Shal

“If the market was not the cause of this what was?”

Good question. A succinct answer is here: http://www.lewrockwell.com/woods/woods111.html

“What has the last 40 years of free market management of the economy been about?”

‘Free market management of the economy’ is a contradiction in terms. ‘Free market’ means one in which the price level is governed by the voluntary contracts of the parties. Government “management” of the economy means using law and policy – ultimately courts, police and prisons, i.e. violence or threats - to force prices e.g. interest rates to something other than they would be in the absence of such interventions.

What the last 40 years of *government* so-called “management” of the economy has been about, is manipulation of interest rates for political reasons, based on two main economic theories: Keynesianism and monetarism (Friedman). The current crisis has proved both of these theories wrong, both because a) it happened in the first place, and b) their ‘cures’ haven’t worked.

“And i repeat are you going to forego your comfortable lifestyle in defence of the market or should we only expect the marginalised and unskilled and the underclass to do so?”

Good question. Everyone decries the bust, but *the damage is done during the boom*.

Lowering interest rates deceives the population into thinking that there is more capital available than there really is, and that certain investments are profitable when, absent the inflation, it would be seen that they are not.

The bust is the process by which these unsustainable malinvestments are liquidated, and the market – the population at large by their voluntary valuations – washes them out of the system. The people through their sovereignty as consumers send broke the businesses based on the fake demand and fake money. The mass of people thus reject government’s monetary policy and impose on politicians the monetary values they will accept.

It is important to understand that there is not an option for government to fix this problem caused by the political manipulation of interest rates.

The issue is not whether to fix it or not. The issue is whether to suffer the consequences of their ignorant greedy incompetent violent elitist meddling now, or suffer much worse consequences later - that is all.

This is because all politicians can do by monetary policy is create more malinvestment and hence worse problems later on for everyone, the burden of which will fall unequally on the marginalized. Politicians’ only concern is to postpone the disaster until they are out of office.

“These are real people and this is real pain not some economic theory.”

True - and that’s the entire argument against political manipulation of the money supply, and is why it should be illegal in the first place!

It is fake, it is fraudulent, it makes us as a society poorer, it privileges bankers and politicians and the financially sophisticated, and it suckers the poor, the workers and the financially unsophisticated.

But the solution is not more and more government ‘economic management’ for gossake!

The solution is to stop what is causing the problem in the first place: letting politicians engage in a Santa Claus act, stimulating booms that lead to inavoidable busts, caused by counterfeiting mountains of fake money via the central banks.

The argument that the problem is caused by free markets is based either on simple ignorance or on deliberate dishonesty. Anyone running that argument first needs to disprove these facts: http://mises.org/story/1315 and to understand the unavoidable social injustice caused by these interventions.

It is an utter delusion to think that the solution lies further down the path to more fascism, which is the way the governments of the western world are headed now – to the point where *Pravda* of all people recently warned the USA and Britain against the ‘descent into Marxism’! See for yourself:
http://english.pravda.ru/opinion/columnists/107459-0/

The ethical and practical solution is also the simplest: freedom – or have we forgotten what that means?

give me a break, blaming keynesianism for the Global Financial Crisis you have to be kidding.

The US and UK abandoned Keynes' teachings to embrace the wonderful world of Milton Friedman and the Chicago School. Reagan, Thatcher and Thatcher light(Blair) changed the economic paradigm to that of the Chicago school. Quite simply over reliance on Monetary policy, abandonment of the Bretton Woods system has led us to where we are.

Let us not live in the world of make believe please!

Thanks again for all your comments. Slasher:

"Quite simply over reliance on monetary policy, abandonment of the Bretton Woods system has led us to where we are."

I agree with you. When I look at the fiscal policy however being employed by western governments around the world it points to larger government (not smaller) and heavy deficit spending which is very much consistent with Keynesianism.

A recent interview well worth a look:

http://watch.bnn.ca/squeezeplay/april-2009/squeezeplay-april-21-2009/#clip163848

Slasher
40 years ago was 1969, before both Reagan and Thatcher.

Any time governments ‘prime the pump’ by ‘injecting’ money into the economy, and any ‘stimulus’ policies such as the latest round of idiocy – these are based on Keynesian, not monetarist theory

i love the austrian delusionists. The current crisis was caused by the private sector creating a secondary monetary system based on property derivatives. Totally unregulated and totally privately owned. Just as the Austrians advocate. It collapsed and we are all paying the price sovereign nations are having to absorb the debts created by the private sector. Stop daydreaming the Austrian experiment has failed.