Did “Near Shoe- Death’ Rattle Bush’s Free Market Stance?

Something happened just recently that seems to have rattled the President Bush’s cage.  Surely it isn’t the failure of his ‘free market system’ that has plunged the entire globe into crisis?  I think it’s much simpler.  Perhaps his near fatal run-in with some shoes’ just recently, yep! I think that has done it.

In early October US President George Bush urged nations to “recommit” to free markets despite economic turmoil.

Then on the the October 24, former Fed Chairman came clean and admitted the ‘free market model’ had failed.

Greenspan admits market system is flawed

Alan Greenspan, the man once called the greatest central banker of all time, has admitted his mistakes contributed to the worst financial crisis in living memory.

The former chairman of the US Federal Reserve has told a committee of US lawmakers the crisis had exposed flaws in his thinking and in the workings of the free-market system.

Asked if he was responsible for the financial crisis, Greenspan admitted he had made a mistake.

And on the very same day the current Chairman also can clean:

I misread subprime crisis: Bernanke

US Federal Reserve chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market’s collapse.

”I and others were mistaken early on in saying that the subprime crisis would be contained,” Bernanke says in an article in the December 1 issue of The New Yorker magazine.

”The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said in the piece titled ”Anatomy of a Meltdown.’

And today, almost two months later President Bush and after his near death experience he now claims

‘I don’t want to make it worse’

US President George W. Bush has revealed he was forced to sacrifice free market principles to save the economy from “collapse”.

“I’ve abandoned free-market principles to save the free-market system,” Mr Bush told CNN television, saying he had made the decision “to make sure the economy doesn’t collapse”.

Mr Bush’s comments reflect an extraordinary departure from his longtime advocacy for an unfettered free market, as his administration has orchestrated unprecedented government intervention in the face of a dire financial crisis.

“I am sorry we’re having to do it,” Mr Bush said.

But Mr Bush said Government action was necessary to ease the effects of the crisis, offering perhaps his most dire assessment yet of the country’s economy.

“I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis. Look, we’re in a crisis now. I mean, this is – we’re in a huge recession, but I don’t want to make it even worse.”

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20 Responses

  1. Please don’t edit the heading reb, it’s a little Bush speak

  2. Are the Yanks for real. Encouraging the rest of the worls to follw them in a way of life that has resulted in greed, pain suffering and loss of jobs. George Dubbya has been the captain of the ship when they have done the unthinkable…tanked. This is akin to the Titanic. If I were Georger Dubbya, I’d be too ashamed to show my face anywhere anythim.

    At least 1 journo has some courage, but shoes, surely he could have done better with a heavuer or a sharper object.

  3. Maybe the man is going senile. Afterall I can never understand what he is saying.

    There will be deafening silence for some time from the extreme right and extreme capitalists.

    Problem is it seems nothing is changing. CEOs and Upper management continue to enjoy obscene wages while sacking the actual workers at the coal face. Until this greed is stopped by legislation or taxes on companies that make obscene profits at the expense of employees things will not change.

    ANZ to sack another 620 workers in Oz and outsource the jobs to India while making massive profits. Another case of destroying the country they operate and make their profits from. Where will this madness end.

    Please remember I own my own small business and believe in capitalism, but NOT what we have now.

  4. “Please remember I own my own small business and believe in capitalism, but NOT what we have now.”

    Nothing wrong with capitalism if it’s adequately regulated Shane.

    Just because communism and socalism failed some people got it into their heads that the ‘capitalism/the free market system’ was perfect. It clearly isn’t, but that doesn’t mean we should now throw the bath water out the the baby either.

  5. I think it’s getting pretty close to the point where the Fed can stimulate no more. What happens then could get very nasty.
    US interest rates head for ground zero

    8:41am | Australian dollar surges as US slashes rate to between 0 and 0.25 per cent, the lowest on record.

    What if China and other major foreign investors go the big squeeze?
    http://business.smh.com.au/business/china-goes-the-big-squeeze-20080829-45q8.html
    A high-ranking Chinese economist has put his nation’s cards on the table in the global financial poker game by effectively telling the US to fix Freddie and Fannie … or else.
    “A failure of US mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system”, Yu Yongding, a former adviser to China’s central bank, says.
    “If the US government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to Bloomberg. “If it is not the end of the world, it is the end of the current international financial system.”
    It is well within the bounds of imagination. People have been thinking the unthinkable for some time.

  6. “Just because communism and socalism failed some people got it into their heads that the ‘capitalism/the free market system’ was perfect. It clearly isn’t, but that doesn’t mean we should now throw the bath water out the the baby either.”

    Your brilliance returns! I mean that in all sincerity by the way. Regulation is essential with continued use of a system powered by human wants and needs. Smith said as much but we can be assured that due to the short memories of most, many of the same crooks are already trying to figure a way in which to circumvent current legislation again. From the small business owner who knowingly hires illegal aliens to the Corporate head and politician who forces banks to make loans to credit unworthy borrowers and the bank heads who ignores the rules because he can blame the politician/corporate head while lining his pocket. Yep, they rode it as long as they could but many were too greedy to “get off” before it sank!

  7. Be it never forgotten that the Liberal Party are ideological and economic soulmates to the American Republicans.

    And that latest Liberal leader, Turnbull, is an ex-merchant banker, the precise ilk from which much of this bloody economic debacle originated.

  8. JWH was an admirer of Greenspan Caney so I don’t doubt your assertion.

  9. Caney

    Don’t expect and apologies from the Liberals though.

    Running up to his electoral defeat last year Mr Howard kept repeating the same dangerous mantra “interest rates are lower and people can borrow more.”

    John Howard said the heavier debt burden reflected rising affluence.

    “It is the case that people are buying ever more expensive houses, and they are doing that because of a number of factors,” the Prime Minister said. “One of them is that interest rates are lower and people can borrow more.”

    Yes, our hero was pushing a dangerous mantra indeed. In his opinion, it seemed as though a new era had arrived under his leadership.

    He then went on to say: “Debt levels are rising, but we are choosing to use the debt more productively to buy assets that traditionally rise in value, like shares and property.”

    At around the same time the Reserve Bank’s figures on household finances showed that assets were rising faster than debt (in spite of many Australian’s carrying record levels of debt). Households, they claimed had assets, including housing, superannuation and other investments, that are equal to eight times their annual income.

    I guess now it’s all Kevin’s fault that the bubbles have burst?

    And to imagine J.K. Galbraith raised his concerns about the markets and US economy (which is also applicable here) in 1998 by saying:

    There’s one thing that should warn everybody. If you forget everything else tonight, remember this, that when you hear someone say, “We have entered a new era of permanent prosperity,” then you should immediately take cover, because that shows that financial idiocy has really taken hold and that history, all history, is being rejected.

    This is the warning of the present time. We had a slight indication of that in August and September. It’s a warning that everybody should have in the back of her or his head. The effect of the speculative collapse is something which economists have not yet, even to this day, fully appreciated, because it is not the collapse that causes the trouble, but the further effect on investment, and also the further effect on consumer spending.

    A very large part of our present consumer spending is based on debt creation, credit cards, or the impression given by stock market gains or real estate gains. If and when the end comes, the economic effect will be the drying up, the slump, in consumer expenditure and, of course, the economic effects of that.

  10. There’s other evidence too John. The Liberals and Republicans speak the same rhetoric: “free markets”, “deregulation”, cut the pay and conditions of employees.

    Beyond that, they share campaigning strategies. A lot of Howard’s scare campaigns are said to come straight from Karl Rove’s textbook.

    And of course there was the rodent’s obsequious crawling to Bush, doing his every bidding. And his stupid attack on the Republicans’ opponent Obama.

    All things considered, they’re thick as thieves (words chosen deliberately).

  11. Didn’t the rodent’s son work for the Republican campaign in some way too?

  12. Caney@10

    Absolutely – (“flexibility in the labour market” was another good one) and despite many protests that our model is different to the US, well, that was just a myth. In fact, Greenspan looked upon Australia’s economy and markets as a smaller version of the US’s. My view hasn’t altered:

    It’s shouting all around
    http://blogs.theaustralian.news.com.au/geoffelliott/index.php/theaustralian/comments/us_news_media_is_dominated_by_shouting_matches/asc/
    John McPhilbin
    Wed 29 Aug 07 (05:32pm)

    Geoff, Just to add to my previous comments we here in Australia need to start considering whether our stock market’s reaction (yes, it’s taken a another pounding on the back of falls in the US) is more than a simple reaction to US markets. Or do we have similar issues with growing and doubtful debts? It’s easy to get bogged down in detailed theory or political debate over the economy in general, including interest rates and our growing prosperity rather than making hard-nosed assessments of the sustainability of growth fueled by easy money, namely debt.

    Mr Howard’s response recently to the fact that household debt has reached the $1 trillion figure was: “Debt levels are rising, but we are choosing to use the debt more productively to buy assets that traditionally rise in value, like shares and property.” Personally, I think his assessment is too simplistic and politically convenient (it is an election year). For me, the lights really came on when I recently came across an insightful assessment of what seems to be one of the primary causes of the emerging economic picture and potential financial crisis in the US. Unfortunately the same elements and conditions that are causing distress in the US also seem evident, in large part, here in Australia. Former US Federal Reserve chairman Alan Greenspan comes in for some major criticism because of his policy that sought to promote greater consumption as a way to increase prosperity through the use of easy money and artificially low interest rates. Another concern is the role of tax systems and their failure to encourage saving and investing.

    Economics author Jim Rogers wrote in 2003: “The current bubble that Greenspan does not see is the consumption bubble he is causing. He has the lunatic idea that a nation can consume its way to prosperity although it has never been done in history.”

    In America, if you have a job, you pay taxes. If you buy a stock and you get a dividend, you pay taxes. If you have a capital gain, you pay taxes again. And when you die, your estate pays taxes. If you live long enough to get social security, they tax your social security income. Remember: you paid taxes on all this money when you originally earned it yet they tax it again and again. These policies are not very conducive to encourage saving or investment. They promote consumption.

    By contrast, the countries that have been doing well the last 30 or 40 years, are the countries that encourage saving and investing. Singapore is one of the most astonishing cities in the world. Forty years ago it was a slum. Now, in terms of per-capita reserves, it’s one of the richest countries in the world. One of the reasons Singapore was so successful is its dictator, Lee Kwan Yu, insisted that everyone save and invest a large part of their income. Whatever Lee’s policies toward personal freedom, at least he forced people to save and invest. History shows that people who save and invest grow and prosper, and the others deteriorate and collapse.

    Artificially low interest rates and rapid credit creation policies set by Greenspan and the Federal Reserve caused a bubble in the US stocks of the late 1990s, policies now being pursued at the Fed are making the bubble worse. They are changing it from a stock market bubble to a consumption and housing bubble. And when those bubbles burst, it’s going to be worse than the stock market bubble, because there are many more people who are involved in consumption and housing. When all these people find out that house price don’t go up forever, with very high credit card debt, there are going to be a lot of angry people.

    No one, of course, wants to hear it. They want the quick fix. They want to buy the stock and watch it go up 25 percent because that’s what happened last year, and that’s what they say on TV. They want another interest cut, because they’ve heard that’s what will make the economy boom. “

  13. So we’re to “re-commit” to free markets after the taxpayers have bailed the corporate cowboys out? How many times will we have to do that? Is that the “free market” philosophy – privatise the profits and socialise the losses? Without adequate regulation, this will be an ongoing cycle.

  14. John @ 4

    I didn’t want to throw out the baby with the bath water. I said I believe in capitalism just not what we have now.

    The only difference between communism and extreme capitalism to me is that in communism the government owns it all and in extreme capitalism a few wealthy people own it all. One rules by force the other rules by money.

  15. Just an observation.

    I visited Centrelink this morning and talked to a couple of the staff there – they both told me that the queues had been getting longer for the last six weeks – many people being laid off suddenly…

    …we also visited Hardly Normal and my grandson left his resume with the manager – the manager said HN had a few positions available and they will be in touch (didn’t say what…

    …its going to get worse before it gets better…and I can’t help thinking that Rudd & Co may have done too much, too soon…

    …however, I’m still trying to figure if Malcolm Turncoat Etc. would have done anything at all, or would be still be thinking about it…

    ….well picked 13. LizzyLou those questions have been raised many times here (and previously on Blogocracy)…

    …at the next G20 meeting Kevin Rudd should suggest and/or present a new capcommand model…part capitalism and part command system…eg heavier regulation to protect society from itself and the Robber Barons coupled with isolation of critical industries from the free market/profit cycle altogether (eg health, education, roads, rail, water, power…the things that society needs to survive and develop)…and a massive global education programme that… greed is NOT good…

  16. I went into centrelink yesterday and there was nobody in there at all and was served immediately. Usually there are between 10 and 20 in the queue.

  17. Shane@14 – Sorry I gave you the wrong impression. I was in wholehearted agreement and just extending.

  18. LizzyLou@13 – you’ve captured the problem with the free market philosophy’ in a nutshell.

    Economist Hyman Minsky he wrote in 1992 :“Over a a protracted period of good times, capitalist economies tend to move from a structure dominated by hedge finance units to a structure in which there is a large weight to units engaged in speculative and Ponzi financing”

    And Ponzi schemes don’t get much bigger than this, nor do they usually sucker so many so-called professional money people.

    Investors chase missing billions
    December 15, 2008
    http://business.smh.com.au/business/world-business/investors-chase-missing-billions-20081215-6yei.html?page=-1
    Investors scrambled to assess potential losses from an alleged $US50 billion ($76 billion) fraud by Bernard Madoff, following the arrest of the prominent Wall Street trader.

    – Bernard Madoff arrest
    – Alleged $76b fraud
    – ‘A giant Ponzi scheme’

    Minsky’s theory

    Hyman Minsky theorized that financial fragility is a typical feature of any capitalist economy. High fragility leads to a higher risk of a financial crisis. To facilitate his analysis, Minsky defines three types of financing firms choose according to their tolerance of risk. They are hedge finance, speculative finance, and Ponzi finance. Ponzi finance leads to the most fragility.

    Financial fragility levels move together with the business cycle. After a recession, firms have lost much financing and choose only hedge, the safest. As the economy grows and expected profits rise, firms tend to believe that they can allow themselves to take on speculative financing. In this case, they know that profits will not cover all the interest all the time. Firms, however, believe that profits will rise and the loans will eventually be repaid without much trouble. More loans lead to more investment, and the economy grows further. Then lenders also start believing that they will get back all the money they lend. Therefore, they are ready to lend to firms without full guarantees of success. Lenders know that such firms will have problems repaying. Still, they believe these firms will refinance from elsewhere as their expected profits rise. This is Ponzi financing. In this way, the economy has taken on much risky credit. Now it is only a question of time before some big firm actually defaults. Lenders understand the actual risks in the economy and stop giving credit so easily. Refinancing becomes impossible for many, and more firms default. If no new money comes into the economy to allow the refinancing process, a real economic crisis begins. During the recession, firms start to hedge again, and the cycle is closed.

  19. 16. shaneinqld

    Yes, mate…but did you enquire about other times and what was happening from staff?

    “Usually there is a queue”…? I thought you ran your own business? 😉

  20. these shoe throwing games are too funny

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