Can anyone explain the “FREE” in “free market” to me?

I know critiquing neocons for market interference is nothing new, but right now it is just so crazy.  Let’s recap the last few weeks.

Hoping to avoid a big drop in the financial markets, the fed subsidizes Chase’s buy out of Bear Sterns, externalizing most of the losses from bad business decisions or unlucky investments or failure to diversify or whatever you want to call it.  Bear Sterns is not saved but how cool for Chase?  They get this big new company and none of the downside risks and costs. 

Oh, and when the economy is faltering let’s give rebates to try to tinker with all kinds of markets. 

Don’t forget helping people who bought mortgages on the free market that they now cannot afford.

And, just the last one for now, all the tinkering we do with interest rates in reaction to all kinds of market faltering or chaging

Don’t get me wrong, I am not against helping mortgage buyers who may have been duped by greedy mortgage brokers who lied to them (hey, how about some regulation with enforcement?).  I am just saying, why do we even pretend that there is such a thing as free markets?  It is hard for me to hear the talk of free markets without giggling. WHat am I missing?  Why doesn’t everyone just laugh when free market lingo is used to justify Chinese imports of cheap stuff?  Or when it is used to resist helping individual home owners/mortgage holders but not Bear Stearns?

What am I missing?

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3 Responses to Can anyone explain the “FREE” in “free market” to me?

  1. nobamakoolaid says:

    The term “free market” has obviously evolved from its original meaning in much the same way we still hear our form of government referred to as a “democracy”. True free markets tend not to be sustainable because they lack level playing fields; enter government regulation.
    As for the Bear Sterns deal, everything I have read does not indicate a bailout, but rather the Feds acting as a loan guarantor. Chase still had to take on the debt load, so the move was not without risk. While one could argue about the environment that led to the necessity of the deal, the government did the right thing given the current circumstances.
    It has become quite clear in the mortgage market that the government allowed far too much “free market” tactics for far too long. Texas, who does not allow home equity loans, is looking to be the most sensible government in this whole mess. Obviously, changes need to be made. In the meantime, it should not be hard for most to understand that government has a roll here in helping save these mortgages and thereby inserting stability back into the market value of all of our homes.
    Interest rates and rebates – The health of our entire economy is measured by a surprisingly simple formula; GDP=G+C+I+NX. To stave off or at least minimize the impending recession, government works within this formula. Government spending (G) is practically guaranteed to stay up due to the two wars we are supporting. Yes, there are about a bazillion better ways we could be spending that money, but this part of the formula is not responsible for the recession. Consumption (C) is a huge issue. People are legitimately concerned and are tight with their money. By getting modest rebates into everyone’s hands, the government will ensure a temporary uptick in whatever consumer spending would have been this summer, so (C) will at least be higher than it otherwise would have been. Investment (I) is helped by lower interest rates as companies choose to make capital expenditures while it is cheapest to do so. Net Exports (NX) is the one shining star in this mess. The low interest rates and subsequent devaluing of the dollar are causing our trade deficit to shrink. Our domestic companies are able to expand b/c of low interest rates and our goods become more affordable overseas.
    It may often sound like just a bunch of ways to help Halliburton, but there is sound methodology at work here. Government’s role is to minimize the peaks and valleys in GDP and help ensure stable growth. As new technologies and markets constantly emerge, previous methods of regulation will prove inadequate. The key is that we learn from mistakes like the mortgage mess. Deregulation in many industries spurred massive growth periods that were often followed by revelations of criminal corruption and greed. We need to continue to look for the balance that gives our people the opportunity to grow while not allowing the Kenneth Lays of the world to have orgies at our expense.
    A bit lengthy but not bad for what is essentially an entire semester of Introductory Macroeconomics.

  2. Mary Rose says:

    I have not taken macroeconomics BUT feel better about the Bear Stearns bailout after reading Paul Krugman’s column (3/17) and last Sunday’s NYT Week In Review article for the naive among us (me, before reading said article) who have feared that this is not just a recession but a depression. The main thesis of the latter is just as the comment above suggests: The benefits of minimizing those peaks and valleys. Apparently in the years since WWII there have been 10 boom and bust cycles, all far less severe and FAR less frequent than the period between about 1870 and 1930’s, when people didn’t know what to expect. This quieter time has come about largely because the Fed has acted quickly against worrisome trends. Krugman’s column simply notes something like: Yes, this is a slimey, undeserved bailout, but the alternative of doing nothing is far, far worse. We all know about painful trade-off’s (even if it’s just having to play nice with a Bush administration appointee).
    Finally: I know this comment could have been much cooler if I actually linked you to said articles, but I haven’t figured out how to do that yet. Leaving a reply to a blog is about as tech-savvy as I ever get.

  3. laurabethnielsen says:

    Convinced by 2 of my favorite people — who should really meet if they weren’t thousands of miles from one another.

    I like it where koolaid concedes that it all sounds like a lot of ways to help Haliburton, because that’s what it seems like. This weekend I watched a mediocre movie called “Inside Man” which tried to raise this issue (ultimately failed to be great because we see the holocaust in a particular way at this moment in history). What would have been beetter is to think through a more modern corporate wrong-doing and actual death/state violence. I guess that is what michael Moore is for?

    Anyway, Mary — I am all about minimizing the peaks and valleys — I just hope the valleys we minimize are for Everyday Person as much as for Big Business Guy.

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