I was on active duty during the Cold War and fulfilled my committment several years before the collapse of the Soviet Union.
I recall with wonderful joy the day the Berlin Wall fell.
It was neither massive federal spending during the Depression nor even more massive federal spending during World War II that ended the Great Depression.
That’s what I was taught in school and what most people believe today.
Stephen Moore explains the WWII part of the falsehood in his article How did the Gret Depression actually run its course?
FDR and his whiz kids were totally convinced that the economy would completely collapse after the end of the war. They planned but fortunately did not implement a New Deal II. Doing so would have strangled the economy, perhaps for yet another decade.
Here is the conclusion to the article: (more…)
My previous post described a comment by Sam Antar during his CPE session that the fines arising from of a long list of financial fiascos are essentially a tax on illegal behavior.
He made another comment in that session that I wanted to describe in detail. He said these frauds are a cancer destroying capitalism.
I had opportunity to visit with him a few weeks ago and asked him to expand on this idea. I will summarize what we discussed.
This discussion is cross-posted from my other blog, Attestation Update, since it directly affects freedom, capitalism, and morality.
Cancer destroying capitalism
He indicated the foundation of capitalism is reliability of financial information. If you can trust financial information you read then we can do business with each other.
He says the extent of frauds we have seen are leading people to lose faith in financial information. That leads to loosing faith in their counterparties. Therefore people have less trust. In financial terms that means the risk premiums for transactions go up. The interest rate built into a transaction increases and the return drops.
Several weeks ago I listened to a continuing education class presented by Sam Antar, current felon and formerly CFO of Crazy Eddie.
In the session, he made two comments that caught my ear. First, the fines we read about as a result of various financial scandals are just a tax on illegal behavior. Second, those fiascos are, he said, a cancer destroying capitalism.
After the session, I had opportunity to interview him by phone and follow-up on both of those ideas.
(This discussion is cross-posted from my other blog, Attestation Update, because this is not capitalism and I don’t think the underlying issue furthers freedom.)
Fines are a tax on illegal behavior
He indicated that essentially no one has been implicated in any of the disasters we’ve read about, which I have discussed extensively on my blog.
He said corporations don’t commit crimes. People commit crimes.
And the people who committed crimes aren’t going to jail.
Lack of jobs for a decade and a half in the Great Depression. What could have slowed the economic recovery that started to appear a few times?
Amity Schlaes provides a quick summary in her Forbes column, Roosevelts versus Plutocrats, in which she also describes the slant and bias in the new PBS series on the Roosevelts.
After the turn of the century, Teddy Roosevelt started his war on big business by going after railroads and coal. The railroad industry was already weak and the litigation toppled a tottering industry. The far less regulated trucking industry made sure rails never recovered.
There is a concept loose in the U.S. and emphasized in our educational system that the Puritans arrived in the U.S. believing in capitalism and went straight to economic prosperity.
Well, capitalism will definitely do that, but the Puritans made a few stops before getting to prosperity. Those included socialism, price controls, and severe caps on finance & trade under the guise of opposing usury. All of those policies will suppress economic development.
Jerry Bowyer explores this journey through false ideas is a series of articles, which summarize his interview with Mark Valeri, author of Heavenly Merchandize.
To encourage you to check out the full articles, I’ll try to summarize some key ideas.
7/30 – Forbes – Jerry Bowyer – Puritans vs. Capitalism: How A Theological Error Led To Financial Stagnation – In the 17th century, pastors and religious leaders were opposed to usury which included even discounting letters of credit more than a small amount. If you can’t use paper (bills of credit) to facilitate long-distance trading, there won’t be much trading.
At the most foundational level, capitalism is moral.
The only way to succeed in the long-term is to treat customers well and honestly. That will provide money to the company to continue paying staff and vendors as well as leaving a profit for owners.
If a company does not deliver a quality product or service that customers value with higher utility to them than the cost to provide by the company, then the company won’t be around long.
At the core level, it is moral to satisfy your customers with profit left over.
CPA Ron Baker makes this point more eloquently than me in his LinkedIn article, Are Corporations Socially Responsible?
By the way, the answer is yes.
(Cross-posted from my other blog, Attestation Update.)
If a corporation provides value to customers, both the company and customer will be better off after the transaction than before. That is a positive social value.
Doing so, within the framework of the law (as Milton Freidman points out) is the duty of a business and it is also highly socially responsible.
Consider the following two stories.
One country with rapidly expanding oil production with no end of the increase in sight. The other country is a member of OPEC and will start importing light crude.
I’ll ask two questions after mentioning the articles, which are reposted from my other blog, Outrun Change. (more…)