HBL How to approach the financial crisis

Dr. Harry Binswanger’s refreshing take on the crisis:

Amidst all the calls for regulation and jettisoning the free market, only a few are philosophically equipped to realize that this is a failure of the regulated market. This system—the whole blessed thing—was crafted in the New Deal era (with continual noose- tightening thereafter) precisely to avoid what has now happened!

The Fed exists to protect us from panics, the FDIC exists to protect our bank accounts from runs on banks, the SEC exists to protect us from shady or tricked up investments, Fannie Mae and Freddie Mac exist (or existed) to protect us from stingy bankers who wouldn’t give people loans merely because they didn’t deserve them.

But somehow, the whole “protect us from our own stupidity” system didn’t work. Somehow, good vs. bad still exists, success vs. failure still exists, fact vs. fantasy still exists.

The lesson is: faking reality does not work. If a man has little income, no assets, drinks a lot, can’t keep a job for any period, he is a bad credit risk, and we cannot pretend otherwise. Or, if a person wants or needs a good, but hasn’t any money to pay for it, he cannot have it—and that is a fact of reality, not something changeable by legislation to seize the good and give it to him or by the Fed’s printing counterfeit money for him to use to “buy” it.

You can fool most of the people most of the time, but you can’t fool reality, and reality will eventually demand payment.

The best short statement is from Yaron Brook:

“The unfree market has failed. It’s time for a truly free market.”

Posted with permission.

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