[TheForge] Peter Schiffer obituary OT

[Andrew Vida]

Justin Fisher wrote:
> A Vida wrote:
> 
> Consumer at fault... to a degree, yes. Artificial labor arbitrage due
>  to trading with non-free economies such as China are a far bigger 
> culprit. Free market economies only work if in fact the markets are 
> free. ALL free. As far as I can tell, none are. Not a one. We're the 
> closest thing to it and we're not there by a fair shot. Those who say
>  "see! free market capitalism doesn't work!" are numbskulls who don't
>  know the first thing about the topic.
> 
> If no markets are truly free (no argument from me on that), then how
> would we know that they would work if a truly free market existed? It
> seems like it is more an article of faith than a provable fact.

	There have been free markets in the past.  The kings of Europe, AFAIK, 
beyond taxation concerns left their markets to do as they pleased most 
of the time.  They were generally smart enough to know that messing with 
the market tended to upset the tax base, which was not good for the 
business of kinging.  There seem to be numerous notable examples of 
sovereigns departing from this wisdom and the results have been 
generally miserable for everyone.

	The USA was a mainly free market up until the about the turn of the 
century when all of a sudden the feds decided they had to stick their 
noses into other peoples' business with drug laws, gun laws, and so 
forth, none if which have done us any good and arguably much harm.  As 
we progressed in time, the philosophy or regulation run amok tightened 
its grip on our lives and look where we are - in a full blown financial 
collapse and heading for social collapse, which will be calamitous if it 
comes to pass.  What we have been doing has not worked.  Time to try 
something else.
> 
> I don't see any evidence that the free-wheeling years on Wall Street
> (which looked a lot like capitalism to me) worked out very well. 

	Perhaps this is because you don't know what to look for.  There are 
ostensible watch dogs who are supposed to be keeping an eye on the 
activities of business with an eye toward the criminal (anti-trust, 
poisoning the food, selling products that explode and kill their 
customers, etc).  They were asleep at the switch or ordered to stand 
down (dunno which... will research this one day, I suppose).  Some 
practices are so patently and obviously unsound that even those not 
initiated into business training would be able to identify them as such, 
if they paid attention.  Lending money at 0.5% when the nominal 
inflation rate is 3.4% is a pretty good indicator that something is 
wrong.  The Fed was *literally* paying you to haul the cash away.  Are 
they that stupid, given that it is a privately held, for-profit 
corporation?  I doubt it.  This leads us very directly to the question 
"then what were they up to?"  This is a question that nobody in 
mainstream media is treating publicly.

 > The
> companies would be bankrupt except for taxpayer bailouts,

	They should have gone bankrupt.  It would have served as an object 
lesson to those who survived that get-rich-quick schemes generally do 
not work except for a few in privileged positions.  unfortunately the 
past and current administrations made and will make all the wrong moves, 
judging by what I see and the results so far, and we will continue our 
slide into economic oblivion.

 > the
> financial system is pretty well shut down thanks to these financial
> geniuses.  Mainly because they had the system rigged for their
> benefit.

	The Fed put out bait - the first few takers pretty well painted the 
rest into corners.  If Bank A takes the bait and can sell mortgages for 
2.5% on an ARM, Bank B pretty much will have to follow suit or be left 
behind once the stoopid customers start flocking to Bank A's door for 
what they think is a sweet deal.  It becomes an all or nothing affair - 
once the first one goes, they hold a great short term competitive 
advantage.  The others have to do the same in order not to lose out.  In 
banking, idle assets are shrinking assets.  If nobody is buying your 
money, you are slowly going out of business, or in some cases not so slowly.

	The consumer, being the generally ignorant slug that he is, never 
stopped to consider the possible repercussions of buying that 2.5% 
mortgage.  When this was all happening, I immediately said to myself 
that the RE market is going to explode with inflation, and that is 
precisely what happened.  It was obvious and it was absolutely 
inevitable under those conditions.  The great lesson here is that 
EVERYONE is to blame for being morbidly greedy and inexcusably ignorant, 
except perhaps for the Fed, who I suspect knew precisely what they were 
doing, though to what end I cannot say with surety.

	What happened in the RE market is a strong analog of the larger 
economic situation when a government starts printing too much money. 
Too much money was made available to the market at too low a cost 
(equiv. of printing too much paper) and the RE values went through the 
roof as speculators started buying like mad, driving the prices sky-high 
(hyperinflation).  My little house in Freehold NJ, which I bought for 
too much money in 1987 for $170K recently sold for $660K!  Absurd.
> 
> This is why honest labor with real materials yielding a quality
> product is a hell of a lot more attractive to me.

	No arguments there, but economic reality says otherwise.  It's probably 
a sign of the times we're in.