Migrant Mother/Pea-Picker in the Dust Bowl, Photo by Dorothea Lange, 1936
Economic Insecurity Update: The False Religion of Laissez-Faire & Milton Friedman, Its Most Persuasive Cult Leader, Have Led Us to a Monetary Jonestown
By Richard Power
One of the bedrock assumptions on which most people have built their economic world-views is that what happened in 1929 simply will not be allowed to happen again.
"Systems have been put in place," that's what many of us tell ourselves.
And it was true, for most of the 20th Century.
But now we live in very different times.
Here in the first decade of the 21st Century, those systems have broken down, or rather the principles behind them have been lost.
The false religion of Laissez-Faire and its most persuasive cult leader, Milton Friedman, have trapped us all in the financial world's equivalent of Jonestown. (And yes, Jonestown is an apt analogy. Unlike the term "Voodoo Economics," which GHW "Poppy" Bush used to refer to "Reaganomics" before he was dealt in; that turn of phrase was an insult to one of the world's oldest and most fascinating religions.)
Don't drink the kool-aid. Run for the helicopters, or take your chances in the jungle.
Here are some excerpts from a good piece from Ambrose Evans-Pritchard, with a link to the full text:
As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world's central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.
"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.
"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds. ...
York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.
"The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard," he says.
"They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park," he adds. ... Ambrose Evans-Pritchard, Crisis may make 1929 look a 'walk in the park', Telegraph/UK via Raw Story, 12-23-07
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Economic Security, Milton+Friedman, Great Depression,Laissez-Faire, Richard Power, Words of Power