“In fact, progressives very often get the story quite wrong in characterizing issues as “government versus market.” Certainly the current financial crisis provides an obvious example of such confusion. No one was really pushing for “deregulation” in the sense of getting the government completely out of the market.

The financial industry’s agenda was to get one-sided deregulation. They wanted to preserve the government security blanket of “too big to fail,” while removing prudential controls that limited their ability to take on risk. In effect, what the financial industry wanted (and got) was government insurance that they didn’t have to pay for. This surely is not the libertarian agenda; this is the agenda of a politically powerful industry (with allies in both major parties) that will get everything it can out of Washington.

In short, I would like to see more of the anti-corporate side of the libertarian agenda. There may be many areas in which libertarians and progressives take opposing positions, but there are many areas in which we should have common ground. I am not interested in keeping the scorecard. I just want to see libertarians be as aggressive in confronting the interventions that support corporate power as they were in confronting Social Security.”

Excellent piece on corporate libertarianism by Dean Baker at Cato. 

Obviously, I think the general thrust of libertarianism is more right than that of socialism, but it’s sadly true that libertarians are usually blind to the anti-individualism and corruption of businesses but alert to the same thing in the state.

“Each month, Madoff sent out elaborate statements of trades conducted by his broker-dealer. Last November, for example, he issued a statement to one investor showing he bought shares of Merck & Co Inc, Microsoft Corp, Exxon Mobil Corp and Amgen Inc among others.

It also showed transactions in Fidelity Investments’ Spartan Fund. But Fidelity, the world’s biggest mutual fund company, has no record of Madoff or his company making any investments in its funds.

DISCREPANCIES

“We are not aware of any investments by Madoff in our funds on behalf of his clients,” Fidelity spokeswoman Anne Crowley said in an e-mail to Reuters…”

Take the Nolan Chart quiz to figure out whether you are a libertarian, and if you are, what kind.

The ultimate result of shielding man from the effects of folly is to people the world with fools.”
–Herbert Spencer

A useful distinction from philosopher Ted Honderich:

“By Zionism I mean the founding and actually necessary defence of the state of Israel in roughly its 1948 boundaries. It was justified by the Holocaust in the past and is justified by the existence of a Jewish homeland now. By neo-Zionism I mean the taking from the suffering Palestinians, the only indigenous people of historic Palestine, at least their autonomy in the last fifth of their homeland.

A decent humanity, the Principle of Humanity, ultimately justifies Zionism. It condemns neo-Zionism absolutely. There aren’t two sides to the story of a real rape….”

 “Economists have failed to analyze the effect of open market operations on bond speculation. “See no evil, hear no evil, speak no evil.” I leave the problem to future researchers to find out whether economists made an error of omission, or whether they knowingly became accomplices to the conspiracy of the Treasury and the Fed in a scheme to the aggrandize the power of the federal government….”

That’s Professor Antal Fekete, refusing to mince his words. 

          “Here is what happens when the Federal Reserve resorts to open market operations to buy government bonds as the preferred means to increase the money supply. Bond speculators are very much alive to the need of the Fed to make periodic trips to the open market to buy the bonds. They lie in wait for the Fed. They want to preempt it; they want to buy the bonds first. Later, they would dump them in the lap of the Fed, making risk-free profits in the process at the expense of the public. The Fed does not mind being ambushed. It condones the risk free profits of the bond speculators. It all comes to the same thing: lower interest rates by hook or crook.

Destruction of bank capital

With the open market operations of the Fed providing a dependable tail-wind, the sails of speculators are bulging. The unison bullish response to monetary policy by the speculators has the effect of steadily driving down the rate of interest. The Fed could report to the boss: “mission accomplished”.

          Nobody bothered to investigate the question whether the symbiosis of the Fed and bond speculators (mostly banks) might somehow have a detrimental effect on the economy. It certainly looked like a brilliant scheme of creating positive value out of nothing — nay, out of negative value! Nobody has raised the objection that there “ain’t no free lunch”, that in our world strict conservation laws govern and draw a line between what is possible and what is not. In particular, it is not possible to create value out of nothing. Any appearance to the contrary must involve the destruction of value somewhere else.

          Indeed, creating bond values out of nothing has coincided with the destruction of capital. Capital consumption is an insidious process. It has no obvious symptoms. If anything, like narcotics, it has a euphoric effect on the economy. Its role is to desensitize the victim before picking his pockets. It may fatten the wage envelope, widen profit margins, jack up managerial compensation, but all that is charged to the capital account. As long as there is a capital account, that is. Trouble bursts on the economic scene when the bottom of the capital barrel has been scraped clean. Of course, by that time it is too late. Nothing can be done to stop the rot.

          This is what we have experienced in the fateful year of 2008. While the capital of the banking industry was eroding, there was a feeling of euphoria, a sense of weightlessness, the exhilaration of levitation as capital consumption has given banking operations an extra lift in defying gravity. But no sooner had the last crumbs of consolidated capital disappeared than gravity came back with a vengeance and the banking industry fell out of the sky. All banks, at the same time. It was not a consequence of local mismanagement. It was not primarily a consequence of too lenient lending standards, it was not primarily a consequence of reckless risk-taking. It would have been a statistical oddity if all banks had bankrupted themselves at the same time. There was a common cause: the erosion and ultimate destruction of capital…..”

Here’s more on the details of open market operations.

Reuters: – “American International Group (AIG.N), is prepared to ask the U.S. Federal Reserve to relax rules on its $60 billion-plus disposals program to allow bidders to use a greater proportion of shares to pay for its assets, the Financial Times said.”

Comment: 

Talk about situational ethics…Do you think you can retroactively change the rules to suit yourself? Try that with the IRS, or your credit company, or the traffic cops, or with your doctor or lawyer.

But the remedy for people at the top finegling the system is not Gimme A Fix Too from everyone else, though that’s what the anti-market mavens will tell you…..

The remedy is: Unfix It For Them.

AIG’s taking a hit? Tough.

Criminal sanctions, not just civil, should be levied on financial criminals.