Don't Give Up on Capitalism, Fix It

Unfortunately, under the reign of Greenspan's Federal Reserve, these important safeguards were discarded in favor of a simplistic, extremely naïve, libertarian Ayn Randian philosophy that the market is always right and can always correct itself. Rand worshipped capitalists and capitalism like a religion. While that ideal would be nice to believe, history also tells us it's not realistic. In fact, capitalism naturally runs to extremes of booms and busts. This is the business cycle.

Greenspan and his followers somehow believed they could eliminate this boom-and-bust cycle by printing enormous sums of excess money, keeping interest rates below the rate of inflation and allowing a Wild West, anything-goes environment. Instead, what they have done, and what Greenspan as much as admitted recently in his testimony on Capitol Hill, is wrecked the financial system -- and probably the economy -- of the entire world.

Even worse, they have destroyed the credibility of capitalism as an economic system. The absurdity of this result is that it was actually central planning, in the form of arbitrary decisions by the Federal Reserve, the Treasury and the Securities and Exchange Commission that caused this crisis and have exacerbated it recently.

If interest rates were set by the market, if there were a gold standard and the dollar could not be printed in unlimited amounts, if the Fed and the SEC actually understood what is meant by ensuring transparency and limiting speculative excesses, if the government were not trying to pick winners and losers among financial institutions, we would not be in this mess.

(And what a mess it is. Consider that in the past two months, the market has seen the bankruptcy of Lehman Brothers; government bailouts for Fannie Mae (FNM Quote), Freddie Mac (FRE Quote) and AIG (AIG Quote); the failure of Washington Mutual and its takeover by JPMorgan Chase (JPM Quote); and the mergers of Wachovia (WB Quote) with Wells Fargo (WB Quote) and Merrill Lynch (MER Quote) with Bank of America (BAC Quote).)