Wiley, NYC, 2009, 332 pgs., index,end
notes, the subtitle is 'how Greed and Easy Money Corrupted Wall Street and
Shook the World Economy - co-author is Aaron Task and there is forward by Bill
Fleckenstein whose opinions of Greenspan as published in his Greenspan's
Bubbles' is fully shared by Ritholtz.
Mr Ritholtz states his philosophy on page 249. "In the
final analysis, allowing markets to set policy is inherently anti-democratic.
Free people are entitled to elect a representative government which then enacts
legislation on their behalf. Those elected representatives go to Washington
D.C. to do the people's will. If it is the people's will to prevent
testosterone-addled traders from saddling the taxpayers with trillions in
losses, that is their choice."
But it is clear that the elected representaties do NOT vote on the total
public's behalf but that of their selves and their supporter interest groups.
And "What the actual result of market-based decision making does is to
eliminate those pesky human voers from exercising their will through a
representrative government. Ultimately, the free-market zealots are not only
antiregulation, they are antidemocracy and anti-representative government.
Taken to illogical extremes, they would create a market-base
But it is the market that is determined by the democratic choices of the
And on page 248, "The misguided deification of markets is the primary
factor that led us to being a Bailout Nation."
No, it is the manipulation of the government via the FED that disrupted the
market and created false signals on prices and risk which caused the
misallocation of capital.
What about it if it is the people's will for government to insist that people
who cannot afford to own houses are nevertheless entitled to own one with the
taxpayer eventually subsidizing them? What about it if it is the people's will
that government provide entitlements to extravent consumption by
exappropriating the wealth of savers and redistributing wealth in the name of
'social justice'? But the fundamental falisity of Mr Ritholtz's entire
description is to blame everything on a non existing 'free market' when it is
government policy itself that has caused the disaster. Yes, many individuals
and groups took advantage of the urging of government to benefit themselves
when real 'free market' conditions were blocked by government. Yes, many
individuals and groups. So among Mr. Ritholtz's solutions is nationalization of
insolvent banks. His descriptions of the conditions of the banks and AIG as of
his writing is wrong. David Smick's chief worry about 'danger' is just what
Barry Ritholtz is advocating, the curtailment of 'globalization' and private
entrepreneural risk by increased government control. Actually, the2008 crash
was a result of theFED creating by monetary policy its underlying risks. They
target interest rates that resulted in the highly leveraged firms based on
worthless assets. It was Chairman Greenspan who deregulated markets after the
collapse of LTCM in 1988. Mr. Ritholtz focuses on a series of 'bail outs"
- that is government and FED rescure of companies and hedge funds and the the
financial industry in general that was collapsing due to bad bets. But he does
not discuss enough the total picture and indirect causes. He specifically
ignores all aspects of the welfare state policies such as government demand
that house ownership be expanded by giving politically based rather than
economically based mortgages to people who obviously could not afford them.
This is what reated the entire structure to accomplish this agenda. He blames
all, of course, on Reagan and Bush not progressives.