Wednesday, October 24, 2012

Beware of Interventionism Dressed Up As A "Market Solution"

By, Chris Rossini
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You have to be on your toes when listening to interventionists. They can be slick, especially when it comes to their use of language.

I want to shed light on a popular linguistic trick that's always ready in their holster: The "Market Solution."

You'll hear how Social Security can be improved (or saved) with 'private accounts'...or how Medicare under Romney can be 'privatized.' Even Rand Paul tried to pull a fast one with his 'privatize the TSA' nonsense.

I'll give you a quick visual for future occasions. Every time you hear the interventionists talk about a "market solution," think along the lines of the following picture:

In other words, you're about to get snowed.

First, such proposals are not a market solution. They're always crony in nature (i.e., government + big business). Second, when failure of such proposals inevitably hit, what do you think will get the blame?

That's right...the market!

Another fresh round of intervention easily moves in.

The latest example of this linguistic trick that I came across is from a piece by James Pethokoukis titled "How Mitt Romney Could Radically Change The Federal Reserve".

Pehtokoukis says:
"Although he hasn’t pledged to 'end the Fed' as some tea party GOPers and Ron Paul fans desire, Romney has already stated that he wouldn’t renominate Bernanke and is on record opposing the Fed’s latest quantitative easing program."
As Ron Paul has repeatedly pointed out. It's not the man in charge of the system, but the system itself that has to go.

Pehtokoukis then offers up some names on who Romney would replace Bernanke with. But then expresses that he favors Greg Mankiw (my emphasis):
"Greg Mankiw is seen as the dove in the group. He has embraced the idea — one with growing popularity on the left and right — that the Fed should target a nominal GDP path, even if that means sometimes allowing inflation to rise about 2% for a period of time...

Would Romney ever offer up a Fed nominee who believed in NGDP targeting? I don’t know, but he should. It would be a very pro-market move. Doing so would be an acknowledgement that big downturns are caused by monetary mistakes, not malfunctioning markets. Like a gold standard, it would be rules based rather than discretionary. Moreover, it might even allow for the transformation of the Fed into a passive buyer and seller of NGDP futures contracts to hit its NGDP target. Markets, not the dozen men and women of the Federal Open Market Committee, would be handling monetary policy.

That would certainly end the Fed as we know it.
See how slick?

First of all, let's get something straight. In a free market, A trades with B, without the intervention of C.

The Fed is about as anti-market as you can get. They specifically intervene and distort interest rates, and subsequently cause the boom/bust business cycle.

The idea that the Fed will be "rules based" like the gold standard is preposterous. We're dealing with humans here! Can't Pehtokoukis see that they'll just change the rules when necessary? How hard is it for a member of the government or Fed to break the rules, or just change them?

And if you want markets to handle monetary policy, as Pehtokoukis says, instead of "the dozen men and women of the Federal Open Market Committee" then all you need to do can be summed up in three words:

End The Fed.

The market plays no favorites.

Profits & Losses are the harshest of regulators. That's why the free market is so hated by government and its legions of cronies.

So beware when you read interventionist propaganda dressed up with a "market solution". It's nothing but a big lie.


  1. Yeah but if there's little popular support for the full free market solution and it's not politically viable, isn't it better to have at least a partial market solution like privatizing social security than to have it be 100% socialist as it is now? Or like school vouchers, there's evidence that scholastic performance is improved in the voucher system and it weakens the teachers' unions so how is that not at least better than it being totally run by the government? As long as the ultimate goal of full liberty isn't forgotten I don't see what harm these interim type programs are. And it seems counterproductive to me to argue against them, similar to the anarcho-capitalists who argue against voting for Ron Paul.

  2. 10 points to whoever can identify the person who said:

    "Gradualism in theory is perpetuity in practice"

    The task at hand is to convince American rubes that government is the cause of most of their problems, not the answer.