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.

Benjamin Kirby Responds to My Post

Benjamin Kirby answers my questions about the Clinton administration's economic team. Kirby was a low level staffer in the Clinton administration. Kirby has a great story about Mickey Kantor that may or may not be true. If true it confirms my suspicion that Kantor one of dumbest people in the administration.

Unfortunately, Kirby couldn't answer my question about Robert Rubin's and Joseph Stiglitz's working relationship. Stiglitz's is more progressive than the neoliberal Rubin. Where Rubin and Stiglitz disagreed is on the size of the deficit reduction package in 1993. Former Clinton administratin Council of Economic Advisers, Laura Tyson, reviewed both Rubin's and Stiglitz's books and weighs their differences. What is interesting is the pro-business Rubin supported vetoing welfare reform (Rubin supports government and private sector anti-poverty programs.) and Stiglitz helped create "third way" neoliberal economic policy theory. Rubin's and Stiglitz's debates were more about policy and both of them could make excellent arguments to counter each other and Kirby should have been in the room with a tape recorder.

These days Stiglitz is calling the Obama economic team incompetent or in the pocket of the banks. Rubin said that while he was at Citigroup "virtually nobody" saw the financial collapse coming. Guess which one is keeping a lower profile.



Agree or disagree with Rubin or Stiglitz they are both smarter than you will ever be. Both are better than former Bush amdinistration economic adviser Lawrence Lindsey. Only a true hack like Lindsey would argue that it wasn't the stimulus, but TARP (the bank bailout) and the FDIC that kept unemployment from rising to 15.7 percent. Lindsey advised President George W. Bush that the tax cuts would pay for themselves. One area that Rubin and Stiglitz agree on is that the surplus should have been used to pay off borrowed debt.

Quote of the Day

"We will see in the next two years the real cost of there not being a second round of stimulus. We will see the economy slow down at a very high economic cost."

Noble-winning economist Joseph Stiglitz.

Stiglitz on what he would say to the Tea Party



Stiglitz on how economist Adam Smith's invisible hand of the market theory is utter nonsense.