Ayn Rand became a stabilizing force in my life. It hadn’t taken long for us to have a meeting of the minds—mostly my mind meeting hers—and in the fifties and early sixties I became a regular at the weekly gatherings at her apartment. She was a wholly originally thinker, sharply analytical, strong-willed, highly principled, and very insistent on rationality as the highest value. In that regard, our values were congruent—we agreed on the importance of mathematics and intellectual rigor…
I was intellectually limited until I met [Rand]. All of my work had been empirical and numbers-based, never values-orientated. I was a talented technician, but that was all. My logical positivism had discounted history and literature—if you’d asked me whether Chaucer was worth reading, I’d have said, “Don’t bother.” Rand persuaded me to look at human beings, their values, how they work, what they do and why they do it, and how they think and why they think. This broadened by horizons far beyond the models of economics I’d learned… [Rand] introduced me to a vast realm from which I’d shut myself off.
Greenspan admits to being merely a “talented technician” until he met Rand. Rand, by introducing him to values, persuaded him to look at the motives and values of human beings. The question is: did Greenspan really learn anything about human beings from Rand? Or did he merely learn the wrong things?
We’ve already quoted Greenspan’s acknowledgement of mystification over what’s happened in the financial markets in recent weeks. Greenspan admits to being in “a state of shocked disbelief” that the “self-interest of lending instutitions” failed to protect shareholder’s equity. Some of us are shocked that Greenspan should be shocked. Those who understand human nature through and through know that the very notion of “rational self-interest,” so important to Rand and her Objectivist philosohy, is highly problematic: for how can self-interest be “rational” when even the intelligent human being in history, as Santayana once put it, holds “a lunatic in leash.” Nor should we underestimate the pernicious effects of crowd psychology on the so-called “rational animal.” As Schiller once put it: “Anyone taken as an individual, is tolerably sensible and reasonable—as a member of a crowd, he at once becomes a blockhead.”
In other words, if Greenspan wanted to figure out how and why human beings think, or what they do and why they do it, Rand was nearly the last person he should have consulted. Rand’s influence, therefore, did him little good. Despite all the broadening of horizons that he achieved as a consequence of Rand’s influence, he remained, at his core, merely a talented technician. When confronted with the credit bubble mania of the last twenty years, he failed to see the irrational elements that went into its creation. In particular, he never fully appreciated the irrationality of using derivatives as insurance instruments and, until very recently, has stubbornly maintained that regulating derivatives is impossible because such financial instruments are too damn complex:
Collecting data on hedge fund balance sheets, for example, would be futile, since the data would probably be obsolete before the ink dried. Should we set up a global reporting system of the positions hedge and private equity funds to see if there are any dangerous implosions?...I would not be able to judge from such reports whether concentrations of positions reflected markets in the process of doing what they are supposed to do...or whether some dangerous trading was emerging. I would truly be surprised if anyone could.
Here Greenspan is talking like a talented technician, rather than a wise man who has the benefit of good judgment. Reports of hedge fund transactions are not need in order to determine whether systematic irrationality is taking place in the derivatives market. Some of us have known for years the dangers of derivatives. Doug Noland from prudentbear.com warned of such irrationality as long ago as 1999, and I warned about it back in 2003. Even Warren Buffet a few years ago described derivatives as "toxic" and "financial weapons of mass destruction." So it turns out that knowledge of the systematic irrationality of derivatives is possible after all! Nor are reports on hedge funds required to attain such knowledge! Merely knowledge of the the frailties of human nature and the mephitic influence of crowd psychology—knowledge, in other words, that Greenspan could never have attained from Rand.
25 comments:
This crisis was not a failure of laissez-faire capitalism; it was a failure of intensive regulation, in which Greenspan took part. In unbelievable, mass stupidity, the most commonly touted solution is more regulation!
From The American Competitive Enterprise Institute:
“While the Dow collapses, we have a bull market in government regulations. The 50-plus departments, agencies and commissions are now at work on 3,882 rules; 757 will affect small businesses. More than 51,000 final rules were issued from 1995 to 2007.”
That’s nearly 54,000 NEW regulations, added to what was there before, in only 12 years!
That is hardly Rand's laissez-faire capitalism; that’s fascism/corporatism & socialism. At root, those are the very ideologies Rand spent her lifetime hoping to save Americans and America from. Now, when the effects of those destructive ideologies from Washington hit the fan, everyone is blaming laissez-faire capitalism instead. They are ridiculous, uninformed, or dishonest.
Greenspan dropped any pretense of understanding Rand's arguments sometime before he became head of the Fed., and he then became a major part of the problem. His monetary policy and suppression of interest rates —when Rand would have said “let the market decide”— were an appalling government intervention. Add in the HUD, CRA, CDS, Fannie Mae, Freddie Mac and the recipe for a catastrophically distorted market, including the trading of derivatives, was complete.
Edward Cline wrote, "Reason and rationality flee when force becomes a factor in men’s decisions, to be replaced with the pragmatism of punishment-avoidance or a risk-free shot at easy money."
So imagine YOU, dear reader, are the CEO of a large financial organization. Your competitors are complying with the regulations and appear to be making good for their shareholders, while things are getting tight for your firm. What do you do?
You do the pragmatic thing, join in, and hope for easy money. If you are able to understand the fraud in the government’s game, you build yourself some protection for when the government's house of cards collapses; evidently most people are not that smart.
You would not have dared to engage in the risky lending or buying that lead to the crisis, were it not for the handful of people in the US government who, believing they were more intelligent than the free market, installed legislation to distort it. Without those people, lending rates would have been adjusted by the financial market years ago, paper money would not have been printed like it grew on trees (e.g. “helicopter Bernanke”) and the present crisis would never have materialized.
Capitalism is the only *moral* system because it let's a man keep what he produces; it was the American system. An historical and geopolitical look at nations shows that those which are more free have citizens who prosper more by their own effort, and live more peacefully. Free markets made America great, from 1776 to the late 1900's, and then serious economic regulation began. Even America's poor were wealthy compared with the middle class of other nations.
Ayn Rand was right, and should not be blamed for a protegé's failures.
[note: while I was writing my response, which follows, rnbram posted a splendid rejoinder and I agree with every word of it. Good one! I'll post my less polite response anyway; experience has proven that repetition is necessary here.]
So what we have here is a dishonest, slow motion mud-drag in the Greenspan/shocked incident.
You know, Mr. Nyquist, most Rand haters are at least having the decency to gloat once, very loudly, very triumphantly over this and then move on. They know their gloat is dishonest, as I am sure you do, but feel safe to belch it out at least once. Permission was given for this by Greenspan himself, who threw Ayn Rand under the train while claiming victim-hood for being ambushed by ignorance of the "flaw" in her theory. I hope he rots in Hell (irony).
How many segments of your droning are you going to squeeze out on it?
Here are the two errors. Perhaps once you see them, and I tell you that every gloat out there on the blogosphere is being countered by Objectivists immediately and completely, you will cease your embarrassing blunder and give it a rest.
1) All resemblance of Alan Greenspan's behavior to Ayn Rand's actual system is a total illusion. We knew it when he took the job, we knew it as he blustered along, we know it now. Here are my excoriations of this person, written eight and seven years ago:
http://jrdonohue.com/commentary/greenspan2.html
http://jrdonohue.com/commentary/greenspan1.html
No Objectivist counted on Greenspan, believed he 'was doing a good thing under the circumstances' or that he was eventually going to birth free-market capitalism. Greenspan is not an Objectivist.
2) Greenspan blaming a 'flaw' in capitalism is void and a craven attempt to self-pardon. The fact that capitalism cleans its own stables and punishes pirates can only obtain if capitalism actual is in play. The system now in place bears little resemblance to capitalism. It is a variant on cartel/statist/Fascist incest between government agencies (with guns) and pseudo-businessmen who would be crushed instantly if their airlock between them and actual capitalism were to be breached.
If Objectivism is to be held responsible for what Greenspan did, it is on the level of all of Islam being responsible for what Mohammed Otta did and Jesus Christ being responsible for all those burned alive by agents acting in his name.
John Donohue
Pasadena, CA
If Objectivism is to be held responsible for what Greenspan did, it is on the level of all of Islam being responsible for what Mohammed Otta [sic] did and Jesus Christ being responsible for all those burned alive by agents acting in his name.
So you agree that Objectivism is a religion?
Good to know.
right. that's a response. brilliant.
"My logical positivism had discounted history and literature—if you’d asked me whether Chaucer was worth reading, I’d have said, “Don’t bother.” Rand persuaded me to look at human beings, their values, how they work, what they do and why they do it, and how they think and why they think."
I'm not sure Greenspan understood Logical Positivism very well.
mbram:
>This crisis was not a failure of laissez-faire capitalism; it was a failure of intensive regulation...
Oh, really? Tell me mbram, which part of the financial system blew up the most severely: the more regulated sector or the less regulated sector? A rather inconvenient fact for your theory.
The remainder of your response is simply a secular version of GK Chesterton's old excuse that Christianity could not be said to have failed, as it had never been tried. In other words, propose an unworkable systems and then decry the fact that men have failed to achieve it. This tactic has been around a lot longer than Objectivism, clearly...;-)
John writes:
>1) All resemblance of Alan Greenspan's behavior to Ayn Rand's actual system is a total illusion.
Here we have yet another variant of Chesterton's Excuse. As I wrote earlier, no-one thinks Greenspan was an Objectivist. (Of course, not even Objectivists can agree on who is a true adherent to "Ayn Rand's actual system"!) The point is: did she greatly influence his thinking in an anti-regulatory way? The answer to that is "yes." And are the current results of this influence the opposite of what he expected -so much so that he is profoundly shocked by the scale of the disaster? The answer is "yes."
>2) Greenspan blaming a 'flaw' in capitalism is void and a craven attempt to self-pardon.
Of course! That's because capitalism (in its Objectivist form of course) is a flawless system - ergo the error would have to be human. Chesterton's Excuse strikes again.
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Here Greenspan is talking like a talented technician, rather than a wise man who has the benefit of good judgment. Reports of hedge fund transactions are not need in order to determine whether systematic irrationality is taking place in the derivatives market. Some of us have known for years the dangers of derivatives. Doug Noland from prudentbear.com warned of such irrationality as long ago as 1999, and I warned about it back in 2003. Even Warren Buffet a few years ago described derivatives as "toxic" and "financial weapons of mass destruction." So it turns out that knowledge of the systematic irrationality of derivatives is possible after all! Nor are reports on hedge funds required to attain such knowledge! Merely knowledge of the the frailties of human nature and the mephitic influence of crowd psychology—knowledge, in other words, that Greenspan could never have attained from Rand. - Greg
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I agree with it.
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Capitalism is the only "moral" system because it let's a man keep what he produces; - rnbrm
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Who decides what is "moral"?
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it was the American system. An historical and geopolitical look at nations shows that those which are more free have citizens who prosper more by their own effort, and live more peacefully. - rnbrm
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That was why U.S. had to rob and kill the natives?
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Free markets made America great, from 1776 to the late 1900's, and then serious economic regulation began. - rnbrm
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Does this mean then you believe U.S. government had not subsidized the industrialization in the 1800's at taxpayer's expense?
Daniel Barnes' attempted Chesterton Excuse attack falls on barren soil. It is void. The "never tried" thing is not the claim. The claim is "not now and not for a very long time." You cannot construct the reality that Miss Rand's form of political economy was in play.
[We could have a beer and discuss the period when it was "closer" to being in play, namely the Golden Age of Capitalism 1840s-1917. I'd give Chesterton a run for his money. But that is a separate issue, irrelevant to this collapse.]
What is happening now is the implosion of the Progressive's cartelBusiness/socialized money system. They are delighted to have an idiot (please use your imagination on the real name I have for him) who will stand up and without them even asking, just volunteer to put the blame on their enemy, whom he betrayed long ago and whose principles he stopped practicing long ago (if he ever indeed did so). They just cannot believe their luck.
Mr. Barnes' 'which half' feeble effort is also fruitless. A mixed economy is mixed, and we have homogenization. I'd say this one is way past the even-Steven point. The root of the un-Capitalism is the collectivism at the heart through the Central Bank. If all money is enslaved, how can one tell "which half" is the free market 'side' and which is the collectivist side?
But don't worry, just because Greenspan's assassination is easily seen through, there are plenty of other attempts to blame Ayn Rand for everything. Mr. Obama did it yesterday.
Thank God she's dead.
John Donohue
Pasadena, CA
Dan,
The intracacies [sic?] of finance are not my strong suit, but I think one could argue that because we live in an an econonomy where the US government routinely bails out entities that make bad business decisions (Long Term Capital, Chrysler, banks, even Mexico a few years ago) businessmen take on risks they wouldn't normally take in the belief that they are "too big to fail."
For example, would businesses in an unregulated economy purchase highly leveraged government insured mortgage securities if they didn't think government was a backstop in case of defaults?
-NEIL
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John: "You know, Mr. Nyquist, most Rand haters are at least having the decency to gloat once"
If John thinks this post is about gloating (or that it's about hating Rand), then he's completely missed the point. We're only interested offering criticisms of what we regard as flaws in Rand's philosophy of Objectivism. John and rnbram are welcome to criticize our criticism. Unfortunately, their criticism fails to address my specific arguments. They seem to make the assumption that laissez-faire and capitalism are synonyms and that anyone criticizes laissez-faire is some kind of fascist-corporatist-socialist. Yet this is precisely the premise in Rand that I am challenging. I am merely arguing that laissez-faire is not an adequate criterion for the free market. Take this issue of derivative securities as an example. This is the one area where market failure clearly contributed to the current financial meltdown. To declare otherwise is to evade the facts. All that one would need to have prevented this market failure is one simple law: namely, a reserve requirement for derivative issues. What reasonable person could be against that? After all, banks have reserve requirements. Austrian economists have argued that banks should back their loans with 100% reserves: that anything less leads to the business cycle. But Randian ideologues won't support any such reserve requirement for derivatives, because it violates their precious principle of laissez-faire. This is an instance where ideology trumps fact and experience—and that is not a good thing.
Neil:
>I think one could argue that because we live in an an econonomy where the US government routinely bails out entities that make bad business decisions...
Well yes the "moral hazard" argument has considerable force. And no doubt there were moral hazards in the way the crisis has occurred, and there are moral hazards in the various rescue efforts proposed.
However the situation is this: it seems that 1) the moral hazards that were involved could have been ameliorated greatly by regulatory oversight and 2) the moral hazards in the rescue efforts seem to be outweighed by the dangers to the overall economy.
Think of building a house. It takes a huge amount of money, time and effort to achieve. Yet it can burn down in a moment due to some design fault or even some lazy or careless mistake. Now, would we recommend that the house should be allowed to burn, with no public authority such as the fire dept to intervene, as the destruction of the house would be a "moral" lesson to future builders that they will not be rescued from their errors? Does having a fire dept create a morally hazardous environment for builders, as they will lazily assume the big red trucks will come along and save the situation should their building skills be inadequate? Will it encourage them to cut corners in fire safety and construction?
The answer is: yes, to some extent. But the problem that represents is far less than that of families cast from their homes, and fires spreading to neighbouring houses (as financial crises can spread to other, initially unaffected sectors), and the overall destructive effects of not having a fire dept. Hence we trade the two things off as the lesser of two evils, and attempt to legislate to minimise the moral problem (just as we do with other moral problems such as theft) as much as possible whilst accepting we can never fully do away with it.
These are problematic situations. Not everything has a tidy solution. It's a choice between the disastrous and the unpalatable, as JK Galbraith once said.
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This is the one area where market failure clearly contributed to the current financial meltdown. To declare otherwise is to evade the facts. All that one would need to have prevented this market failure is one simple law: namely, a reserve requirement for derivative issues. What reasonable person could be against that? After all, banks have reserve requirements. Austrian economists have argued that banks should back their loans with 100% reserves: that anything less leads to the business cycle. But Randian ideologues won't support any such reserve requirement for derivatives, because it violates their precious principle of laissez-faire. This is an instance where ideology trumps fact and experience—and that is not a good thing. - Greg
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Excellent point.
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Think of building a house. It takes a huge amount of money, time and effort to achieve. Yet it can burn down in a moment due to some design fault or even some lazy or careless mistake. Now, would we recommend that the house should be allowed to burn, with no public authority such as the fire dept to intervene, as the destruction of the house would be a "moral" lesson to future builders that they will not be rescued from their errors? Does having a fire dept create a morally hazardous environment for builders, as they will lazily assume the big red trucks will come along and save the situation should their building skills be inadequate? Will it encourage them to cut corners in fire safety and construction? - Daniel Barnes
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Brilliant analogy.
Daniel,
The Fire Department used to be a private institution. In the case of the financial markets, you can call it the rules of market economics themselves, which mean that no one is going to invest in shoddy house building, unless someone with guns and money is forcing them to (like, I dunno, the Fed or the Gov). If they do break the rules, they face the 'Fire Department' of another bank coming in and putting out those fires, but claiming the burnt down land where the property was as its own. For an example of this, see the Panic of 1907 (http://en.wikipedia.org/wiki/Panic_of_1907) in which JP Morgan got everyone to tell him where the fires were, before he went about putting them out.
If other people's property catches fire because of the shoddy building of one's person's house... well, your analogy kind of breaks down here. It'd be better if were talking about Campervans, since they can be moved around easily. Or Houseboats. Because they're fun. Why is anyone going to park their Campervan - or lay anchor - next to someone who is notorious for dancing around on their property with a cigarette in one hand and a can of petrol in the other?
Or in terms of finance - why is anyone going to invest irrationally, in vast sums of money, unless they've been made to believe that things aren't as dangerous as they seem, because there's so much (inflated) money to spend, or because their investments have been 'guaranteed' by the government in case they fail?
Tenure:
>The Fire Department used to be a private institution.
So have police forces and military forces and monetary systems and what have you. At varying points of history such institutions have come in and out of private or public control. I'm not sure what your point is here?
>If other people's property catches fire because of the shoddy building of one's person's house... well, your analogy kind of breaks down here.
Why do you think so? The point is that crises can quickly migrate from one business to another, from one asset class into another, from one market into another. In most cases one can no more extract one's assets profitably from a simultaneously deleveraging market (ie one in crisis) than move one's house during a neighbour's fire.
>Or in terms of finance - why is anyone going to invest irrationally, in vast sums of money, unless they've been made to believe that things aren't as dangerous as they seem, because there's so much (inflated) money to spend, or because their investments have been 'guaranteed' by the government in case they fail?
Because humans err. This is not such a revolutionary proposition, no? Now, the idea is that we must be able to learn from our mistakes. But in order for this to happen, these mistakes must not be fatal. We have to survive them in order to learn! Hence the justification for government action, just as in any other type of national emergency such as wars or earthquakes or any other situation where a market cannot function properly. (Pace Rand, let's call it the "economics of emergencies", where normal market rules are suspended, just like she suspends her normal ethical rules in emergencies...;-)) Of course the argument becomes more complex in practice (we must make sure the fire chief is not also a closet arsonist - as happens sometimes sadly!) But there is the basic principle at least which underlies a government backstop in economic and financial crises.
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The Fire Department used to be a private institution. In the case of the financial markets, you can call it the rules of market economics themselves,... - Tenure
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Tax collectors used to be private enterprises as well long time ago.
So do you think privatizing IRS in the free market fashion would work better?
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...you can call it the rules of market economics themselves, which mean that no one is going to invest in shoddy house building, unless someone with guns and money is forcing them to (like, I dunno, the Fed or the Gov). - Tenure
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So you think there had been no slum lords in the golden age of capitalism?
If you think so, then you are obviously out of touch with reality.
tenure: "Or in terms of finance - why is anyone going to invest irrationally, in vast sums of money, unless they've been made to believe that things aren't as dangerous as they seem, because there's so much (inflated) money to spend, or because their investments have been 'guaranteed' by the government in case they fail?"
This seems to be the stock rationalization used to defend the irrationality of investors in the world of finance. There are several problems with it: (1) much of the inflated money came about because the investment community lobbied for it (remember how much they squealed when Greenspan accused them of "irrational exuberance") or because the investment community actually contributed to that inflation (via unregulated non-banking instititions that contributed to the credit bubble). What is little appreciated is that before 9-11 the Fed did not carry out any reckless open market purchases: open market purchases in the nineties were about on par with such purchases in the eighties—so why the difference in outcomes? Where did all the money come from that drove the Stock Market to giddy heights in the nineties? It didn't all come from the Fed, that's for sure. (2) There exists a long and not terribly illustrious history of irrational investments during bubbles, from the Tulip craze in the 17th century on. Not all of these crazes can be blamed on government interference. (3) Inflation through credit creation of banks (via fractional reserve banking) is not an invention of the Fed or of any government, but a spontaneous development of banks that can be traced back to renaissance Italy. Fractional reserve banking is the normal state of affairs (it's how banks make money) in a free market. To limit it (or force 100% reserves), the government would have to intervene in the economy.
Mr. Nyquist's post citing his illusions about what Ayn Rand considered laissez-faire are simply and flatly so erroneous that it is fatal for someone not only writing a who-knows-how-long critique of her economics, but for someone who's blog is only about Rand's failures.
You are disqualified.
Ayn Rand very clearly held that banks operating on marginal reserve were a violation of rights. Not because banks needed regulation and therefore 'intervention' was justified; but because it was CRIMINAL.
To smash the hammer down specifically, a note that says redeemable in gold, a demand certificate, that is not backed 100% by gold is fraud. The apprehension, trial and incarceration of perpetrators of this does not constitute "regulation." This was most certainly Rand's position, and to claim that 1) Rand believed government ought not prosecute such marginal reserve criminal banking; or 2) that Rand favored "regulation" as a way of deterring such fraud and she was therefore not for a free market; or 3) prosecution of financial fraud such as the passing of un-backed financial instruments indeed constitutes "intervention" and therefore demonstrates the impossibility of a free market, is a fallacious claim.
Having made the above mistake, it is inevitable to have fallen into the next one:
"They seem to make the assumption that laissez-faire and capitalism are synonyms and that anyone criticizes laissez-faire is some kind of fascist-corporatist-socialist. Yet this is precisely the premise in Rand that I am challenging. I am merely arguing that laissez-faire is not an adequate criterion for the free market. "
I think I can illustrate your error best by referring back to the origin of the phrase. [i realize I am expanding the mythos of the origin; it's for fun. The point is the same. Google for more origin myths] The newly emerging Bourgeoisie in France began to be so productive that the stunned King Louis could not believe his luck. They seemed to keep going even when he taxed the hell out of them. He realized this was the actual arrival of the goose/golden egg thing. He sought to maximize the situation. He called the enterprising burghers together for a meeting. His pitch was "This is so great. Before capitalism all we could tax were the peasant farmers and they could only produce so much. They seemed real vulnerable to tax increases too. But you guys are fantastic. Now, I want to do whatever I can to help you. What laws can I pass and how can I help you fight off your enemies by me harassing them. Is there anyone you want killed?" The proud capitalists just looked at Louis with pity for him, and for what this parasite would unleash through his regulation and guns. They said "Just let us do it. Leave us alone."
Capitalism implies laissez-faire. Capitalism subsumes absolute property rights and individual freedom under its definition. Any incursion into that condition by government regulatory agencies means it is not Capitalism any longer. I will add the opposite: one thing NOT subsumed under Capitalism is fraud. Fraud is a crime. If you defraud, you are not a Capitalist; if you claim such defrauding should not be prosecuted, you are not a Capitalist.
So, when Objectivists encounter someone intrusively regulating the economy with government coercive power, issuing fiat money and turning his head from the most egregious forms of unbacked securities ever invented, and this cretin is constructed to actually "be a Capitalist" and imputed to be "an Objectivist" and when his house of cards implodes and the gloating over the failures of Capitalism and Ayn Rand pour forth, we will speak up.
By the way, you were pre-disqualified in that post anyway; you just cannot help injecting sophomoric smear labels. I and many others have pointed out to you that this is a formal fallacy and makes everything that follows void. Naturally you are free to continue to use denigration in print. It telegraphs your weakness and bankruptcy of argument, however. I have mentioned that before here. You must be getting feedback to the contrary otherwise, such as the adoration of those who become aroused over the inflammatory labels.
John: "Ayn Rand very clearly held that banks operating on marginal reserve were a violation of rights."
She did? Where did she do that? Could you please provide citations on that? Because that's not the position advocated in CUI, where fractional reserve banking under a gold standard and laissez-faire is supported. Indeed, I'm not aware of any orthodox Objectivist (with the possible exception of George Riesman, who is no longer associated with ARI) who does not support fractional reserve banking.
The position that 100% reserve requirements are consistent with laissez-faire because anything less is tantamount fraud is problematic because if you can pass a law to prevent fraud in this instance, why not in countless others? Suddenly, all kinds of laws become consistent with laissez-faire. Laws against selling sub-par meat, for example, are consistent with laissez-faire, because its fraudulent to sell sub-par meat: the selling of such meat violates rights!
John: "that Rand favored 'regulation' as a way of deterring such fraud and she was therefore not for a free market"
Given that there is no evidence that Rand favored any such laws or regulations, this is a moot point. However, it illustrates John's refusal to understand the point at issue. Support of regulations does not necessarily make one opposed to the market! All markets require a framework of law in order to flourish. Lawless markets (such as black markets) are grossly inefficient (see de Soto's Mystery of Capital for further elaboration). The laissez-faire standard is not an adequate criterion for determining whether a market is "free" (or what laws should be framed for regulating it)—and this is true for a whole host of reasons, some of which I have already touched upon (the issue of contracts for example), and some of which I will explicate in later posts.
no, once again you misconstrue. You do not "pass a law" to make fraud illegal. Therefore it is not "regulation" as you keep trying to establish. Instead, fraud is a violation of contract, a crime. No one has to pass a law to make a crime a crime.
What is CUI?
John Donohue
Pasadena, CA
CUI=Capitalism: The Unknown Ideal.
I understand there is some confusion among Objectivists on this issue. Do you have a cite for your view?
I am citing myself as an Objectivist of many decades. Why do you need a citation? Do you think it's like the Bible? Objectivists don't follow the Bible, they think for themselves. If I were having dinner with Miss Rand and this subject came up, and she suddenly started extolling the benevolence and excellence of fractional reserve banking, I would be alarmed. I would also send the wine out for analysis suspecting the presence of drugs. I would listen to her argument in support of it. I would think about it. And then I would agree or not agree. I would not be burned at the stake or go to Hell for heresy if I disagreed. Did it ever occur to you that she could be mistaken about her own philosophy?
Here's another dude who thinks much as I do. I found this video today. He thinks "theft" is the opperative word, not "fraud" as I do.
http://www.youtube.com/watch?v=OWnhX2koVEc
You will find no instance of Ayn Rand herself -- Rand herself -- stating support for marginal reserve banking. Absent positive writings, you cannot assume she favored it. Short writings, you have to go to the principles of the philosophy, which can in no way be reconciled with fractional reserve, either in it's most innocuous form when gold certificates were actually backed by gold, what a quaint notion, and the margin was far more conservative than 10%, nor later in its utterly wanton disease stage, when combined with going off the gold standard and running the printing press like a meth-addled counterfeiter, it has killed and corrupted like the plague.
I welcome your construction of reality such that Ayn Rand would have been a cheerleader for that with shining eyes for Mr. Greenspan as he raped money using her sanction. For a characterization of proper banking as imagined by Ayn Rand, I suggest you absorb the character and actions of Midas Mulligan and the Judge who quit over the Mulligan case in Atlas Shrugged. I suggest with all the dignity I can still muster for this subject, that Alan Greenspan was absent the day that was taught in kindergarten.
I could argue about whether Rand had any tolerance for fractional reserve (she did not), but this is a diversion.
You are blaming Ayn Rand for Greenspan's incompetence in his role as czar of money. This is the subject here. Two powerful refutations have already appeared in these comments and remain standing.
The principles at stake, and the facts, are very clear: Ayn Rand had zero tolerance for fraud and theft in actual money. Greenspan violated every tenet of this position. He smiled on the new inventions of thieves He thrumped the economy both with stupendous interest rate hikes and bizarrely low rates, enforced with his guns. Greenspan's actions were substantial contributors to the current implosion. Ayn Rand's philosophy had absolutely nothing to do with it.
John Donohue
Pasadena, CA
"no, once again you misconstrue. You do not "pass a law" to make fraud illegal. Therefore it is not "regulation" as you keep trying to establish. Instead, fraud is a violation of contract, a crime. No one has to pass a law to make a crime a crime."
That has got to be the funniest thing I ever read.
How can something be illegal without a law being passed to make it so?
A crime is something that goes against an established law, a law passed if you will.
All this from a guy who thinks he is qualified to disqualify anyone.
Randians always have the best sense of humor, or maybe they are just a good source of it.
"Anonymous"
Since you won't show your face and you posted no response to any of my points, and instead decided to attempt to spin one of my formulations out of context and into an absurdity as your only potshot, the only conclusion I can make is that you are bankrupt. Why did you bother to even open your mouth it is so embarrassing.
Here, get the concept.
John Donohue
Pasadena, CA
John: "You are blaming Ayn Rand for Greenspan's incompetence in his role as czar of money."
John obviously didn't read the post carefully, because that is not what we are doing. The post only brings up Rand's influence on Greenspan's view of what motivates human beings and how it relates to the issue of "rational" self-interest, which Greenspan believes ought to have regulated the conduct of banks and financial institutions (a view in which he is obviously influenced by Rand—and influenced not for the better, but for the worst). In other words, we are not blaming Greenspan for whatever he might have done in a regulative, non-laissez-faire direction, for that portion of his behavior is obviously not influenced by Rand; we are only suggesting that Rand influenced Greenspan's non-regulative and deregulative tendencies, which caused him to believe that the finance system could be trusted to behave rationally (because of self-interest) and that derivates, for example, should not be regulated.
John: "You will find no instance of Ayn Rand herself -- Rand herself -- stating support for marginal reserve banking. Absent positive writings, you cannot assume she favored it."
We've run across this line of arguing before: only Rand speaks for herself, no one else does. But this means we have to assume that she was willing to publish, in her The Objectivist journal, and in books bearing her name, views that conflicted with her own. Given Rand's horror of anyone ascribing to her views she didn't hold, there is no reason to believe this is true. When it came to the issue of laissez-faire, Rand was intransigent. She, for example, detested both Hayek and Friedman precisely because they were not purists when it came to laissez-faire. So why, then, would she allow one of her followers to publish, in a book bearing her name, an article supporting fractional reserve banking if she regarded such banking as essentially fraudulent and contrary to laissez-faire?
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