Market Economy Still Strong - Vibrant - Flexible

This is another great article that explains why we have the best economy in the world - even though the naysayers continually come out of the wood work to deny history. As anyone can see that cares about this country, the politics of failure is strictly part of a liberal Democrat, New Socialist Progressive Party, agenda designed to persuade the uninformed voter that we have no chance of survival without more government, i.e. high taxes.


I would never have believed we, in this country, would have this many closet socialists or com-munists, in our population. They are like sharks circling a victim that has a small cut - even the slightest scent of blood in the water will have the hoard ready to mindlessly attack.


Who are these people? Where do they come from in such large numbers? Worse, why do so many people that have everything to lose believe what these killers of common sense say is fact? Are there that many mindless and insecure robots working and enjoying the fruits of this great country ready to give it all up on the word of someone that they have never heard of before?


For the love of God, look around you - what do you see? Are we going down the tubes? Hardly. Get a grip. The malls are jammed - the restaurants are full - Virtually nothing has changed, only our priorities in the short term.


Come on people, read this great piece, get a grip and keep the faith, the battle is joined!


Road to heaven still paved with free markets

*Terence Corcoran, National Post *Published: Thursday, March 20, 2008


When financial markets are gyrating and economic turmoil hits, declarations of pending cataclysm are frequently at hand. At such times -- junk bond crash, Asian currency crisis, Enron collapse, tech meltdown -- we are either said to be at the brink of the end of capitalism, brought down as Marx predicted by its own rampant greed and ritual lurches toward self-destruction, or we are set to plunge into some kind of replay of The Great Depression of the 1930s.


So it's no surprise there's a lot of this kind of talk around. The current star gloomster is Nouriel Roubini of New York University's Stern School of Business. He made an appearance on these pages two weeks ago under the headline "The coming financial pandemic." Mr. Roubini is now a household name among readers of Financial Times, where he is being lionized by Martin "The Mother of All Meltdowns" Wolf, and the Socialist Worker, which yesterday explored the "Shocking instability that is built into capitalism" by citing Mr. Roubini's scary estimate of global financial losses exceeding $6-trillion.


And now my good friend Michael Bliss has emerged from retirement to announce that the urrent U.S. subprime credit crisis marks the end of an era, the collapse of the "capitalist game" of the last few decades and the beginning of a return to regulation on a scale not seen since the Great Depression.


First, whether we -- Canada, the United States, the world -- are heading into some kind of economic cataclysm I cannot say. Alan Greenspan wrote the other day that the current financial crisis in the U.S. is "likely to be judged in retrospect as the most wrenching since the end of the Second World War." While that's bad, it's a far cry from the economy-wide devastation of the Great Depression.

It lasted 10 years, economic output fell 8.6% in 1930, 6.4% in 1931 and 13% in 1932. Unemployment hit 25%, wages fell 42% and world trade dropped 65%.Unless we plunge into that kind of economic hell, it's hard to imagine a return to what Mr. Bliss calls "massive new regulation of business, massive new taxation of wealth and sustained vilification of the values that have driven Wall Street and Bay Street."


How likely is it that Americans (or even Canadians) will insist on a an explosion of state intervention against business? Mr. Bliss cites Capital One's TV commercial portrayal of bankers as greedy vermin to be exterminated. It would be a mistake, I think, to blow an ad campaign into a political movement against banks -- especially since everybody knows Capital One is a bank.


At this point, I'm not sure whether Mr. Bliss is being predictive or prescriptive. He certainly seems convinced there's been an "awesome failure of free enterprise," and the state needs to step in "to protect us all from the havoc wreaked by greed and incompetence." And he adds: "My good friend Terence Corcoran will find his way to heaven still blaming accountants and regulators for the crack-up." I always thought Mr. Bliss would be joining me in heaven, but now I'm not so sure. He seems to be taking far too much glee in the idea that politicians, bureaucrats and regulators will -- and should -- be called in to overthrow free market capitalism.


Whatever the real failings of the capitalists whose risk detection systems failed -- to their own peril and at massive loss to themselves -- it's not as if they operated in a deregulated free market unfettered by bureaucratic and political interference. Banks have been subject to elaborate controls for years. Fresh accounting and bank capital rules are newly imposed at regular intervals. Post-Enron regulations blanket all public corporations and their employees.


But let's take a look at one of the bigger non-capitalist boondoggles behind the current credit crisis.Where did the U.S. subprime mortgage boom come from? In the early 1990s, the Clinton administration asked the U.S. department of housing to come up with a National Homeownership Strategy.


Working with private and public institutions, the strategy was to "achieve an all-time high level of homeownership in America within the next six years." Plans included innovative schemes to streamline transaction costs, bring in creative financing rules, ease land assembly and get money for mortgages into the hands of people who had no money.


To fulfill the American Dream it advocated, among other things, "financing strategies, fueled by the creativity and resources of the private and public sectors," to help home buyers who lack cash to buy a home or get income to make down payments. By the Bush years, the program had ballooned to encompass dozens of initiatives, including the American Dream Down Payment Fund and the Home Investment Opportunity Program.


The strategy worked, says Joseph Mason, associate professor of finance at Drexel University LeBow College of Business. "It worked really well. Some might say too well." U.S. home ownership rose to record highs by 2007. But it was a strategy that promoted risk, and when coupled with financial engineering wizards, the risks multiplied.


If there's a backlash to come, maybe it will hit business. But maybe it will turn--as it should--against the massive regulatory regimes that already exist.


tcorcoran@nationalpost.com