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Thursday, October 23, 2008

Blaming 'Laissez Faire' For the Credit Crisis Is Shoddy

Great article from Mises.org on how absolutely stupid it is to claim that laissez faire caused the credit crisis.

A fundemental rule of sound argument is to define your premises.  In this statement, "laissez faire caused the crisis", one of the premises is that we currently live under a system of laissez faire.  This requires a definition of laissez faire, which is seldom given by those making the claim, yet the phrase gets defined de facto in the context of the article in which the statement appears.  And it ussually comes to mean completely unleashed free-market capitalism - a definition which would destroy the original statement, since we do not live under such a system.

Read the article.

Posted by Isaac Morehouse on October 23, 2008 in Economic freedom | Permalink

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Comments

Such rubbish! If only it were true that we live under a system of laissez-faire.

Posted by: Alain | 2008-10-23 1:19:27 PM


Ah yes, the unfettered free market that caused this. This unseen, unfettered free market has somehow reared its ugly head from wherever it is, to cause this big old economic melt down.

If only it were true.

Posted by: TM | 2008-10-23 7:54:12 PM


To gauge the scale of its responsibility, in the period of time just since 2001, the Federal Reserve caused an increase in the supply of checkbook-money capital of more than 70 percent of the cumulative total amount it had created in the whole of the previous 88 years of its existence — that is, almost 2 trillion dollars.[5] This was the increase in the amount by which the checking deposits of the banks exceeded the banks' reserves of actual money, that is, the money they have available to pay depositors who want cash. The Federal Reserve caused this increase in illusory capital by means of creating whatever new and additional bank reserves were necessary to achieve a federal funds interest rate — that is, the rate of interest paid by banks on the lending and borrowing of reserves — that was far below the rate of interest dictated by the market. For the three years 2001–2004, the Federal Reserve drove the federal funds rate below 2 percent and, from July of 2003 to June of 2004, drove it even further down to approximately 1 percent.....

http://mises.org/story/3165

I'm closer to 50 than 40...and I've never, ever seen a system of laissez-faire government or economics being practised anywhere in my life.
I wonder how it could possibly be responsible for this melt down. No way, the real culprits are government low lives and are all acting busy at trying to save us...and if they would all hang themselves we would be saved.

Posted by: JC | 2008-10-23 8:08:07 PM


Blaming the Fed doesn't wash. It's true that the government loosened the regulations, thus allowing the granting of mortgages to those with borderline credit. But it was the lending institutions who actually granted those mortgages, in the midst of a real estate bubble they knew would eventually burst.

Canada's own solution to the housing bubble, the introduction of the 40-year mortgage, is in a way even more insidious. In such a mortgage, you won't pay off a single penny of principal until the 31st year. It's good that the bubble has finally burst. It's a pity it didn't happen sooner, because then there'd be less blood on the floor.

Posted by: Shane Matthews | 2008-10-24 10:15:35 AM


What gives with this server? You can't see your posts for several minutes, and most of the Archives links have stopped working.

Posted by: Shane Matthews | 2008-10-24 10:16:39 AM



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