Sunday, July 20, 2008

As the myth of free markets and free trade

gives way to reality:

IN the narrative that has governed American commercial life for the last quarter-century, saving companies from their own mistakes was not supposed to be part of the government’s job description....

...The central banks of China and Japan are on the hook for hundreds of billions of dollars worth of Fannie’s and Freddie’s bonds — debts they took on assuming that the two companies enjoyed the backing of the American government...

The United States has been financing itself by leaning heavily on foreigners, particularly China, Japan and the oil-rich nations of the Persian Gulf... American debts swell and foreigners hold more of it, nervousness grows that, some day, this arrangement will end badly...The New York Times.

Although neither free trade nor free markets actually exist on any large scale---they are all managed---it has become about impossible to question either in the US. Even the press, which was never enamored of free trade/markets when Reagan was pushing for them (markets and trade managed in a new way and called "free"), now defends them as nearly an unquestionable good. Even though they don't really exist.

Maybe after this crisis, we can rethink the way we manage markets, but still pretend it is free trade.

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