Even if they* missed the relevant section in Wealth of Nations, cursory understanding of the main argument leads to the conclusion that banks should be regulated. Too many of today's economists are technicians -- like auto mechanics -- and not thinkers/intellectuals.

*"Greenspan and his ilk" works for me.

I wonder what Adam Smith thought of central banking. I am sure he wouldn't advocate a fiat money system like the Fed. The government gave up it's power to regulate the currency in 1913 so expecting commong sense regulation (as opposed to overregegulation) is too much to expect.

I wonder what Adama Smith would think of government policy used to increase home ownershpi at any cost. I am sure he would have opposed that too.

He was also for the free movement of labor,Everyone forgets that part.

Ok lets accept Smith wanting banks being regulated...and everything else Smith believes.

Fair?

"
Ok lets accept Smith wanting banks being regulated...and everything else Smith believes.

Fair?"

That isn't the point of the article, the point is that the folks against regulating the banks try to pretend Smith was against regulating the banks.
He wasn't, they are dishonest.
The basis for their argument is discredited.
That, in no way, says that the rest of us then necessarily endorse everything else Smith ever wrote.
I do hope that the logic of this isn't too hard for you.

I do hope that the logic of this isn't too hard for you.

Can't....wrap....little mind....around....Danni'
s....brilliance.

Frighteningly enough, the lesson that most rwingers seem to have learned from a near great depression caused by the deregulation of financial products is that we need more deregulation of financial products.... and everything else they can think of.

Smaller gub'mint being easier pick'ins fer corporate hogs and all.

"Smaller gub'mint being easier pick'ins fer corporate hogs and all."

I always thought the small government advocacy thing was a matter of pure ideological affinity. Something that one may or not agree with, to one degree or another, but you had to respect. I never expected that there might be a more practical, underlying reason behind it. Hysterical.

"Smaller gub'mint" was a Reagan GOP rallying cry, picked and promoted by crony corporate capitalists who know that every bit of responsibility We the People give up in a government that Lincoln called of, by, and for, the People, could then be easily taken over with cash.

Smaller gub'mint being easier pick'ins fer corporate hogs and all.

So you think big government would solve that problem? LOL. No, big government puts more William Jeffersons out there -- just more 'pickings' for the corporate hogs.

No, big government puts more William Jeffersons out there -- just more 'pickings' for the corporate hogs.
#10 | Posted by goatman at 2009-11-16 10:13 AM | Reply | Flag:

I think that corky is arguing that the smaller the government, the less it will cost for the same degree of influence, which is a hazard to be aware of.

The more We the People give up our representation in gov, the more corporations take it over.

That is obvious and self-evident.

Smaller gub'mint being easier pick'ins fer corporate hogs and all.

Seems the bloated, over-sized, over-spent government we've had in recent decades has done the same thing.

Considering that George W Bush presided over the largest expansion of Government in history WHILE he was deregulating everything he could manage, your premise is out-right false.

Hardly.

Any vacuum in our representative government created by trying to, "drown it in the bathtub", is quickly filled by corporate lobbyists with hands full of cash.

It was the deregulation of financial markets that got us into this recession... from which the wingnuts only lesson leaned seems to be.... more deregulation.

Bubba reduced the size of gov and left a surplus which the GOP spent like drunken sailors.

All apologies to drunken sailors everywhere.

Ok lets accept Smith wanting banks being regulated...and everything else Smith believes. -- #4 | Posted by andyuhenet

Not sure what he "believes" -- he's dead.

But I'm a leftie and would agree with most of his analysis. Remember, his inferences were based on ASSUMPTIONS that either are or are not met in specific circumstances.

"Smaller gub'mint being easier pick'ins fer corporate hogs and all."

Phoenix, I believe the heart of the article wasn't posted:

The recent debacle demonstrated the foolishness of one theory of capitalism: a utopian version of free-market theology that happens to have dominated American economic thinking for two generations. Sadly, the financial wizards Sorkin portrays so colorfully are still very much with us, and their simplistic mythology is far from "officially dead."

Cassidy traces ideas about capitalism from Adam Smith's 18th-century "invisible hand" through Alan Greenspan's hands-off philosophy toward regulating banks as chairman of the Federal Reserve from 1987 to 2006. The theory that Greenspan inherited from Milton Friedman, high priest of the Chicago School, "says simply: self-interest plus competition equals nirvana," Cassidy writes. Greenspan applied this idea in various contexts, perhaps most notably when he opposed government oversight of an increasingly manic Wall Street casino culture based on his faith that rival financiers would police one another and not take potentially self-destructive risks. The blind faith that Greenspan exemplified turned out to be flat wrong. "For him to claim that the market economy is innately stable wasn't merely contentious," Cassidy writes; "it was an absurdity."

The parallel drawn to Greenspan in order to discredit free-market capitalism is completely bogus as hypothesized by the author.

Alan Greenspan was under intense scrutiny to answer for his slow response to his lowering and raising of interest rates that led to the intense market volatility on both sides: irrational exuberance and market crash.

Greenspan's controlling interest in power via the Federal Reserve, as is common knowledge, and the resulting boom and bust obviously has nothing to do with the validity or flaw of free-market capitalism.

Do you not recall that in an interview Greenspan readily admitted that Congress has absolutely no power to regulate the decision-making policies of the Federal Reserve? This is the heart of the issue.

I believe the heart of the article wasn't posted:-- #18 | Posted by L_RContrarian

I figured it would be harder for the true believers to dismiss Adam Smith out of hand than it would be to dismiss Cassidy.

But of course, you're absolutely right. Thanks!

Greenspan's controlling interest in power via the Federal Reserve, as is common knowledge, and the resulting boom and bust obviously has nothing to do with the validity or flaw of free-market capitalism. -- #19 | Posted by L_RContrarian

Good point, but it's not obvious to me that there would be no crisis without low interest rates. Remember, LTCM went under b/c of derivatives based on foreign interest rates. If Greenspan had allowed interest rates to rise, we may not have had a crisis driven by mortgage-based securities -- but 30:1 leveraging with derivatives was going to lead to a crisis regardless.

"Adam Smith didn't know anything. I played a banker once so I know everything about the economy."
Bonzo Reagan

#21 | Posted by Phoenix

So do you reckon you could over-leverage 2:1 if you had favorable interest rates?

#21 phoenix
Absolutely, I believe we are in full agreement.

The point I was making was the god-like power of Greenspan included the "easy money" boom cycle. Also, to your point his stand against the CFTC Chairman Born's attempt [who was then fired by Summers] at regulating the OTC derivate market was a major factor in what is now an estimated $Quadrillion in complex derivate products.

Market Structure. On April 27, 2008, the New York Times described how former Fed Chairman Alan Greenspan and former Treasury Secretaries Larry Summers and Robert Rubin coordinated to undermine efforts by Commodity Futures Trading Commission Chairperson Brooksley Born to impose greater federal oversight of over-the-counter derivatives markets. They report: "On at least one occasion, Mr. Rubin lined up with Mr. Summers as well as Mr. Greenspan to block a 1998 proposal by the Commodity Futures Trading Commission under Ms. Born that would have effectively moved many derivatives out of the shadows and made them subject to regulation."

So do you reckon you could over-leverage 2:1 if you had favorable interest rates? -- #23 | Posted by Lipzoidial

Me? No.

Citi, before the crash? Yes. They'd have simply convinced the people they were selling junk to that the return on the junk would be higher than the prevailing interest rate -- and people would have believed them because THEY'RE CITI.

Remember, LTCM was leveraged at over 30:1 back in the late 1990's when interest rates were close to 6%.

By the way, it gets even better. Larry Summers, who fired the CFTC Chairwoman back in 1998 over her suggestion to regulate complex derivates, now working for the Obama administration now readily admits: