Where is the Libertarian explosion coming from?

donegalfella wrote: »

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donegalfella wrote: »

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Exile 1798 wrote: »

I think their response to the Global Financial Crisis shows the unseriousness of most Libertarians, or at least those who identify themselves as such.

The origin of the crisis is readily knowable. There was a basic flaw in the American Capitalist system, a flaw that was allowed to grow unchecked because of a lack of government regulation and the degradation and running down of existing regulation. This was predicated by the nonsense belief in the "hidden hand" of the market.

The flaw was that people creating mortgages were able to sell them off to Wall Street Banks. Because the people originally brokering the loan were simply making money from selling it on they didn't do due diligence on whether the mortgagee could afford the loan. Worse then that, they started creating loans and mortgage products specifically designed to sell to people they knew couldn't afford them. The more of these bad loans they made and sold on, the more money they made. These people were merely acting in their selfish self interest – not an immoral thing by itself, but very bad for the wider financial system. Strict regulation on mortgage lending practices and on-selling would have ensured that the self interest of these people was instead tied up with making good loans that were a strong chance of being honoured. A bit like the way it's in someone's financial self interest to rob a bank, but that self interest is altered by the law against robbing banks and the significant penalties that exist against that particular action.

What turned a mere housing bubble into the Global Financial Meltdown was the actions of the big banks who took these loans, securitised them and sold them off in bundles. These securities were incorrectly appraised by Credit Rating Agencies as Triple A or B when in reality they were rubbish. Again no due diligence was done. Credit Ratings Agencies are paid by the issuers of bonds to rate those bonds, therefore a conflict of interest exists. Actually it was no conflict at all, CRA's simply rated bonds as their major customers Bears Sterns, Goldman ect wanted. An epic failure of industry "self regulation." Overtime Wall Street developed new financial instruments and markets based on these rubbish mortgage backed securities. These markets, being new, were virtually outside the bounds of any regulation. They grew to an outrageous size. It is estimated that about 70 trillion dollars worldwide were tied up in these bogus markets. Eventually mortgagees started defaulting, the property bubble burst and these markets collapsed along with the banks and unwitting investors supporting them.

At every step this catastrophic collapse could have been stopped or mitigated by strong government regulation. At every step it was enabled by self interest left unchecked. Yet what is the Libertarians response? And for that matter what is the response of much of the Right? The same old anti-government rhetoric, blame the Unions, blame the home buyers, blame the Greeks, blame the left – blame everyone and everything but their own discredited beliefs about the nature of self interest, "self-regulation", and the negligible role government should play in a modern Capitalist economy.

Their unserious nature is also demonstrated by the fact that they are able to identify for blame a very minor player in the meltdown – Frannie and Freddie – but this where all their analysis stops. To go any further would be unrewarding from their point of view, so they don't. They just stick to the tired government bad, regulation bad dogma that underpins all their arguments. They simply ignore all the evidence that contradicts their outlook, and thus don't allow reality to shape their world view. Much like the Utopian Socialists of old.

donegalfella wrote: »

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donegalfella wrote: »

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