At City Journal, Guy Sorman notes how quickly the managed-market winds have shifted. When the credit unwind started, the papers, the TV and the newsweaklies declared capitalism dead in just a little less time than it took for Kent Brockman to declare his loyalty to the Space Ants. Less than two years later, you can’t buy good press for the stimulus; the economy is frozen solid in August; the nation is rediscovering — despite the herniated efforts of local, state and federal government — the virtues of thrift; and if you search for Keynes on the interwebs, all you turn up are headlines like “How Dr. Keynes killed the patient.”
First of all, as a guy who puts together blog posts in his free time, lemme tell you that the blinding array of contextual links in just this one excerpted paragraph is impressive as all get-out. I find that the more hurried I am, or the more tired I am, the thing that suffers first is any nonmaterial links. That Tim Cavanaugh put in the effort to link and thus back up each and every assertion is an obvious sign that he cares very deeply about getting his message out, and getting it out right. Bravo.
Second, the Kent Brockman reference is brilliant.
But here’s the tell: We’re already starting to see the first of the “Today’s Keynesians are misreading Keynes” walk-back arguments.
What’s funny here is that he’s absolutely right. And while the first inclination of folks like you and folks like me would be to shake our head and mutter under our breath that great old line from Ronald Reagan: Oh, there they go again. The thing is, I would need all of my fingers and all of my toes to count how many times I’ve countered the standard “capitalism is dead” and “capitalism is evil” and “capitalism obviously doesn’t work” with the argument that what we’re seeing today is anything but true capitalism.
The difference, of course, is that we are not seeing capitalism in the sense that actual market autonomy could provide, while there is no doubt–and there has been no doubt for quite some time now–that Keynesian economics just simply doesn’t add up.
Alright — I’ve said enough. Read the Cavanaugh piece. Here’s just one more taste:
“The banks probably had to be saved,” Cochrane tells me, “but the problem was that the salvation followed no pattern.” Some institutions, like Bear Stearns and Wachovia, were rescued; others, like Lehman, were not. It became impossible to know what the government was going to do next. “If governments couldn’t be predicted, nobody could be trusted any more,” Cochrane explains. Credit froze.
I have an alternative explanation: Credit froze because all over the country defaults on mortgages, car loans, student loans and credit cards were reaching historical highs. Letting Lehman die was Henry Paulson’s single act of courage, and he followed it up by doing what he does best: soiling his Depends and scaring the children with wild tales about the bank failures, derivative defaults and lover’s lane murderers that would be unleashed if the taxpayers didn’t give a trillion dollars to the largest banks on the planet. The entire ethical structure of the free market was destroyed so that Sheila Bair could be spared the inconvenience of euthanizing crippled, syphilitic ghouls like Citigroup and Bank of America.