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The Education of Alan Greenspan
Greenspan 1963: Writing in Ayn Rand's Objectivist Newsletter, Greenspan declared as myth the idea that businessmen "would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings. It is in the self-interest of every businessman to have a reputation for honest dealings and a quality product."
Greenspan 2008: Testifying before the House Committee on Oversight and Government Reform, Greenspan recanted: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief.... This modern [free market] paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year."
Greenspan's life spanning quotes are the bookends of the dramatic ascendance, dominance and ultimately demise of the radical right's unquestioning faith in unfettered free markets.
Greenspan's pronouncement in 1963 marked an inauspicious beginning of the new Free Market Fundamentalism in the midst of the coming LBJ landslide and Goldwater defeat. But Rick Perlstein's Before the Storm, an account of the roots of the coming conservative movement, detailed how the Goldwater debacle launched a 40-year project to construct a sophisticated conservative movement and create a new American conservative consensus.
For the Free Market Faithful, those early years were dark days of "big government" marked by the Great Society, landmark civil rights legislation, Medicare and Medicaid. Dominant public opinion even drove progressive policy-making well into the Nixon and Carter years with major environmental and workplace legislation and new regulatory agencies.
But the Fundamentalists, with revolutionary zeal, kept their eye on the prize and systematically built the infrastructure for a conservative triumph. Their greatest accomplishment was the shifting of mass public opinion towards a set of agenda-enabling free market beliefs - that the government could do no right, and the market could do no wrong. They posited, successfully, that the laws of markets were as immutable as the laws of nature.
Throughout the period of conservative dominance there were always those who understood the fallibility of unregulated markets. In 1992, the GAO, asked by Democratic Congressman Ed Markey to study the impact of new and complex financial derivatives, concluded presciently that "The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole. In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers."
In 1994, a bi-partisan bill was introduced in Congress to tighten the supervision of the complex and growing derivatives in the banking industry. The bill would have had the regulatory agencies establish standards for capital requirements, disclosure, accounting and examinations and audits. As expected, the banks argued that no new laws were needed. Greenspan sealed the legislation's defeat (as he was able to do with all attempts to establish updated regulation for the financial industry) by testifying that the Fed had the powers it needed and that a taxpayer bailout caused by derivatives was remote.
Greenspan claimed with the resolute faith of a true believer that "risk in financial markets, including derivatives markets, are being regulated by private parties... There is nothing involved in federal regulation per se which makes it superior to market regulation." There were doubters, but Greenspan, in the heady days of free-market mania, was the ultimate silencer of doubt.
In 2003 Greenspan continued to praise derivatives as "extraordinarily useful." As recently as September 2005, in a speech to the National Association for Business Economics, Greenspan proclaimed his continued confidence in derivatives in free, un-regulated capitalism, the inherent ability of unfettered markets to self-correct in times of economic distress and the overwhelming dangers of government intervention.
Greenspan spoke glowingly about the "development of financial products, such as asset-backed securities, collateral loan obligations, and credit default swaps, that facilitate the dispersion of risk." He claimed, with remarkable lack of foresight, that "these increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago."
The argument was an old one. The inviolability of the laws of the market would generate the information needed to establish appropriate asset value and risk and self-regulate to prevent excessive speculation. Government regulation would, by definition, get in the way of natural market forces.
He did admit that the Fed, concerned about the irrational exuberance of the Tech Bubble, considered and rejected aggressive action to reign in the speculative excess of the late 1990's. They chose not to "risk recession" and decided to "wait for the eventual exhaustion of the forces of boom." Unfortunately, exhaustion turned into global collapse.
Now, just three years later, the economic crises and its obvious roots in a fanatical aversion to regulation led to Greenspan's striking admission that he and his fellow believers had been wrong.
The dramatic collapse of the banking industry finally exposed several key flaws in the Book of Greenspan. First, the entirely self-evident fact that economics is a behavioral science - that economic conditions are the sum total of human actions, emotions, vice and virtues. Ultimately it was a very human vice - greed - that became the paramount driver of economic growth. Greed, inherently incapable of recognizing excess or limits, inevitably leads to economic distress.
Second, predictions that market signals would cause the necessary corrections turned out to be stunningly false in the face of financial instruments so complex that no one could accurately determine the value of assets or level of risk.
Greenspan's awakening signals a turning point for American capitalism. It's the beginning of the end of the fundamentalist free market epoch, underlined by calls from Democrats and Republicans alike for greater regulation, far more government oversight and even public ownership of private capital.
The rise of the free market zealots is a study of how a movement, driven by the clarity of purpose and a commitment to the long haul, created a narrative of the American economy that clouded the steady erosion of American living standards and the death march to the environmental precipice wrought by global warming. Their fall is a lesson for progressives who, shellshocked and silenced by right wing ideological dominance, couldn't see the way back to a more progressive future.
Progressives have plenty to do to undue the damage and fully untangle America from the sway of the free-market faithful. Still, distrust of government is high, the institutions of government have been hobbled and the right wing message machine is still intact even if on the run. Fortunately, the progressive intellectual infrastructure, more developed and more capable than even just a few years ago, is ready to drive a new New deal, focused on 21st century economic and environmental challenges and reinvigorated with 21 century ideas.
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22 Comments so far
Show AllCertainly, "distrust of government is high" following W's eight-year effort to destroy any faith that anyone on the face of the earth may have had in the US government.
I wonder if his admission means that Greenspan expects to die soon? I find it difficult to believe that his "awakening" is the result of compulsive honesty.
q
Alan MacDonald
Donald, your "Education of Greenspan" prompted my thinking of the need for a political economic education of all 'working class' Americans.
This may not be 'sound bite simple' but it's really not that hard to understand:
Our country has been almost fully taken over by a ruling-elite 'corporatist Empire' that hides behind the facade of its two-party, 'Vichy' sham of democracy.
This superficial disguise of a domestic empire makes it somewhat more demanding for us to see the reality than it was for the French people in WWII to more easily see that the one-party 'Vichy' government installed by the foreign/enemy Nazi Empire was phony and was not a government working in their popular interest.
But the vast majority of average, 'working class' Americans are starting to understand in their gut and their dinner plate that some kind of corporate / financial empire has 'our' government by the throat with 'their' moneyed hands. [By 'working class' I mean anyone below retirement age who makes more from their work than from their unearned investments. IE. 95+% of those non-retired.]
Admittedly, it's a bit confusing and more difficult to see through the political disguise of this new-style 'corporatist Empire' because the corporate MSM media doesn't tell us anything about any "corporate Empire" (maybe because they are owned by them), and thus the polite corporate media doesn't ever even whisper the word 'empire' --- and neither do many corporate supported politicians. Surprise, surprise, surprise, uh?
Well, what's really not surprising is that all empires in history are basically economically driven, and tend to take over countries by using economics (and military) to take over the political side of government --- and so did this new-style 'corporatist Empire' infecting the us in the U.S.
But the good new is that average Americans have seen this movie before --- but long ago, before 1776.
When average people and their own honest leaders saw that the British Empire was oppressing and tyrannizing both of their intertwined political AND economic interests, they first reasonably resisted the British Empire in both its political/royal governors AND its British East India Corporation economic oppressors --- and then overthrew the British Empire in BOTH its political and economic roles.
This new-style, disguised, and domestic ‘corporatist Empire’ had taken over the American economy first with concentrated money-power of the type that FDR tried to fight in the 1930’s, but now the economic side of empire has been so successful in it’s dominance of our economy that its taken over our government itself with the same money-power.
The concentration of money-power was always recognized as dangerous to our democratic government by Jefferson, FDR and many others, but now the concentration is greater than ever, and has overwhelmed the political side of our political-economic democracy.
The indivisible political economy (as it used to be called) of any country or society forms the basis of how decisions are made and power shared --- and there are only two basic ways. Either a country is controlled by empire (which often goes by several differing names, like monarchy, autocracy, dictatorship, etc), or governance is controlled by the people, which is called democracy (direct, representative, republic, etc). Luckily, our forefathers built a good democracy, called a republic --- of which Ben Franklin said, “Now we have a republic, if we can keep it (from empire)”.
Increasing imperial money-power concentration that concerned Jefferson, Franklin, and others used to be produced on the economic side by investor corporations exploiting resources, technology, and labor to directly make the money profits that could support good developments and progress, but could be misused to gain control over the political side of government. Sometimes big corporate industrial projects to make profits also caused some by-product costs to our country’s environment or people, but that was thought to be mostly by accident (which economists call extenalities --- or outside the scope of the business).
However, in our new world of post-industrial society, some aggressive financial imperialists have discovered and exploited the well known ‘market flaw’ of ‘negative externality cost dumping’ to make money even faster and easier (for them) by intentionally ‘gaming’ the system and actually designing money making schemes that profit them by producing financial products with no real value, but which cause massive costs (like debt bombs) to be dumped/externalized on our society/government/US.
Such elite ‘bad actors’ in the financial side of their ‘corporatist Empire’ are pulling the same dirty trick that industrial cigarette manufactures abused to make private profits, while spreading ‘social costs’ (negative externality costs) into peoples’ lungs by producing an array of physical products, like Lucky Strikes, Camels, Marlboros, etc.
Now instead of these simple and well known ‘brands’ of cigarettes, the financial side of the corporate Empire has manufactured a dizzying array of intentionally complex and deceptive financial products, like subprime and altA mortgages, CDOs, SIVs, CDSs, and derivatives, which pump negative externality cost cancers into both our economic and political lungs.
Luckily, average Americans, well intentioned political leaders, and honest economic experts (not employed by the corporatist Empire) can work together to rebuild our democratic political economy with some simple changes to make our lives of working, saving, and investing into a socially responsible and honest economic system where positive benefits are supported and rewarded --- while negative externality cost dumping schemes and social cost con-jobs are prevented.
Obviously Greenspan would have befitted from a little less time hitting the books and a little more time on the playground.
Most of us know that high stakes games with no referee tend to turn bloody.
Next, let's see if Bernanke can figure out what the average kindergartner with an allowance knows -- we can't "borrow" forever.
They posited, successfully, that the laws of markets were as immutable as the laws of nature.
The markets have no laws because the markets are a Wet Dream and a Fantasy. They are Disneyland; they are a heroin addict nodding in a filthy shooting gallery and thinking they are in The Presidential Suite at Trump Plaza. Contrary to what's been appearing in progressive blogs, the musings of "Joe The Plumber" are possibly the most relevant thing I've read about the current state of this nation because they indicate a place where ordinary people, most of whom are completely aware that they are being ripped off in an unprecedented manner, indicate, completely without irony, that they want most of all to be the people who are ripping them off. They don't want to be themselves. They still think they'll hit it BIG in the lotto or the stock market.
Good observation Mordechai, and well put. The wannabe-wealthy class apparently think that if we eliminate the gilded class they will never be able to join it. What they fail to realize is the game has been rigged by the gilded ones they keep installing in power. They will never get their camel through that golden needle's eye no matter how hard they try, but by buying their lottery tickets and selling their votes they convince themselves they still might.
Yes, well said _ M O R D E C H A I _ ,
__ The victim's idea of JUSTICE,
__ wishfoolly wanting to become
__ the new perpetrators & criminal slime froth
Namaste
My audacity of hope is that Obama reads Common Dreams articles too.
Years ago when I was very young, before I had gone to university, I came across Ayn Rand and proceeded to read all her books, and even subscribed to her newsletter "The Objectivist". At that time in my life, I wanted to understand politics and economics. I became a convert as everything she wrote was so black and white and so simple. It was easy to digest - she had an answer to everything and it was always black or white. Never ever grey. She thought grey was a sign of weakness.
Then I went to university and took liberal arts and humanities and realized how simplistic Ayn Rand and her "philosophy" was. I did a 180.
One of her premises was that "socialism", or whatever you want to call a caring government with safety nets and social programs cannot work because of greed and human nature. She posited that once you start helping people, they will take and take and take. If you give assistance to afford food, they will not be satisfied with a simple meal, they will want lobster and caviar. If you give assistance in housing, they will start demanding mansions. If you assist them in dental work, they will bring all their kids and grandmas to get free caps and crowns and cosmetic work, and so on.
She wrote that human nature (i.e. greed) will make hard-working capitalists fodder for the lazy and the greedy. If you were poor, it was your fault. She never wrote about social environments, misfortune, lack of opportunities, etc.
And she believed that entrepreneurs, capitalists, CEO's, etc. will always be honourable, honest and principled, because it is in their best interest to be so and that they will benefit society by their hard work and their wealth will trickle down.
She never factored in greed amongst the corporate capitalists.
So when Alan Greenspan was interviewed by Amy Goodman on Democray Now, he said that Ayn Rand was one of his mentors and she had a great influence on his thinking. I was horrified and disgusted to realize that the most powerful "economist" in the world was influenced by this simplistic, one-dimensional "philosopher."
It's very surprising that a man who became so powerful, could believe something that is so contrary to ordinary experience, if the article correctly describes his idea about self interest.
I agree. Several decades ago I worked in a store and one of the many things I did was to help sell bicycles. One day a customer brought back a bike with a broken front fork. The bike had a good reputation and I could hardly believe what I saw. Later I learned that the company that made the bike had been bought by another company. Now the factory, employees, and supply lines had been in place for a long, long time. So what happened, greed and the desire to make a fast buck.
Later I learned some more history about how to make a fast buck. Buy some defective rifles at a discount price. Then sell them to the government at a higher price. Don't mention that they are still defective and will blow the thumbs off of soldiers who will use them in battle. Actually it is hard to believe that Greenspan would not know this bit of history.
If this is beginning of the de-deification of Ayn Rand and her philosophy of moralizing greed (and completely ignoring the toxic effect of unearned wealth), then this financial meltdown has a positive side. For far too long, her conservative groupies have been spreading her gospel to the point of putting Rand up to the level of Plato & Aristotle (which, in hindsight, is truly laughable). Don't expect that crew to admit defeat though, they will be around philosophical thought like herpes.
If we take at face value the fact that Alan Greenspan is smarter than the average bear, than I believe some questions should follow. Let’s focus on his 20 year tenure as chairman of the Federal Reserve. What transformation of our nation’s economy occurred during this time? The way I see it is; two decades of talented and potentially useful workers were led to the financial services sector by greed, glitz and glitter. It was there for all to see. Where one quarter to one third of our whole economy hinged on these finance-related activities. We should remember that the growth of this burgeoning financial segment of our economy came about in large part due to Greenspan’s dogmatic deregulation and his manipulation of interest rates, not to mention his unforgivable kowtowing to George Bush’s tax policies. But fairly, it should also be remembered that we shamelessly idolized, and envied, many of these guys pulling down salaries and bonuses of tens, and hundreds of millions of dollars a year. Could it be called obscenity? Could it be called anything else? These highly profitable, though dubious activities, drew people away from the productive and useful sectors of our society. I would argue that the lost opportunity costs to our country during this period far overshadows the current economic upheaval.
If we can now discount their claims of creating wealth, as any sane person must, we realize that these people in the financial sector were among the most unproductive of all American citizens. Most of them must have known this. They must have known the truth about the deceitful home loans, the hedge funds, the mergers, the elimination of jobs, the gutting of pension funds, the fraudulent energy trading, the realities of toxic derivatives, the credit default swaps, and the Ponzi pyramids they were producing. Yes, this is what they produced. The fruits of these efforts were the useful paper for them, while what they left for our society is the useless paper we are now stuck with. Greenspan’s speech was not accidently garbled and misleading. He spoke in this fashion precisely to distract, delude and defraud. Yes, unfettered free markets do work. For those in a position to manipulate them. This is no secret. It is also no secret that if you wish to get paid handsomely for producing nothing, that money must come from those who actually produce real things of real value. And what Greenspan and these guys actually produced is the biggest, most worthless pile of shit this country has ever seen. Only now do our most esteemed economists admit this, yet still, seemingly intellectually and morally bankrupt, they are unable to follow this crime through to a logical, and just, end.
I am further at a loss as to why some people think that we can rely on the very same slimy, immoral crooks who engineered this collapse, to get us out of it. I wonder if I am unfair in suggesting that hundreds of these people should be jailed on charges of treason until they receive a trial by jury. Would it not be justice of the highest order, to strip this little man, Alan Greenspan, of every cent of his money considering what he has done to the citizens of our country? It should not matter to us how much he has stashed away in offshore accounts, if his final days are spent behind bars. He was brilliant enough to amass his own personal fortune, but somehow, just somehow, an error in his judgement allowed him to facilitate the rape of the productive class in this country. We should get back as much of this missing money as possible. The same way a drug dealer, or a bank robber has no right to keep their booty, why would we allow these thieves to keep theirs? Should Paulson keep his 600 million? Absolutely not. Given the economic state that the world is in, this would be a message to the world that the U.S. is ready to begin to start acting responsibly and morally. U.S. taxpayers should not be asked to help in this bailout until every person who has profited from this mess is stripped of all their money except what they need to buy food. Harsh? Only if you have your head in the sand, ignoring how many deaths will be occurring in the U.S. this winter specifically due to this engineered economic catastrophe. How, in our supposedly educated and moral minds, can we allow Most of our citizens to suffer, while a handful of greedy bastards get filthy rich? They breached our trust. And for that, they reasonably and fairly deserve to pay the consequences. Along with the politicians who enabled them. See Phil Gramm et. al.
This winter, while many families will be burning Ayn Rand, Milton Freidman and Alan Greenspan books just to stay warm, Greenspan’s family will be taking it easy, luxuriously insulated from the frigid realities on the ground.
The present economic crisis wasn’t just a miscalculation. Nor was it an accident. What this amounts to is the deliberate and brutal violation of the hard working, honest people of the United States. Were there justice in this country folks, Greenspan and his cronies would not be walking our streets as free, wealthy men, and the Federal Reserve would no longer exist. As I see it, this wealth rightly belongs to the American people. Once these injustices are addressed, the military industrial complex should be next in line for a complete democratic structural readjustment.
Excellent analysis! Please keep writing here. Thanks.
You said it.
Joe
From The Financial Times ... a critique of how the 2005 Bankruptcy Bill ended up backfiring... just like deregulation did.
Wall Street unwittingly created one of the catalysts for the collapse of Bear Stearns, Lehman Brothers and American International Group by backing new bankruptcy rules that were aimed at insulating banks from the failure of a big client, lawyers and bankers say.
The 2005 changes made clear that certain derivatives and financial transactions were exempt from provisions in the bankruptcy code that freeze a failed company’s assets until a court decides how to apportion them among creditors.
The new rules were intended to insulate financial companies from the collapse of a large counterparty, such as a hedge fund, by making it easier for them to unwind trades and retrieve collateral.
However, experts say the new rules might have accelerated the demise of Bear, Lehman and AIG by removing legal obstacles for banks and hedge funds that wanted to close positions and demand extra collateral from the three companies.
“The changes were introduced to promote the orderly unwinding of transactions but they ended up speeding up the bankruptcy process,” said William Goldman, a partner at DLA Piper, the law firm. “They wanted to protect the likes of Lehman and Bear Stearns from the domino effect that would have ensued had a counterparty gone under. They never thought the ones to go under would have been Lehman and Bear.”
The Securities Industry and Financial Markets Association, the trade body that lobbied for the changes, rejected the criticism, saying the 2005 rules “enhance legal certainty for contracts, [and] reduce legal risk . . . and systemic risk”.
The International Swaps and Derivatives Association added that the 2005 clarifications “provided legal certainty by clarifying existing federal policy”.
The changes in the code expanded the scope and definition of financial transactions not covered by bankruptcy rules to include credit default swaps and mortgage repurchase agreements – products used widely by Lehman, Bear and AIG.
Lawyers said under the old rules, creditors of companies facing financial difficulties were wary of settling trades or seeking extra collateral because they knew such demands could precipitate a bankruptcy filing and potentially freeze their claims.
However, when the financial health of Bear, Lehman and AIG took a sharp turn for the worse this year, their trading counterparties – mainly hedge funds and other banks – were not deterred from seeking to settle their trades or forcing the three companies to put up more collateral.
Such pressure exacerbated the liquidity squeeze that ultimately forced the three companies to hoist the white flag. Bear was sold to JPMorgan in a cut-price deal in March, while Lehman filed for bankruptcy last month and AIG was rescued by a $120bn government loan.
Lawyers said the 2005 exemptions also could apply to non- financial companies, potentially complicating the bankruptcy process of any company that uses derivatives.
Stephen Lubben, professor at Seton Hall University School of Law, said: “These provisions affect a non-financial firm, such as a car company or an airline, because they also engage in derivatives trading.”
(Copyright The Financial Times Limited 2008)
Free markets by definition are built on greed. Governments need not be, although, as Lord Acton noted, power corrupts, sometimes absolutely. But the inherent tendency of free markets is to greed.
It is amazing how often the "general consensus" is wrong. "The Maestro" was reappointed by Clinton who appears to have agreed with him. Those of us watching through a different lens could see the foolishness and ideological bias that prevents objective analysis. There has to be a better way to have these countering voices heard. Has everyone noticed how the news media are still asking for analysis and policy critique from those who have been wrong for 7 years.
in my view... i would say that Greenspan is either more stupid than many thought (very possible if denial for convenience=stupid), is a "fall-guy" (not) thinking of next generations close to him (very possible); or, is just about as bright programmed as "W" and has just been a giddy school boy tool for the elites. Keep in mind, even the centralized gov't of USSR had it's elites. Even more important, see the possibilities in that Greenspan lived a long run of lies... one that many believe for, yes, our balance of the collective empire's greed sake. He knows, as many of us know but are often re-programmed to believe a "free market" is what we had...
Just what is a free market... what is an educated populace? Tax write offs, subsidies, grants, tax laws, access to resources, and yes (very good incite above in many responses) the ability given to dump "external" costs into the public domain (ie, planet that is our "home") and act like the cost is no burden let alone has much if any costs (Though we have had a lot of effort of late to slowly yet scientifically quantify better). I'm guessing the eventual fall of this empire will have it's positive and negatives. *If* it falls now (or relatively soon), as the mighty consumer goes further into disarray, there will likely be some good and bad in the field of global socio-economics for most of this planet. Even (for a short time?) likely some relief for the "external dumping grounds" as we consume less. Yet, even more dire than our political-economic fallout of "global standing" within a time we are waking to the mess we made at last night's free for all (Well, free with strings at the elites' hands to sway much of "our" resources, minds, and institutions of governance & justice). In the long run after much of the fall-out of this believed to be "free" market (Not that I {at all} subscribe to an uneducated nor a totally free-for-all), we will likely see (Without the elusive paradigm shift that doesn't shift each time the price {Yes, without externalities figured-in} of such things as fossil fuels retreats for a bit) pretty much a hopeful; yet, somewhat ugly state of humanity getting uglier toward each other. It could be an ugly era of desperate souls selling away their days to the most base examples of greed formed by extra-national corporates and variations of ugly "my tribe survives at the cost of yours' in stages & cycles of demise."
I don't know the answer to an alternative... other than using resources to educate and make people understand that we are the leaders that tell those in public offices to understand there is a difference in what you believe & want and what we have been sold thru a vast array of tools to believe that this was "a free market."
Note, I may be one of the few that could actually see some good from A.Rand (in at least Fountainhead) and still not see much at all (good) in the architects (such as Greenspan or the bush-type lineage) of much of what we are now a part of in what we (now) call the USA. While I do think A.Rand did not see the good in some innately good "working together" ways in less dog-eat-dog fashion and had some undue glorification of one gender over another -- I think Fountainhead revealed that she could see good in that a "chief" could work with the "lowly" in construction of something... and though a bit "outdated" (for most non-extreme fundamentalists) on a couple concerns, could see the value in concern & attention to develop things in better way no matter if a private or public building effort. Even with that, I would still say, in terms of quality of life experiences, when building or working on anything we should be making much effort to come together on basic global human dignities with much much more attention to eco (eco-logical & economy truely know no separation from internal or external) with little excuse for something much less than our best of efforts in every way. Beyond somewhat ashamedly, I have "longer way to go" for myself, for what I do have hope that more positive will grow out of the currents in the world than many could imagine right now.
Can someone tell me what effect the $700B giveaway will have on inflation in the US? And if it as they say (which I doubt, hence my asking) and the affect will be marginal, what mechanisms are put in place to ensure little inflationary effects?
Politricks_of_de_sh-tstem
transparency has always been the holy grail of free-market ideologues when preventing new regulation or deregulating existing regulation
Greenspan destroyed transparency, a cornerstone of competitive markets, based on a premise that "private counter-counterparty surveillance" would act to discipline the deregulated shadow financial market
the history of regulation/deregulation is replete with free-market ideologues shouting down regulations of any sort with the principle of transparency - just make it transparent goes the chant, so individuals can have the information necessary to make the necessary decisions in a "free market"
for example, this is the standard argument against campaign finance reform - all that's presumed necessary is to make available who contributes what - actually restricting contributions in ways that levels the political playing field to maximize the effect of individual votes is off limits as "regulatory interference" with "freedom of speech", which leaves the latter to emerge as "freedom of monetary speech" which suppresses real political freedom to vote free of money
it was bad enough when certain, essential regulations necessary for competitive markets to function were undermined in the name of transparency - it would be like a regulation that required no lead in paint, versus one that allowed lead in paint as long as it was listed on a label on the paint container - at some point, the damage from lead, even when listed explicitly as a poison, overwhelms the individual capability to control it (such as ingestion by children) and it's more efficient to ban it than merely list it as a poison
Greenspan took the transparency ruse to a whole new level ... he didn't make the usual argument against regulation that when markets are made transparent, they don't need regulation, instead, he DESTROYED TRANSPARENCY ITSELF with specific prevention of regulation or deregulation of existing regulations designed to provide transparency - like listing the amount of lead in paint on the container
Greenspan was intent on stripping the warning label of risk off the container entirely ... never mind transparency ... the "free market" will take care of that too ... why should buyers of securitized mortages need to know what's in them, particularly that they were leveraged up to ratios of 40-to-1 ... like the lead in paint, a known poison, why not let it take its "natural free market path" and kill off enough people or damage enough minds until the market figures it out on its on ... after all, as Greenspan claims, there's only a "once-in-a-century-chance" that the market will fail, which is of course, why he's "shocked" that it didn't work
In the following paper, George Kennan (State Dept): Policy Planning Study 23, Kennan discussed the thinking behind the idea of economic and political integration of Europe after WWII (i.e. Soviet Union of European States) It was centered around trade. On Page 4, he said the following:
1. The administration of the program.
The most significant feature of the emerging recovery program is that it is to be conducted by this Government as a technical business operation and not as a political matter.
And "Free Trade" was born. Everything about it has been a fraud since the beginning. The program was intellectual judo - and we lost.
http://www.j-bradford-delong.net/movable_type/archives/000567.html
logged in to post comment that A.Rand's Fountainhead wasn't that "off" (If much at all) on portrayal of characters as mirror in the real days of her time & setting of the story... been a while since I read.
More important... I want to emphasize that the primary thing to notice or learn from the past is that it (USA) wasn't very close at all to a "free market." And how the language, speeches and all show the "ideals" of were used to defend & further favoritism towards centralizing or concentrating control of resources.
On the comment below asking about how the bail out will effect inflation.... that's a tough one since it is known that the measuring devices have long known to be skewed.... I would guess, since the drop in some energy prices on the market, that it will take a few months to show up... also, a glut of product has started to show weakening consumer good prices. Articles good to study perhaps: greening our economic choices and shifting capital toward new & proven industry that is more locally controlled for efficiency & innovative uses of labor dollars towards greening our workforce... support local, act on global crisis on human and climate levels.
Though I am not into banning things, good comment on 'we should ban things such uses as those proven items such as lead.' With real actions also taken to largely put efforts to make "externalities" passed on to consumers and get rid of subsidies highly geared at covering or hiding cost of public resources and degredation of ecology. This needs to be engaged systemically... costing out such things as CO2 release from quick lime usage to beef production. {Much effort given to [continued] educational of current producers to see benefits for years to come in getting most to transition instead of fighting these costs as simply monetary concerns}