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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: John McCarthy who wrote (76726)	3/24/2008 6:26:43 AM
From: Mike Johnston	Read Replies (2) of 116555

He makes a couple of good points, but his main thesis is totally and gravely wrong. Just when everyone thought that the German philosopher's critique of capitalism had been buried with the Soviet Union, suddenly capitalism reverts to type. It has laid a colossal, global egg and plunged the world economy into precisely the kind of crisis he forecast. It is not a free market capitalism that caused the current crisis, but the lack of it. Too much government intervention in the economy, to prevent the occurence of natural recessionary cycle is at the root of the crisis: - artificially low interest rates, close to 0% real rates - excess creation of money - moral hazard ( Greenspan put )+ socialization of risk in the form of bailouts for example LTCM. - government intervention in housing finance through GSE's. Without the above, there would be no real estate bubble. What are the proposed solutions to the current crisis ? Even lower interest rates ( sharply negative ), even more money creation, even more moral hazard and socialization of risk, even more government intervention in housing finance.

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