Evidence suggests that freer markets generate greater prosperity, and more controlled markets have the opposite effect, to the extent they are so. It follows that a completely free market will create the greatest amount of prosperity, unless you can demonstrate and give reason for why this wouldn't be the case.
You say that, but there is plenty of historical evidence that suggests otherwise: particularly the Panic of 1907, which was one of the key factors in the creation of the Fed in the first place. We haven't moved towards a system where the government has a hand in how the economy functions because the economy functioned perfectly without it: the government attempts to take a hand in the economy because it frequently does not work without it. Hell, if you want my favorite example for how the government can take a hand in the economy to great results, look at China. That country has observed amazing growth over the past twenty years because they are actually following good economic policy. (To that end, I'd strongly recomend "As China Goes, So Goes the World: How Chinese Consumers are Changing Everything" by Karl Gerth. Fantastic read.)
The great depression was caused (in simplified terms) by massive and reckless credit expansion by the Federal Reserve, which is a state controlled central bank. Credit expansion and the unrestricted printing of money are not features of a free market, they are state driven interventionist policies.
Yes, those are very simplified terms: you realize that the same things happened when the banks were unregulated by the Fed, right (see Panic of 1907)? And that it was only the loosening of regulation (an attempt to be more "capitalist") that caused a great deal of the problems related to the housing bubble? More-over, it was by adopting Keynesian economic principles that we were able to begin to move out of the great depression in the first place (IE, distinctly non "capitalist" ones)? It seems like your argument should that it's bad to have poor management of the money supply, so the government needs to take tighter reigns, but you're saying that dropping the reigns altogether leads to a better result, and I don't see that you have a warrant for that argument.
You say that, but there is plenty of historical evidence that suggests otherwise: particularly the Panic of 1907, which was one of the key factors in the creation of the Fed in the first place. We haven't moved towards a system where the government has a hand in how the economy functions because the economy functioned perfectly without it: the government attempts to take a hand in the economy because it frequently does not work without it. Hell, if you want my favorite example for how the government can take a hand in the economy to great results, look at China. That country has observed amazing growth over the past twenty years because they are actually following good economic policy. (To that end, I'd strongly recomend "As China Goes, So Goes the World: How Chinese Consumers are Changing Everything" by Karl Gerth. Fantastic read.)
It isn't neccessary to have a central bank for the banks to inflate the money supply. In 1907, the financial industry was heavily regulated, and this enabled big banks to collude and cause a panic. This was used as justification for more regulation of the market.
Before 1913, recessions were caused by:
limited liability incorporation, which encourages irresponsible behaviour by bank owners and management
regulation of the banking industry
a few large banks acting as a cartel
fractional reserve banking being an inherently unsound banking model
After 1913, recessions were created with full force of law via the Federal Reserve. Recessions are not a natural free market phenomenon, they are artificially created by the financial industry to line their pockets. State violence is needed to cause recessions.
Paraphrasing Murray Rothbard:
Spoiler
"In the forty years 1890 to 1930, the population of the country doubled, the value of farm property increased three and a half times, pig iron production four and a half times, exports five times, coal production five times, and freight traffic five and a half times, but commercial bank deposits increased over seventeen and a half times. Thus, while the gold stock had increased proportionally with the increase of industrial production, the expansion in bank credit had far outstripped both and had thus been at the expense of a thinning gold reserve. The monetary gold stock available to support and redeem this tremendous amount of bank liabilities that was being created, which had been 25.3 per cent of total note and deposit liabilities of banks in 1865, and 23.9 per cent in 1880, steadily dropped under the pressure of the public upon the banking interest for more and more credit, standing in 1900 at 20.4 per cent, in 1910 at 14.2 per cent and in 1930 at 10.4 per cent. Such had been the diminution of reserves that by the decade 1920-1930, banking was being conducted "on a shoestring." In 1900 the ratio of vault cash to deposit liabilities of commercial banks had dropped to 14.8 per cent, and in 1910 to 12.7 per cent—vault cash in those years being respectively $706,302,000 and $1,366,164,000.
After attempts to create a central bank failed, the Secretary of Treasury Leslie Shaw attempted to continue and expand the experiments of his predecessor Lyman Gage in making the U.S. Treasury function like a central bank. In particular, Shaw made open-market purchases in recessions and violated the Independent Treasury statutes confining Treasury funds to its own vaults, by depositing Treasury funds in favored large national banks. In his last annual report of 1906, Secretary Shaw urged that he be given total power to regulate all the nation's banks.
The Panic of 1907 struck in October, the result of an inflation stimulated by Secretary of the Treasury Leslie Shaw in the previous two years"
It seems strange that you'd use China as an counter-example. The Chinese economy has been hugely liberalised, which is what has led to such astounding growth. More freedom would create even more growth. I'm quite knowledgeable about Chinese economic policy already since my wife is Chinese and her dad is heavily involved in the Chinese stock market and runs a business over there himself.
Yes, those are very simplified terms: you realize that the same things happened when the banks were unregulated by the Fed, right (see Panic of 1907)? And that it was only the loosening of regulation (an attempt to be more "capitalist") that caused a great deal of the problems related to the housing bubble? More-over, it was by adopting Keynesian economic principles that we were able to begin to move out of the great depression in the first place (IE, distinctly non "capitalist" ones)? It seems like your argument should that it's bad to have poor management of the money supply, so the government needs to take tighter reigns, but you're saying that dropping the reigns altogether leads to a better result, and I don't see that you have a warrant for that argument.
See above.
Could you explain how regulation was loosened, and how it led to the housing bubble? It seems quite clear to me that the housing bubble was primarily a result of artificially low interest rates set by the Federal Reserve, which was an attempt to encourage the buying of houses. Then, when those interest rates could no longer be sustained, they had to be increased and people could no longer afford their mortgages. Again, simplified. I'd be happy to go into more detail or provide sources, but I'm a bit short of time today.
If you have the time I'd strongly recommend this video series (part 1 of 8):
http://www.youtube.com/watch?v=0SP1pyVcT1w
I also have a long list of books on the subject that I could recommend if you like.
In my opinion there is very strong evidence that the presidents of the US are now nothing but puppets, JFK junior was the last true president the US had. The entire monatary system that the US now runs on was a planned decision in my eyes. The banker bail out bill especially had member of congress confirming to media that they where threatened by the treasury department in regards to signing the bill. The federal reserve is not a government run agency, it is a private bank that has ties in US politics due to some very sketchy dealing that went on the past. This is something that Ron Paul has mentioned numerous times, if I was a US voting citizen I would vote for him on the fact that he seems a million times more genuine that the other candidates.
If you have some time to kill I reccomend watching this link , its long but if you go into it with an open mind you won't look at global politics the same way. http://www.youtube.com/watch?v=eAaQNACwaLw
In my opinion there is very strong evidence that the presidents of the US are now nothing but puppets, JFK junior was the last true president the US had. The federal reserve is not a government run agency, it is a private bank that has ties in US politics due to some very sketchy dealing that went on the past. This is something that Ron Paul has mentioned numerous times, if I was a US voting citizen I would vote for him on the fact that he seems a million times more genuine that the other candidates.
If you have some time to kill I reccomend watching this link http://www.youtube.com/watch?v=eAaQNACwaLw , its long but if you go into it with an open mind you won't look at global politics the same way.
I agree on regulation in the market, but that regulation should come from elected goverment officials (with appropriate education) who are non-partial and should be prevented from owning stock in companies or any other ties that would give them a bias in their decision making. Right now it seems like the financial elites are controlling the regulation through lobbying and threats which is not how it should be.
In 1987 a wall street crash greater than the one in 1929 occurred. However the government continued to expand credit, thereby avoiding the effects. In 1929, although the federal reserve did expand credit, as soon as the market began to crash, the government retracted the credit.
In 1987 a wall street crash greater than the one in 1929 occurred. However the government continued to expand credit, thereby avoiding the effects. In 1929, although the federal reserve did expand credit, as soon as the market began to crash, the government retracted the credit.
The stock market crash was the inevitable consequence of inflationary boom. The Great Inflation of 1982- 87 was fundamentally a monetary phenomenon, orchestrated by the Federal Reserve System and financed by a massive and prolonged increase in the money supply.
Greenspan and the federal government proposed to cure the disease--the crash and future recession--by pouring into the economy more of the very virus (inflationary credit expansion) that caused the disease in the first place. Only in Cloud Cuckoo-land, to repeat, is the cure for inflation, more inflation. To put it simply: the reason for the crash was the credit boom generated by the double-digit monetary expansion engineered by the Fed in the lastseveral years. For a few years, as always happens in Phase I of an inflation, prices went up less than the monetary inflation. This, the typical euphoric phase of inflation, was the "Reagan miracle" of cheap and abundant money, accompanied by moderate price increases.
By 1986, the main factors that had offset the monetary inflation and kept prices relatively low (the unusually high dollar and the OPEC collapse) had worked their way through the price system and disappeared. The next inevitable step was the return and acceleration of price inflation; inflation rose from about 1% in 1986 to about 5 % in 1987.
As a result, with the market sensitive to and expecting eventual reacceleration of inflation, interest rates began to rise sharply in 1987. Once interest rates rose (which had little or nothing to do with the budget deficit), a stock market crash was inevitable. The previous stock market boom had been built on the shaky foundation of the low interest rates from 1982 on.
Isn't it ironic that the 80's boom occurred under the far right leadership of Reagan and Thatcher...
Inflation was already very high before Thatcher took power, but it's irrelevant - the inflationary boom was a result of anti-capitalist economic policy.
Unfortunately, the pluses of the Thatcher economic record are more than offset by the stark fact that the state ends the Thatcher era more of a parasitic burden on the British economy and society than it was when she took office. For example, she never dared touch the sacred cow of socialized medicine, the National Health Service. For that and many other reasons, British government spending and revenues are more generous than ever.
Furthermore, despite Mrs. Thatcher's lip-service to monetarism, her early successes against inflation have been reversed, and monetary expansion, inflation, government deficits, and accompanying unemployment are higher than ever.
