Thursday, November 6, 2008

Free-Market System Failure

Diehard capitalists and those who make their living on Wall Street, or connected with most financial activities, are lamenting the "takeover" of the free-market system. They need to get over it. If the financial free-market system could be likened to a ship, it is one that is hard aground on the rocks and taking water, still in danger of sinking. Governments in Europe, in addition to our own, are pouring hundreds of billions of dollars into banks and other financial institutions in an effort to stabilize a system that was destabilized by unfettered and unregulated greed.

Before anyone accuses me of being a socialist, let me make it clear that I am all for free-market capitalism because that is the best way known to produce material goods and most services. A planned economy is usually a planned disaster. However, when the greed driven folks on Wall Street, in banks throughout this nation and abroad, and other assorted crooks and scoundrels didn't have proper supervision, they created a debacle of bad loans, packages of assets that soon became worthless, and trillions of dollars of derivatives that will take years to resolve. To complain about the free-market system being taken away, is like a child crying because the parents are finally taken away the matches that have been used to set several fires.

What started as a meltdown in financial institutions and banks soon became a meltdown on Main Street throughout the world. Commodity prices which had been going straight up have come straight down. Oil prices which had been gushing through the roof came tumbling down and countries that had been strutting around like peacocks (Russia, Venezuela, and Iran as well as many others) suddenly found themselves faced with potential budget shortfalls of enormous magnitude. Venezuelan may have to postpone the launching of its Pacific Fleet while it deals with 30% inflation and an economy that cannot be supported with oil selling for under $70 a barrel. The only benefit out of the economic chaos for America has been the reduction in the price of a gallon of gasoline from over four dollars to just over two dollars. However, if people resumed their SUV driving habits we will soon be in the four dollar a gallon gas crisis again.

The financial free-market system will never be the same, nor should it. The people who should have been supervising it were contemptuous of government regulation and assumed that the people who ran financial institutions could be trusted (ouch) to "watch out for their own good." Fiduciary responsibility was all but abandoned and now we all have to pay to fix a system that is almost broken beyond repair. It will take cooperation in this country, not recently a practiced art, as well as cooperation with other countries to avoid another Great Depression. We can only hope.

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