Saturday, April 23, 2011

The Free Hand of the Market

The invisible hand of the market magically fixes hamburgers and the financial sector. Just ask Alan Greenspan.

Today's competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith's "invisible hand" that is unredeemably opaque. With notably rare exceptions (2008, for example), the global "invisible hand" has created relatively stable exchange rates, interest rates, prices, and wage rates.

The Great Depression of 1929 and the Great Recession of 2008. Greenspan is right. They were notable. The housing bubble was a partial cause of the 2008 financial meltdown. Economist Joseph Stiglitz blamed Alan Greenspan's failure to raise interest rates or regulate mortgages.

First, key regulators like Alan Greenspan didn't really believe in regulation; when the excesses of the financial system were noted, they called for self-regulation -- an oxymoron.

The market will fix itself. With the notable exeption of the Federal government having to commit $700 billion in bailout money.

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