Almost a hundred years of the American planned economy has brought us to an ominous collective conclusion that all along the 2008 economic crisis was not a regulated event at all, but a laissez-faire free market recklessly abandoned to Adam Smith’s (apparently malicious), invisible hand. I don’t know what to say about this public perception. Alan Greenspan, (Reserve Chairman from 1987 to 2006) and Ayn Rand, (Russian-born American novelist, philosopher, playwright and screenwriter) are not responsible for the current crisis, nor are Milton Friedman, (leader of the Chicago School of Economics) or Friedrich August Hayek, (winner of the Nobel Memorial Prize in Economics and member of the Austrian School of Economics), anymore than Murray Rothbard, (author of Man Economy and State - member of the Austrian School of Economics) and Ludwig von Mises (founder of both the study of praxeology and the Austrian School of Economics with of course a nod to Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser and others like perhaps the wisest living libertarian in the world, Thomas Sowell), see, Intellectuals and Society and Basic Economics.
If your government is going to create a Federal Reserve System (originated 1913), then on some level you have socialized the money supply and have an almost outright planned economy. Furthermore, you’re going to have some economic booms and busts because of it and notwithstanding it. Human beings are fallible and can’t predict all economic trends, even the stock market has enormous trouble doing it. Many don't understand economics but bankruptcy has its positive side and some would say, including me, that it's downright essential, including bank runs and even bank closures. They teach us things, keep us competitive and root out inefficiency, among other things.
Unsound credit expansion causes business cycles. The Fed has never contracted the monetary supply since The Great Depression on the fear of a repetition of that event. Essentially the Fed caused it in the first place by shrinking the money supply at the exact time when the market needed liquidity. Since the reason for its creation was to prevent a situation precisely like the Great Depression, one has to ask this most important and difficult question about political and economic philosophy: How did the market get blamed for something the government did? [There had been market crashes before and ones worse than 1929, but this time Herbert Hover reacted to it with a global trade war -- The Smoot Hawley Tariff -- and although the year immediately following the crash, unemployment never exceeded 10 percent and a recovery was on its way, Hover's over-reaction was blamed for under-reacting and he lost the election to Roosevelt whose progressive administration in the years ahead introduced massive government expansion with the New Deal and employment reached as high in America as 27 percent in the decade after the crash].
Isn’t this the fundamental problem with governmental legislation? Even if a state law, agency and institution is proven to be mistaken, wrong, or if it just doesn’t work, to dissolve it seems inconceivable. What the government generates might as well be Ex Cathedra. Hence, the bloated bureaucracy blunders along making us their working-grunts. Over time, it dilutes the currency and inflates the cost of public services. The whole world is poorer for it. It is the goods which are produced which creates real wealth, not governments; prosperity is about production not consumption. Paper money used to water down currency results in inflation. The only essential capital (i.e.. the singular economic value) is human capital; that is humans and the ideas they create and possess.
Here are some basic facts about the planned economy under Franklin D Roosevelt’s New Deal. FDR started his public economic plan with society and the state having little private or public debt. Credit cards didn’t exist. The new US President has inherited private and public Debt of unimagined amount and now Covid is stretching this to the nth. A stable currency – the gold standard – was operating at the time of the New Deal. The 20th Century magical paper monetary currency is based roughly on GNP, (Keynesian Economics enabled this view) an event which is quickly becoming destabilized as GNP shrinks. Despite the New Deal, the Great Depression lasted 16 years and a full recovery didn’t come to fruition until well after the end of WW II, in fact, American stock prices didn’t equal 1929 highs until 1954. "In 1931, Adolph Miller [a critic inside the Fed system of Benjamin Strong Jr.'s decision to cut interest rates] . . . would testify before the Congress that the easing of credit in the middle of 1927 was, 'The greatest and boldest operation ever undertaken by the Federal Reserve System . . . [resulting] in one of the most costly errors committed by it or any other banking system,” Lords of Finance.
The current American consumer nation, despite its ignorance of the facts of the economy, its history and how currency actually works, expects a full swift recovery without addressing the nation’s basic systemic problem: It consumes more than it produces. In FDR’s time, the reverse was true. The population was hard working, frugal and used little credit. The USA is over leveraged, indebted and maxed out on its credit cards. The Fed has suppressed contraction by artificial reduction of interest rates causing this extraordinary run of consumerism and creating the long-running atmosphere of cheap credit throughout the whole world for decades–it has fueled the fires. (Could we see another economic bubble burst after the 2020 election? The accumulated US Federal debt as of 2016 was some 19 trillion dollars and is now approaching 30 trillion.) This is all the result of a planned economy, and especially the Federal Reserve System. It hardly matters that a free marketeer was navigating it for a while except in this sense: If your going to run a planned economy at least put people at the helm who believe in government regulation. It’s a good time to hire socialists.
Over the decades, Keynesianism and the Left, have had it both ways. If you’re going to say, laissez-faire and libertarianism be damned – we’ve tried it and it’s wanting – then at least in fairness you have to actually have tried it. If in 1913, you changed your mind about the market and started a planned economy in earnest, and continued to organize and expand it for almost a century with a dramatic growth of the state, not just in America, but in the whole world, then at some point you must take responsibility. Make your own original arguments to defend it and not the same worn-out old half-truths. Say the words, “A planned economy is what we’ve had for nine decades.” This crisis (and other past ones), is caused by government economic incompetence. It’s not that hard to own. Then make your statist’s contentions. Don’t fight a straw dog 24/7. It makes the enemies of liberty look cowardly. After all, you can judge an idea by its enemies, and the opponents of free markets, I can assure you, are wanting.
If you’ve seen the documentary Inside Job C H Ferguson, what you can plainly see is that the children have taken over the candy store. They practice Willy Wonka Banking with lobbyists togged up as clowns trained to give out free samples to everyone who gets inside the doors. No adults allowed; after all All the Devils are Here. The regulators are given jobs behind the counter, the senators and congressmen are of the oligarch (The New Ancien Régime) and abstract about how much candy the poor should have anyway; the president is trapped by the system and the whole thing is autocracy with a democratic face. Surprisingly, many of the bankers who defrauded the system out of millions and millions of dollars have jobs with the government as regulators; at any rate no one has been prosecuted for the 2008 economic crises and this tells you all you need to know.
(Finally in January 2012, six former executives of Freddie Mac and Fannie Mae were charged with economic crimes by the SEC relating to the 2008 crisis but as of 2016, at least in the United States, no top executives at large Wall Street or commercial banks have been convicted of criminal charges; and as of 2022 no Wall Street executives have done any prison time and I think we can safely conclude they never will.)
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