We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
|
Samizdata quote of the day Consider the fact that the Federal Reserve is a central planning committee. We are lucky, I think, to have intelligent, highly professional planners, but there are in-principle limits to what they can do with limited information, and so there is no way they are not going to get it wrong sometimes, or a lot of times. The housing “bubble”, which has turned out very badly for a lot of people, and the historically high price of gas, which is to a large extent a function of the low value of the American dollar, probably has had a lot to do with the policies chosen by our monetary central planners. Failures of government planning don’t discredit free markets. Rather, they suggest free markets might be worth trying some time.
– Will Wilkinson, of the CATO Institute, on their blog.
But of course, blaming the credit crunch, or high oil, or expensive bread and rice prices on evil speculators is soooo much more satisfying!
|
Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
|
It is not lack of information that is the real problem.
The basic point of the Federal Reserve system was to safeguard the banks and other financial enterprises so that credit could be safely expanded beyond real savings.
This basic idea is simply wrong.
There is no way (in the long term) to safely expand credit (borrowings) beyond real savings (the banks, etc, get into trouble sooner or later) – and it is a bad idea anyway.
If someone wants to borrow money (whether to spend on cocaine or to build a facrtory) someone else must lend to them – either directly or via a financial enterprise.
In short someone must GIVE UP them money, not have to spend at the same time that they have lent it out.
A lender only has the money to spend when AND IF the borrower pays it back.
This is not an information matter – it is a matter of basic economic law (logical reasoning).
Trying to get round it leads to boom/bust.
Or to put the above another way………
It is not a matter of the Fed getting interest rate calculations wrong (due to imperfect information) – it is simply that the government should not be setting interest rates for credit expansion at all.
And neither should anyone else.
Interest rates should be pure time preference – decided by the supply and demand of real savings (i.e. money that is NOT avilable for the consumption of the person saving it) and what people are prepared to pay to borrow these real savings.
We are lucky, I think, to have intelligent, highly professional planners
I’m reminded here of a conversation I’ve had more than once over the meaning of the word “lucky”:
“Hey, I was in a horrible car accident yesterday!”
“Really? I’m sorry, are you okay?”
“Yes, I was lucky to escape unharmed.”
“Hmm… if you were lucky, you’d have avoided the accident altogether.”
Yes, Paul, of course it’s a gimmick. Just about everything statists do is some form of smoke and mirrors.
But the deeper issue is an old and still very potent human need—that of feeling someone is in charge and can “take care of things”.
From the ancient creation of spirits and gods to explain mysterious events and, allegedly, give true believers an access to powers beyond mere human to influence those events, to the more modern appeal to science, both by 19th century marxism and current technocrats, the inner urge is the same.
It is one of the most natural and understandable human drives—trying to get control over all those elusive and mysterious variables that seem to always be lurking at the edge of the campfire, just waiting to mess things up.
The hardest part of capitalism and free market theory for the average person, or even the highly educated and supposedly sophisticated person, to accept is the idea that certain desirable things will happen naturally, if free individuals are left to make choices based purely on their own desires and calculations as to what they believe will satisfy those desires.
But those who “know better” will always try to convince the fearful and uncertain that they have an inside line of some kind, and can rig the game for a better outcome, however that might be defined.
The “Fed”, by trying to manage the money supply to a multi-trillion dollar economy, something that has never existed before in all the history of human civilization, is just one more example of the statist fallacy. Just because they have computer models instead of incense burners doesn’t guarantee any better long term result.
But, of course, when things go boom, it will obviously be the fault of all those specualtors and unregulated markets. After all, managed economies and regulated industries never collapse…oh, wait…
speculation is encouraged by the bizarre legislation that bans so called ‘insider trading’, to encourage more gambling like ‘outsider trading’.
Two concepts are exactly just that ‘concepts’ and actually have no real world meaning, remove ‘insider trading’ laws you would reduce speculation and boom and bust cycles that they cause.
I agree with the comments. Nothing more to be said – other that to (yet again) apologize for my bad typing and lack of checking.
While the Fed may be imperfect, there is a solid reason for its existence. Without a national bank, boom/bust cycles have been historically much more painful. Booms were pretty good, but the busts were horrific. It was once common for the economy to suffer total collapse (not like our modern weak-kneeded “recessions”) every 20 or 30 years. Rampant speculation was common long before the rise of corporations or insider trading laws.
Patrick – please give at least one example where free banking led to an ‘horrific’ bust. I’m genuinely curious and know of no examples that predate centralised/cartelised banking in some form.