Crisis flags end of free market: Sarkozy

[costargh]

Crisis flags end of free market: Sarkozy
26/09/2008

The economic turmoil provoked by crises in the American subprime and finance markets has put an end to the free market economy, French President Nicolas Sarkozy says.

"Laissez-faire is finished, the all-powerful market that is always right, that's finished," Sarkozy said in a widely anticipated speech, his first in France on the economic crisis.

As a result, it is "necessary to rebuild the entire global financial and monetary system from the bottom up, the way it was done at Bretton Woods after World War II," Sarkozy said.

In July 1944, an agreement was signed in Bretton Woods, New Hampshire, that established new rules for commercial and financial relations among the world's major industrial states.

Banks must be regulated, Sarkozy said, "to regulate the system....

The crisis must lead to a wide-ranging restructuring of the entire global banking system."

The French president also called on the European Union to begin a "reflection" on a new monetary policy, an indirect criticism of the anti-inflationary policy carried out by the European Central Bank.

"If (the EU) wants to have the means to emerge strengthened, not weakened, from the current crisis, it must carry out a collective reflection about its doctrine of competition,... on the instruments of its economic policies, on the aims of its monetary policy."

With France currently occupying the rotating presidency of the EU, Sarkozy said he would "propose initiatives" on these issues at the next EU summit, on October 15.

I can hear Coblin and Brendan screaming all the way from Keysborough

[Collin Li]

Yeah, this is silly. They don't understand that free markets have been crucially undermined since the beginning of the 20th century, and the various layers of regulation (particularly since the 70s) have been accelerating and worsening the business cycle.

[costargh]

Enlighten me...

Yeah, this is silly. They don't understand that free markets have been crucially undermined since the beginning of the 20th century, and the various layers of regulation (particularly since the 70s) have been accelerating and worsening the business cycle.

I don't think I understand

[Collin Li]

This is a recession we have to have eventually. The longer we delay it with cheap easy credit, the worse it will become. It is simply trying to solve the problems of regulation with more regulation.

The reasons why we ended up here make up a totally different story though. This is where people may disagree with me, as socialists hope this is the 'failure of capitalism' they can refer to after years of ridicule after the Soviet Union collapsed, but I believe it was because of the compassionate, although misguided, government intervention that initially guaranteed the loans that firms like Freddie Mac and Fannie Mae were giving out.

They thought they'd make housing loans more accessible to the poor. What they ended up doing was incentivising a build up of junk loans. Now the taxpayer must pay for a relationship between government and corporations that went wrong. The market certainly doesn't want to buy these junk bonds, so the right now the proposed "solution" is to price-fix at the tax-payers expense. We, the taxpayers, will buy them.

[AppleXY]

Urgh. The bailout is socialism lol.

The SEC chairman should be fired lul.

and Jeez, why is there so much subprime attention. Does everyone in the US have poor credit ratings that they require a subprime loan lol. meh. They should know that poor people are at a greater risk of defaulting

[Collin Li]

Enlighten me...

Yeah, this is silly. They don't understand that free markets have been crucially undermined since the beginning of the 20th century, and the various layers of regulation (particularly since the 70s) have been accelerating and worsening the business cycle.

I don't think I understand

What I am saying, without providing particular examples (because it's not hard to find them - the regulations grow at about 50 thousand pages a year, on average in the past few decades), is that to blame this on free-market capitalism is invalid. There are hardly any examples of free-market capitalism. If we have a closer look at how rapid regulations have grown in the recent years, this is a much more logical explanation for the collapse of the US economy.

[costargh]

So in other words, with the intentions of government being to have a leash on markets (eg. financial markets) to try and stop what they would consider market failures, they are actually doing more harm by having even the slightest bit of regulation. ie. no regulation is better than a freer market with some regulation (where the regulation has the intention of stopping potential problems which government fear may arise out of a free market?)

[Collin Li]

So in other words, with the intentions of government being to have a leash on markets (eg. financial markets) to try and stop what they would consider market failures, they are actually doing more harm by having even the slightest bit of regulation. ie. no regulation is better than a freer market with some regulation (where the regulation has the intention of stopping potential problems which government fear may arise out of a free market?)

A freer market is a market with less regulation.

Don't assume that regulations are for the microeconomic reasons you are taught in VCE Economics. Politicians regulate for any reason that sounds good - i.e.: helping the poor get housing loans (not an externality or a monopoly really).

[TrueLight]

yeah i agree with coblin... because it sounds like something ron paul would say !!!lol!!!

[costargh]

So in other words, with the intentions of government being to have a leash on markets (eg. financial markets) to try and stop what they would consider market failures, they are actually doing more harm by having even the slightest bit of regulation. ie. no regulation is better than a freer market with some regulation (where the regulation has the intention of stopping potential problems which government fear may arise out of a free market?)

A freer market is a market with less regulation.

Don't assume that regulations are for the microeconomic reasons you are taught in VCE Economics. Politicians regulate for any reason that sounds good - i.e.: helping the poor get housing loans (not an externality or a monopoly really).

Yeh what I meant though was that many government believes that no regulation is more gangerous that a market with some regulation (even if it's just a little bit of regulation) which is why they regulate it in the first place.

But yeh, good point about why they regulate.