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BLUE CAFE

Has Free market Economics proven to be a failed experiment

Private Enterprise had to be supported by the public purse when years of unfettered freedom led to this huge financial collapse. Is Free market Capitalism a fundamentally flawed ideology?
Koko:

If the liberals would have left it alone we wouldn't be in a crisis. Even still, the free market will recover from the crisis and it's still the best system in the world.

CalCarp:

Ever been to a "Farmers Market'? ..or a garage sale? ..Do you "haggle" over price, ..and try to get the best deal? Of course you do! Do you want "Central Committee" pricing? ..That is what you get when you go to the electronics store and you pay $100 for the phone, ..only if you buy a "plan", ..and then wait upon a "rebate" check, ..after filing a "verified purchase receipt", ..and waiting 90 days, ..and making 4 "follow-up" phone calls! (..and then the phone breaks anyway, because it is a cheap piece of work!)...Do you REALLY want "Central Planning?"

CalCarp:

..and the "Home Mortgage" collapse was the fault of "The Community Re-Investment Act" of 1977, ..a Democrat sponsored subsidy program which forced the writing of bad mortgages.

BLUE CAFE:

Central planning - no. Regulations - yes.
When you go to a farmers Market, do they accept short sells? Do you generate your cash out of thin air? Are your interest rates market driven? The answer to all of these is No. But this is the way Financial markets work. You have dudes short selling stocks driving paper value down through sheer speculation, you have a Federal Reserve that punches out money with no gold backing, no nothing backing & has no real value. You have interest rates that are pegged by the Fed Reserve, not driven by Market pressures. So there is a big difference between your quaint little market & the lawless jungle on Wall street.
This is not about central planning, it's about mixed economies, with healthy free markets, safe from monopolistic forces, protecting the consumers with Regulation that is enforced upon the wealthy multinationals. It's about democratic Governance being able to make decisions through electoral votes, not through share holdings.

BLUE CAFE:

And as for the Home Mortgage Act. The masses are too caught up in partisan blame trying to save their own political bents to realize it happens on both sides of the spectrum. It's a zeitgeist ideology shared by both parties.
Reagan bought in radical deregulation, Clinton continued with it & Bush picked it up. It's the same ball.
Sure the Community Reinvestment act was the cause of sub prime, but who over the past 8 years kept the act in place? Under whose watch did this occur? Bush had 8 years to repeal the act & all he did was further deregulate.
It only took a 3 trillion dollar War deficit to give life to the act & which would drive the nail into the economy. Wake up. It's not one parties fault. It's the Friedman economic ideology all parties believed in that killed America.
Bring back the mixed economic model which serves the community, not the rich

Pegalomania The Artsqueen:

No.

Muttin':

yes with all the liberals trying to socialize on it. Freddie/mac is a democratic problem that republicans have to not only deal with but solve. AND take the blame for. Yeah, we cant let the liberals be in control. They just proved it.

BLUE CAFE:

Forget Freddie & Fannie, I'm talking about all the private beneficiaries:
Citigroup and JPMorgan Chase were told they would each get $25 billion;
Bank of America and Wells Fargo, $20 billion each (plus an additional $5 billion for their recent acquisitions);
Goldman Sachs and Morgan Stanley, $10 billion each,
Bank of New York Mellon and State Street each receiving $2 to 3 billion.
Wells Fargo will get $5 billion for its acquisition of Wachovia,
Bank of America the same for amount for its purchase of Merrill Lynch." (Calculated Risk).

This is a result of trickle down Raeganomics.

Muttin':

Yeah it costs money to bail out ALLOT of Money. We aren't stupid.

BLUE CAFE:

I rest my case.
Really? Why? Please extrapolate on this smug answer :)

BLUE CAFE:

woops - wrong thread :P

Cutekannan:

For all its shortcomings, a reasonably free market economy has resulted in an explosion of growth and opportunity for a large proportion of those alive today.

The "experiment" is a work in progress that is presently undergoing a significant adjustment. That's the way a free market works....a bit like a pendulum that slows a bit as it approached the top of its arc.

As the pendulum swings back it will gain speed and then slow again.

BLUE CAFE:

yeah, I have no problem with a 'reasonably' free market.
My reference was to the unfettered freedom perpetuated over the past 20 years in the form of regulation of almost everything which has inevitably led to today (as the opponents have always said it would).
It seems like a battle of fundamentalist ideology where free Market is taken to its purest extremes & offered up as 'democracy'. This, as it is being proven, did not work as you need checks on 'human nature'. It only serves the elite crust at the top & ironically erodes democracy.

=Squeeky Clean Mike=:

Its hard to say because it's not a pure form of free market economy. If all involved played their part and did what they were suppose to do,it is a sound system. Humans being humans,have emotions like greed,envy and pride that makes them think of themselves as above or better than the next man, which in turn creates the environment in which power struggles may flourish. the system isn't flawed, human nature is flawed

BLUE CAFE:

I'm not sure if that's quite correct. If it was a pure form of free market economy, the final outcome, left unfettered would be Capital generating Capital. The more Capital you have the more you make. Without regulation, this would lead to monopolies. Monopolies would stop competition, drag liquidity out of the market & cause a recession or collapse of the market, which is what fundamentally what we are experiencing now.
Greed, envy, human nature may have been the fundamental cause, however they were working within the framework of the law available to them, after all, it's deregulated. Greed & envy are drivers of Capitalism. Without them Capitalism would die.
The real cause is that regulation was taken away (Short selling for example) as well as almost all regulation. This is the cause. Free Market deregulated Laissez faire capitalism, the great experiment - failed.
Back to a good old Keynesian mixed economy. Freidman was wrong.

=Squeeky Clean Mike=:

If it was a pure example of free market economy, then by performance selection the companies offering the best price and, or service would rise to the top,true, but ina true free market,competision would not cease, monopolies would be the stepping stone to improve productivity, cut waste and red tape. In a pure free market economy, companies would strive to be better, not rest on it's laurels, and new improvements in product,pricing or delivery system,would curtail monopolies. A pure market always looks to improve itself. If humans weren't so greedy and selfish we would not need regulations, it's an indictment on us that we do. Greed would not exist in a pure free market,it doesn't drive markets, it drives people. We are in this current mess because people cheated the system and broke laws and didn't do what they were trusted to do, shame on them not the market.

BLUE CAFE:

Thanks pmt.
Can you explain exactly what illegal things were done to cheat the markets?
.
Also, why in a pure market is there no greed? Is there no desire for as much profit as you can take from your competitor? This must certainly be defined as greed; greed being the possession of more than you need.
And why would a monopoly (a single entity in a market without competition) have any need to improve itself? As a monopoly, all it needs to do is fix the price higher to increase profit.
Could you answer these three points?
Thanks

=Squeeky Clean Mike=:

monopolies price fixing, may lead to more competion. An opportunity for competitors is created when companies stop improving,this is why so much $$ is spent on R&D. To take advantage of a monopoly,start competing with it until it buys you out,then start another &do the same,until it's cheaper for said monopoly to compete rather than buy every new start up. If they try &crush opposition with lower prices,consumer wins. Is trading while insolvent a crime? if not it should be. Free markets work on paper until you add the human element. Ant,greed is not good,but i appreciate your perspective,markets need regulation due to human nature being what it is.That's the real pity.Did i answer all three points?What do you suggest?

BLUE CAFE:

Thanks pmt for your time in that answer. I guess it answers my questions although I was in fact looking for a specific law broken which had caused recent meltdown. Was there an actual law broken or a case of 'no law but there should have been'?
I guess why I am skeptical of free market against mixed is that back when markets were mixed, there was no radical fluctuations, no unfettered growth which led to corrections, everyone had a decent paying job & everyone could afford a mortgage. There was a greater deal of job security, you didn't have bank fees, you could earn fair interest at a bank. This is all from experience. These days there is much less security. Sure the potential to earn vastly larger amounts is possible but only if you are positioned as an entrepreneur or CEO, which is not in the nature of the majority of people. In my mind, a mixed economy benefits more people, is more stable, less susceptible to market volatility & corruption. In my mind this would be a better system

=Squeeky Clean Mike=:

i do agree with you,balances & checks must be in place,what annoys me is that, social & morally bereft people are running the show. The idea that greed is good & the the person with the most at the end wins,need to be rained in,it's imbedded in the minds of these people,definately a time for change on wall st

Spr808:

We have the best system in the world. Prices rise until we can't afford to buy at a certain point then demand drops to where we can again afford to buy again.
Like Obama said we should had 21st. century controls in place when Bush deregulated wall street.
This is one of the things I have against Pres. Bush. One of the few things I side with Obama.
Our system is flawed but we learn by our mistakes.

BLUE CAFE:

I agree totally & you seem to be able to make the distinction that most are missing; that Capitalism is good, but must be regulated. Unfettered, deregulated markets lead to what we have today, worse, it leads to monopolistic fascist states.
Regulation does not equate to communism as so many are trying to make out. On the streets we have regulations so as we don't kill each other, steal & have the physically strongest or best armed rule. Why should markets be any different? We need laws in place so that the strong do not destroy the weak & in turn the entire capital system.
Unfortunately the last 20 years of deregulation rape starting with Reagan though to Clinton & now Bush, has left the US in a perilous state.
It is not Left or Right, it is simple common sense. There must be laws in place with penalties that will be carried out upon infringement. Wall street crimes do much more damage than a door to door burglar. The Burglar gets thrown in Jail, why not the suits on Wall street?

Timkat2:

The mortgage companies were not free to refuse loans to people with bad credit.
The social engineering of the democrats forced them to make these loans.
If anything this proves free markets should not be messed with.

BLUE CAFE:

The mortgage companies were not free to refuse loans to people with bad credit.
Good point. Why didn't Bush, in 8, years repeal this?

Koko:

So, you admit that was the cause?

BLUE CAFE:

If that's the case then certainly it would be the straw that broke the camels back. Yes. Indeed. Not admit, but agree.
But you need to look at why Bush didn't repeal this law. A 3 trillion dollar deficit left the market in dire need of liquidity. Bush kept these laws in as it was the only way he thought that people could afford homes. The War broke the US economy. This law was used to try to sustain it for a little longer by stimulating the market with housing. In the end though you can't cheat the market with a 2 trillion dollar hole in it. It died.

Koko:

No. Show me ANY socialist country whose citizens enjoy a higher standard of living than ANY capitalist country.

BLUE CAFE:

Australia 30 years ago

BLUE CAFE:

BTW, this is not a question of Socialism Vs. Capitalism. Socialism is not in question, nor the answer. I am questioning the degree of freedom in the free market.
This is not black Vs white but at what point do we draw the line.
All US Governments since Reagan have followed a relentless path of deregulation despite warnings of dire effects. The answer is not Socialism but a sensible degree of regulation.
The trouble is the morons of the world have been brainwashed into thinking that any regulation = Socialism. This is to promote the agenda of a rule of the jungle style Capitalism which moves wealth to the rich but destroys economies in its path.
The irony is that they are preaching freedom in this when in fact it only moves freedom to the corporations, not the individual. You, Seeker, are one of the individuals losing your freedom & your livelihood in return for your devotion to the loss of this very freedom.
Brilliant really!

Jodi:

I can think of 3 right now--- Norway, Sweden, and Denmark.... Wages are higher, homes are built to a higher standard, and even the poor have food in their bellies and a roof over their heads.....

Koko:

m, Norway, Sweden, and Denmark aren't socialist countries. They are free market economies.

Koko:

"Australia 30 years ago "

I rest my case.

BLUE CAFE:

Seeker, the nations m (Hello m ) mentioned are mixed economies, not the radical free market of the US. I think what you fail to grasp is that there are degrees of economics. It's not Socialist or Neo liberalism. It's a swing between these. Take Germany France, Spain & Belgium. These are considered Socialist economies but of coarse there is an abundance of private enterprise but it's mixed with public utilities. It is the degree of public spending that earmarks it as Socialist, not whether its flag is red.

BLUE CAFE:

I rest my case
Really? Please expand on this smug answer
I would counter this by saying that if the US was entrenched in a ten year depression then the ten years prior to that would certainly be better regardless of it being in the past.

Cindy:

Even in the broad sense, I wouldn't label any of the Western European countries mentioned as socialist, they're either social democratic or state capitalist. Socialism isn't just about public spending.
http://en.wikipedia.org/wiki/Socialist_economics#Western_Europe

BLUE CAFE:

Thanks for the distinction Wilma. That was in fact what I was referring to when speaking of Socialist. I meant as you point out, Social Democratic

Jodi:

Yes, this may be true. This policy encourages greed and corruption....

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