Re: Real Free Market Capitalists Demand that Financial Fraud Be Prosecuted

An article on Zero Hedge that definitely needs some refuting.

The author writes:

Real, deep-thinking anarchists (as opposed to those using fake anarchy philosophy in order to promote lawlessness by the super-elite) are not for destroying all organization.  Instead, they argue for self-organization and self-regulation. See thisthis and this.

JP Morgan and Goldman Sachs aren’t reining in one another’s fraud.  Bank of America and MF Global didn’t police each other’s fraud.   Tepco and BP didn’t make sure the companies made accurate reports about their safety measures.  Solyndra and Koch Industries didn’t guard against abuse by the other company.

So if one wants to argue that the Federal government should not regulate financial players, fine (perhaps our country is too big and complex to manage, and the federal government has become too corrupt) … but who should?

Certainly not the Federal government.  Only a lunatic would want the SEC regulating corporations who routinely hire Harvard academics.  Consider the odds of a mid level bureaucrat, who has nothing to lose if he fails in his mission to uncover fraud, facing off against someone who has a Harvard business degree and stands to make millions if he succeeds.  Clearly the SEC’s efforts to date have demonstrated their complete incompetents.

But that’s just the icing on the cake, the meat of the matter lies with the system itself.  Consider that there are no laws against Goldman getting a backdoor bailout by having the Feds bailout AIG.  Goldman WRITES the regulatory laws by-proxy.

And how does Goldman accomplish this?  Perhaps it is worth noting that Goldman was one of the largest contributors to the Obama campaign.  Further, consider the following 29 people listed off in this Business Insider article as being former Wall Street executives now working in positions of regulatory power with the State.  Example: Hank Paulson – Former Goldman CEO and Former Secretary of Treasury.  Clearly Goldman and other major financial players can buy the power they need to avoid oversight, place their people in positions of power and use the system itself to socialize their loses.

Is the author of the Zero Hedge article simply naive?  I have to wonder.  Clearly the State is the servant of financial interests on Wall Street.  The very existence of the FDIC creates moral hazard and encourages risk taking.  The very existence of the Fed encourages speculative bubbles.  The very existence of the SEC also creates moral hazard by the fact it reduces the due diligence of private investors.

The State is the corporate gun.  There is no way for the common folk to control a system that is for sale to the highest bidder.  In fact, there is no way to control the system itself, because the system itself is predicated on violent looting at its core.  When a society allows groups of elected people to use guns against them in order to extract money for public purposes, that elected elite has a monopoly of power that will always be corrupted in the end.

How does the author propose the State’s power be limited to simply “playing referee” between market participants?  A Constitution?  LOL – how well has that historically worked out?  Not just for us, but for every nation on the face of the Earth that has ever tried it?  Democracy?  Isn’t democracy simply a polite term for mob rule?  Who controls the mob?  Who controls the media?

Why should there be a double standard, whereby the State can use guns to steal yet the public may not?  Why should a society ever allow its elected officials to engage in acts that any ordinary citizen would be charged with a crime for committing?  In order to have a real referee, the people doing the refereeing must be subject to the same rules of civilized behavior as the rest of society.

Consider that if there were no Fed to issue unlimited reserve dollars, all the major banks would have collapsed looooooooooooong ago due to insolvency.  So how can the author claim that the market is incapable of refereeing when we have a centrally planned economy that completely prevents any real market refereeing?  The State prevents those financial giants from ever going under no matter how insane or criminal their behavior may be.  The author wants the same bureaucrats who handed trillions of dollars to Wall Street fat cats to suddenly change their ways and do nothing but “referee” the market?  This is like asking the mafia to stop its racketeering operations and do nothing but “protect” its clients from bad guys.  What are the chances of that ever happening?

The author confuses the controlled centrally planned economy we have today for being “capitalism.”  Clearly we do not have capitalism.  Free markets do not involve fiat money forced upon us at gun point.  Free markets do not involve centrally planned interest rates.  Free markets do not involve socialized losses in the form of bailouts.  Free markets do not involve public insurance programs for private banks.

Free markets BANKRUPT banks who lend out more than their reserves.  Free markets BANKRUPT banks who squander their depositors’ money in speculative lending.  Free markets BANKRUPT banks who pyramid ponzi debt.  To claim what we have today is a failure of the “free market” to regulate is totally and utterly preposterous.

Finally, to answer the author’s question of “who should?” regulate – the answer is quite simple.

We should.

For more information on how a private law society can protect the rights of the innocent and punish those who commit fraud, see this article.

Professor Mark Thorton explains why the market is the only real regulator:

Further lectures:

Rotten from the Start: The Inherent Corruption of Central Banking in America | Thomas J. DiLorenzo

Monopoly and Competition | Thomas J. DiLorenzo