Free Markets - Key to Our Standard of Living

A friend forwarded this article from the Atlantic the other day. My friend is a brilliant defense intellectual and a defender of the West, but seemed to be easily swayed by the all-too-easy argument that Wall Street "oligarchs" are to blame for the current economic mess, and that we should break up the oligopolies (banks) in order to solve the problem.

The danger here is that very smart people who do not have the time to think seriously about the importance of free markets to our standard of living are susceptible to anti-market arguments in times of crisis.

There is always increasing systemic risk and a buildup of toxicity over time in a free market system as transactions become more complex in support of a rising standard of living. And it always flushes itself out. Breaking up the largest banks would not change that (in the U.S., this has been tried).

Moreover, I think that it is politically dangerous to blame any single 'class' for the inevitable corrections in market systems. Government may be able to moderate the effects of these corrections, but it is not, in my view, smart enough to prevent them.

Besides, there are other folks besides investment bankers who are powerful, closely linked to government, make significant political contributions, and who arguably deserve part of the blame for this crisis (e.g., the unions and trial lawyers). Why does Johnson not recommend that *these* "old elites" be broken up? Perhaps because he is a friend of left-liberal Bill Moyers (see this softball interview with Johnson on Bill Moyers' Journal: http://www.pbs.org/moyers/journal/02132009/profile.html )

But, if we must have a fall guy, there is another group of suspects. I do not think that the oil price spike last summer was a coincidence. I think that it was an act of intentional economic sabotage committed principally by the Russians, Iranians and Venezuelans in order to influence the election and bring us to heel (more subtle than the oil embargoes of 1973 and 1980, but effective, nonetheless). Yes, our adversaries paid an economic price when oil demand and prices plummeted at the start of the recession, but, given the more accomodating foreign policy of the Obama Administration, it was a pretty good investment.

That said, this time, oil prices rose (or were driven higher) at precisely the wrong time for the West -- at exactly the 'tipping point' -- when enough toxicity had accumulated in the system to require readjustment.

Here's the bottom line for me -- while I was checking CNBC to see how my positions were doing yesterday morning, I heard Kevin Ferry of Cronus Futures Management say something like (paraphrasing Jack Nicholson in "A Few Good Men"):

"I have neither the time nor the inclination to explain myself to someone who rises and sleeps under the blanket of the very economic protection that I provide, then questions the manner in which I provide it. I would rather they just said thank you, and went on their way, Otherwise, I suggest they come down here [to the floor of the options exchange], open an account and try their luck."

Here's the link, the quote is a little over 5 minutes in:

http://www.cnbc.com/id/15840232?video=1079589726&play=1