vote No on 59, Ari Armstrong was interviewed by the local news for a segment on Amendment 59 on Tuesday. It was shown at 5:30 and again at 9:00; you can watch it here. (The reporter called me due to the web site, and I pointed her to Ari, as he’s more knowledgeable than me.) That’s an unusually good result, but certainly possible in a busy election season! In the meantime, over 100 interested Colorado voters each day are reading why they should vote “No” on this permanent tax hike.

You can make a difference — if you speak out!

A Slender Silver Lining to the Bailout?

 Posted by on 14 October 2008 at 1:02 pm  Activism, Economics, Finance, Politics
Oct 142008
 

Although the economic crisis and subsequent bailout are going to be painful for our country, there may be a very slender silver lining — namely that the loss of money will likely derail some plans for more big government programs.

Here are a two recent examples, one in health care and the other in “green” legislation:

After Bailout, What Will Health Reform Look Like?

A growing number of experts have abandoned all hopes of major health reform. “The bailout makes it that much tougher, because health care will be crowded out by other issues,” said Drew Altman, president and CEO of Kaiser Family Foundation…

And,

Efforts on global warming chilled by economic woes

The economic free fall gripping the nation may bring down one of the main environmental objectives: capping the greenhouse gases that are blamed for global warming. …[T]he focus on stabilizing the economy probably will make it more difficult to pass a law to reduce carbon dioxide and other greenhouse gases. At the very least, it will push back when the reductions would have to start.

These stories suggest that even if a President Obama and a Democratic-controlled Congress wanted to implement these bad ideas, they probably wouldn’t be able to do so immediately, purely because of cost.

(It was similar economic constraints that stopped California from imposing “universal health care” at the state level last year, even though the Democratic state legislature and Republican Governor Schwarzenegger were both strongly in favor of it.)

Obviously, this would just be a temporary reprieve — the liberals’ underlying bad ideology has not changed. And I fully recognize that there are plenty of other bad laws that both the Left and the Right could propose (such as restrictions on free speech) that wouldn’t require much money to implement.

But the economic downturn could buy us a little more time to continue the fight for good ideas. Let’s not waste it…

Update: This New York Times column by David Brooks argues the opposite — that an Obama admininistration would use the financial crisis as the pretext for massively increased government spending, despite the fact that the country will not be able to afford it.

Either way, I think we’ll have our work cut out for us…

Three Press Releases

 Posted by on 10 October 2008 at 8:05 pm  Finance, Politics
Oct 102008
 

The Ayn Rand Center published three great press releases on the financial crisis lately. First:

How Not to Defend Free Markets
October 3, 2008

Washington, D.C.–In response to the financial crisis, traditional defenders of free markets have criticized certain controls passed by U.S. regulatory agencies, but are not calling into question the legitimacy of the agencies themselves. But, argued Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “It is insufficient and indeed counterproductive to criticize a few failed policies of the Fed and the SEC, without challenging the existence of these market-dictating agencies in the first place.

“As Exhibit A, consider the response to the SEC’s recent war on short selling. The Wall Street Journal, regarded as a strong defender of free markets, wrote that ‘[T]he SEC first clamped down on so-called naked shorting–a reasonable move under any circumstances, even if there’s no evidence of widespread naked shorting of financial stocks in this panic. But Mr. Cox didn’t stop there. The SEC has also temporarily banned any short selling of hundreds of financial stocks, a list that has grown to include the likes of General Motors. Then, when the SEC was reminded that selling a stock short is a legitimate part of many unimpeachable hedging strategies, it relaxed the prohibition for certain types of sales while continuing to expand the list of “protected” stocks. . . . If the SEC wants to help restore calm, it would stop issuing new emergency rules in the dead of night and bring some transparency and calm to its own rule-making.’

“In praising some of the SEC’s actions, while criticizing others, the Wall Street Journal is conceding a disastrous principle: that financial markets should be controlled by government at all.

“Under capitalism, the proper role of the government in financial markets is to protect individual rights by banning force and rooting out fraud. This requires objective laws that do not permit would-be central planners to tinker with markets when they don’t like the results. But the SEC’s regulatory authority allows it to coercively prevent individuals from engaging in voluntary transactions like short selling whenever it decides those transactions do not serve the ‘public interest.’

“Since the ‘public interest’ is an indefinable standard compatible with any interpretation or rationalization, this means in practice that SEC goons can arbitrarily unleash their regulatory club on financial markets whenever they feel it’s warranted. For example, see Chris Cox’s blitzkrieg of contradictory emergency orders attacking short sellers.

“The basic principle behind regulation is that the government can use force, not to protect individual rights, but in an attempt to engineer ‘socially desirable’ outcomes, i.e., outcomes different from what would result from the voluntary choices of individuals on a free market. That is the same premise that underlies all disastrous attempts at central planning–from the Soviet Union to modern-day Venezuela.

“If the Wall Street Journal really wants to defend capitalism, this is the premise it must oppose. Instead of prodding government regulators to be better central planners, it should call for a complete end to government control of financial markets. This is the lesson all defenders of capitalism must learn: you cannot defend capitalism by conceding the legitimacy of its opposite.”

Second:

Ayn Rand Saw This Coming
October 9, 2008

Washington, D.C.– “Despite overwhelming evidence that government policies caused the current financial crisis, Congress is blaming businessmen,” said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. “What’s worse, the capitalists who have been shackled with unprecedented regulatory burdens are unable to defend themselves morally. Though the events are different, this pattern of abuse and submission is straight out of Ayn Rand’s Atlas Shrugged.

“The cycle starts with government intervening into the economy and imposing regulations and controls on business. This distorts the free market, leading to economic dislocations. When the problems caused by these distortions inevitably follow, everyone blames the free market and its greedy capitalists. The proposed solution? More government controls. Over the years, conservative critics of creeping government have repeatedly exposed this illogic but have always been helpless to explain why the cycle keeps repeating, decade after decade.

“The pattern keeps recurring because businessmen are willing to take the blame. From capitalism’s inception, its defenders have been morally disarmed by the widespread view that self-interest is morally suspect, and disinterested service to others is a moral ideal. So each new spate of controls has been grudgingly accepted as a fair price to pay for society’s toleration of the selfish pursuit of profit.

“Atlas Shrugged depicted a society in economic collapse due to this recurring cycle, and today’s parallels are obvious. Government manipulation of money, credit, and lending standards over several decades caused the mess we’re in. Now, the offered solution is more of the poison that sickened the economy–more bailouts, more cheap money, more government-guaranteed loans, and above all, more regulations.

“This chronic cycle will not end until businessmen accept that their production of profit is neither immoral nor amoral–it is the capstone of moral virtue. Once they shrug off the role of scapegoat, businessmen can demand with moral certitude that government punish fraud and enforce contracts but refrain from interfering with voluntary trades among consenting adults.

“When America’s markets are finally free of all coercion–in other words, when laissez-faire is achieved–financial crises such as the one we’re experiencing will never happen again.”

Third:

Are We All Socialists Now?
October 10, 2008

Washington, D.C. –The Treasury Department, as part of its ongoing assumption of control over the financial industry, is preparing to inject cash into U.S. banks in exchange for preferred shares of bank stock.

“Are we all socialists now?” said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. “Have we learned nothing from the devastation that socialist policies wrought worldwide in the twentieth century? Government intervention distorts markets and causes economic dislocations, no matter whether Uncle Sam controls private companies by regulation or assumes public ownership outright.

“A crisis doesn’t transform poison into medicine. Over decades, government manipulation of money, credit, and mortgages poisoned this economy and left it dangerously weak. Now Hank Paulson and his comrades are hooking up IV tubes filled with more of the same poison–bailouts, loan guarantees, cheap money, and more burdensome regulations–and hoping we will lie still and trust in their cure.

“But the real cure is capitalism, not more doses of socialism. We should act quickly to put government in its place, by rolling back the interventionist measures that caused the present emergency. Government’s proper role is to punish fraud and enforce contracts, not to own and manage the economy. We cannot achieve financial health unless we are willing to free the markets.”

Letter on the Bailout

 Posted by on 10 October 2008 at 11:38 am  Economics, Finance, Politics
Oct 102008
 

On September 27th, I sent the following letter on the bailout to various papers in Colorado. I don’t think it was printed — although I haven’t checked. In any case, I thought I should post it here:

Are politicians in Washington trying to sink the country into a depression? It seems so. The current financial crisis was created by government controls and subsidies. Now politicians want to inject more of that poison into the markets.

Financial meltdowns are the inevitable product of bureaucratic meddling. The health of the economy requires the opposite: freedom. The government should not bail out any Wall Street firms — or anyone else. The ban on shorting financial stocks should be lifted immediately. The Community Reinvestment Act must be repealed. Fannie Mae and Freddie Mac should be privatized.

The only proper role of the government in the financial markets is the protection of the inalienable rights to property and contract. Only then will every person be free to act on his own rational judgment in pursuit of his own wealth, security, and happiness. That’s what America should be all about.

Diana Hsieh
Sedalia, Colorado

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