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Monday, January 12, 2009

The end of the Free Market!

The Free Market Capitalism idea is dead as it is now. The multi-lateral system, also, is at a state of exhaustion with no clear form on how to move forward. I feel that the unabashed truth, would save allot of people thought time, in regards to trying to salvage back to form either of the two. But, for the sake of this article, the free market in regards to root level economic activity is gone. For good reasons, for many different reasons, as well.

Let's take a step back and look at what's happened. For one, the credit taps were turned off in the USofA and around the world, especially free market democracies. Analysts blamed the sub-prime mortgage exposure and the over-leveraging of sub-prime related trading activity, as the root cause of all of this. But, really and truly, does anyone expect us to believe that sub-prime derivatives- a widely opaque financial instrumentation- is the sole and root cause for banks to not extend credit? Even in light of healthy bank balance sheets, especially in the UK and the rest of Europe? Would, and, should, anyone really believe that is the case, considering the variety of other financially related instruments traded on a daily basis?

No. The free market, in this sense; lending or not lending and investing or choosing not to invest, has shown itself to be true. No one is forced to lend money to anyone under any circumstance. Thus, the free market prevailed! But, it is not the free market type of activity folks were accustomed too. Certainly, it is not the type of free market behavior, in sync with production and investment growth. The chances of the free market rearing its ugly head and for it, choosing to do what it wants to do with what it has, cannot be relied upon for everyone esle's benefit. Government, will have to do something about it. What an ironic cycle of events.

Same thing with employment, no one is forced to employ anyone at anytime if they don't want to. It would be wise to hire someone to do work for you, in order to provide certain economic value to your goods and services. However, employment, for anyone, is not a guarantee. It is a privilege and an opportunity to seize upon, but by no means is it a given. It simply can't be guaranteed to anyone, or, everyone at any time they choose. It's a myth.

Government has met it's match in regards to regulation, however. Governments' past have over taxed, over burdened, forced unfair operating practices and over regulated regular businesses like; the automobile industry by way of uncompetitive wages and safety standards; the clothing industry by way of high taxation on imports and exports; the commodities industries by way of linking them to subsidies and tax breaks, hurting us all and more recently; the software industry with levies, upon levies, on companies like Dell and Microsoft, forcing them to create and/or share their creations, in the means of anti-competition regulations, over taxation and fines on the basis of freeing up any form of monopolization said software companies may have, all in the attempt to subsidize government officials spending sprees.

In fact, the free market has been dead--or non existent-- for quite some time now. This time, with the financial industry--with their last movement of freedom (their unwillingness to lend at a time where the country and world needed it)--will cause more regulation to come. Reason why? It is unheard of and morally wrong that people, in a free market society, as many claim, can't get their hands on credit--money, in simple terms.

The political ramifications of such freedom, placed in the hands of a concentrated few individuals, is stark and the effects of not meeting the demands, are evident. The TARP (Trouble Asset Relief Package) laid out for the banking industry by Sec of the Treasury Hank Paulson, endorsed by the Bush administration and the US Congress (who were pulled into voting for it very sheepishly by their shameful display of lack of understanding of the issues, by the US Senate and the news media the second time around), has showed you the lack of resolve by current state legislators on how to treat the financial system. Basically, cow-towing to the banking industry's demands and threats, evidenced by a $350 billion dollar first half of the TARP bail out, with no delineation on how the money should be spent. To, now, not being forthcoming on how was that money spent. To, now, even more startling, unashamedly asking for more of the money, even when they have fritted away the first half of the bail out TARP funds, by consolidating other banks and not re-arranging their banking practices.

The big issue now for the new Obama administration, is how to go about curbing the influence of the financial sector on policy? For one, the Federal Reserve can't be a lender forever and now, even as a lender of last resort, runs the greater political and economic risk of creating a secondary market, making the current private and "free" market system null and void.

So, whether or not you think the "free-market capitalist system" is worth salvaging, or, the free market is dying, or, the free-market just died, or, the free market never was--fact of the matter is, in regards to business and economics, at least, the free market is no more. When or where it was no more, is of little consequence if we can ever unwind that position.
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