Thursday, February 19, 2009

Roubini On Laissez-Faire

Nouriel Roubini:

"To paraphrase Churchill, capitalist market economies open to trade and financial flows may be the worst economic regime--apart from the alternatives. However, while this crisis does not imply the end of market-economy capitalism, it has shown the failure of a particular model of capitalism. Namely, the laissez-faire, unregulated (or aggressively deregulated), Wild West model of free market capitalism with lack of prudential regulation, supervision of financial markets and proper provision of public goods by governments."

Oh, yeah, Roubini clearly has a point. It was clearly a big mistake to let Bush cut government spending by 90%. And it was a big blunder to let him repeal the Community Reinvestment Act and to abolish "government sponsored enterprises" Fannie Mae and Freddie Mac. Not to mention what a big mistake it was to abolish the Fed and replace it with a pure gold standard, something which prevented government from lowering interest rates to 1% after the end of the tech stock bubble. And did I mention that Bush also stopped federal subsidies to housing? If it hadn't been for those laissez-faire policies, clearly the housing bubble and the ensuing crisis would have been averted.


Blogger Ke said...

I hate how he stigmatized lassez-faire capitalism as the primitive "wild west" methodology. This type of propaganda has caused millions of young Americans to completely missed the real problems at hand and instead use lassez-faire capitalism and Republicans as scapegoats. What abhors me even more is that most of these young Americans won't give any time of their day to do research to find out the truth as if they're in a fanatical religious cult. Well, what else can you expect when there are flocks of history professors teaching us that the New Deal was a success and FDR was a messiah-like hero?

7:07 PM  
Anonymous Anonymous said...


7:08 PM  
OpenID JSC said...

Roubini, like Obama fail to see their short-term views on the economy and economic policy. How fundamental fallacies escape people of their stature boggle the mind.

9:02 PM  
Anonymous Anonymous said...

Something good may come out of this crisis. I belive and hope that Austrian school of economics will strengthen it´s position in the public debate.

12:34 PM  
Anonymous Bruce said...


The myth that GWB was a small government free-market guy is apparently still strong.

2:26 PM  
Anonymous Anonymous said...

Your sarcasm proves the absurdity of Mr. Roubini's comments.

4:12 PM  
Anonymous Anonymous said...

Roubini is either clueless, playing semantical games unprudently using terminology or just plain evil, either by advancing his own mental interests of being the 'great' intellectual or by advancing the interests of his political idols. But the reality will probably be that it's all of the above in some degree.

- Arend

5:32 PM  
Anonymous Anonymous said...

Another way to characterize the implications of what Roubini is saying is that anything that is not full-blown slavery and or fascism/socialism is laissez-faire capitalism. This piecemeal characteriszation of laissez-faire is contradictory to any reasonable definition of laissez-faire. Laissez-faire doesn't come in degrees, it either is LF of it isn't.

Roubini is expressing a great amount of intellectual dishonesty, which by his own standards isn't of course true. I'm more and more seeing that intellectuals defending government social engineering solutions to government social engineering clusterfucks are actually by their expression of their instrumental opinion into the social engineering business as well; because the truth may 'backfire'. Yeah right...


5:38 PM  
Blogger Celal Birader said...

Donald Rumsfeld once said "we go to war not with the army we wish we had but with the army we have".

When we come out of the womb crying we don't come out into the world we wish we had but the one we have -- with all of its Central Banks etc.

To be fair to Roubini, and you can hear him say it yourself HERE , he understands "stimulus" is going to be a burden on future generations and he also recognises the threat of hyper-inflation.

Fractional banking is what made modern capitalism possible : watching THIS VIDEO is time well spent in my opinion. From it you can see how it enabled man to exploit the natural resources of this world to the extent he has.

Hence, there may an ecological argument against fractional banking but perhaps not necessarily an economic one which is as persuasive.

Sure there will be bubbles and there will collapses. (Mandelbrot and other mathematicians indicate these cannot be avoided under any system, as far as i can make out these things).

What is an open question is how far can de-leveraging can be allowed to happen as people like Faber and Rogers would like to see without leaving everybody in some primitive stone age king of existence ?

8:10 PM  
Blogger stefankarlsson said...

Celal, when the Rogers-Faber solution was tried by President Harding in 1921, strong growth and not "primitive stone age" was what followed.

10:00 PM  
Blogger Celal Birader said...

1921 ? That was before the Great Depression wasn't it ? My feeling is that we are currently analogous to a situation like the Great Depression. i.e. we've had our "roaring 20's" of credit expansion and now we face something analogous to 1930-33. (BTW, i have purchased Rothbard's book and plan to read it at the earliest opportunity). That is the context in which i make my comment re Faber/Rogers de-leveraging.

10:04 AM  
Blogger stefankarlsson said...

In 1930-33, Rogers' solutions weren't applied. Instead, Herbert Hoover pursued policies more similar to Obama's, as you will see when you read Rothbard's book on the subject.

10:48 PM  

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