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Libertarian Economic Model - Mike "Mish" Shedlock

Posted by ProjectC 
'..the basis of the Libertarian economic model is that we need to protect private property, prevent fraud, protect human rights, and give everyone an equal chance under the law.

...

Government would not be allowed to spend more than it takes in, banks would not be allowed to lend more money than they have ownership of, and the Fed would be abolished.'


'Libertarian Economic Model

The Libertarian model does not end all regulation. Indeed the basis of the Libertarian economic model is that we need to protect private property, prevent fraud, protect human rights, and give everyone an equal chance under the law.

Had we done that, and "just" that we would not be in this mess.

In the Libertarian model, Fannie Mae and Freddie mac would not have existed. Nor would there have been a Fed keeping interest rates too low, too long. Without the loose lending model of the Fed, and without banks being able to lend more money than they have, the housing securitization model that blew up would not have happened or if somehow it did, it would have been less problematic by orders of magnitude

In the Libertarian model, there would not have been government sponsorship of the rating agencies Moody's, Fitch, and the S&P.

In the Libertarian model the construct of "Too big to fail" does not exist. Indeed, allowing failure is one of the tenants of the Libertarian model.

Note that something like Glass-Steagall would work in the context of a Libertarian model because its purpose is to put a firewall to prevent fraud. Pollution laws would still be needed to protect private property. Child labor laws would still be needed to protect human rights. Public safety laws are fine. No one would be allowed to yell "fire" in a movie theater.

If you want to take that model and add some social safety nets, all but strict Libertarians might agree.

Failure of Regulation

All the corporatism, all the bank failures, the credit bubble, the housing bubble, and all the warmongering is a direct result "of" regulation that Libertarian economics has nothing to do with.

Indeed most of those those things could not happen in a Libertarian model. To the extent that any of them could happen, they would not occur to the same magnitude.

Libertarian Solution

The solution is to throw away all legislation except what is needed to protect private property, prevent fraud, protect human rights, and give everyone an equal chance under the law.

That means all tax breaks that favor GE as well as all tax breaks for homes, have to go. Tax code should not favor any group or thing. Drug imports from Canada would be allowed in this model and warmongering would stop. Subsidies to home builders would stop. Subsidies for ethanol would stop. In fact, subsidies for everything would stop.

Government would not be allowed to spend more than it takes in, banks would not be allowed to lend more money than they have ownership of, and the Fed would be abolished.

Instead, those in the regulation camp want to patch a million misguided pieces of legislation that should not even exist, and worst of all they expect Barney Frank to get it right.

One model has been tried and failed a million times. One model has never been tried.'

- Mike "Mish" Shedlock, Misguided Views of Libertarian Economics and the Alternative "Regulation" Model, March 28, 2011