As is not unusual I disagree with this assertion by John Tamny in his latest offering at RealClearMarkets:
Left alone, economies and markets never go haywire when natural market forces are putting out to pasture the weak, only to redirect the previously underutilized resources of the weak to higher uses.
That is false and even the slightest knowledge of economic history would have made that clear to him. The National Bureau of Economic Research, the official scorekeeper of recessions in the U. S., lists every recession since 1857. At least the first eight of those took place while the federal government maintained a laissez-faire policy. That doesn’t even include the many famouse crashes and panics that took place before 1857. And Mr. Tamny has apparently never heard of the Tulip Craze or the South Sea Bubble, two times when economies went hayware without the benefit of state intervention.
That having been said in the article Mr. Tamny has a point. What happened in 2008 has been widely mischaracterized, probably because “financial crisis” sounds so much better than “regulatory capture crisis”. Make no mistake federal or hybrid government institutions knew about the problems, recognized that they were problems, and had the authority to prevent the crisis but did nothing, presumably because they thought they were profiting from it or might profit from it.
And they were right! Tim Geithner, the Forrest Gump of the crisis, was actually promoted for his misfeasance and nonfeasance. And I have yet to see any proponent of activist government explain how they would prevent regulatory capture which at the very least casts a pall over their preferred solution. I’ve made any number of suggestions of how that could be done but I don’t expect any of them to gain any support.
So we’ll just have another boom and bust, the brunt of which will fall on the people least able to cope with it.