The Free Market's Not Dead - Forbes.com

The Free Market's Not Dead - Forbes.com

"The financial free market in the U.S. ended in 1912 with the passage of legislation to create the Federal Reserve System--the central bank. Before that, financial crises were simply Darwinian: fearful depositors, numerous bank failures, economic contractions, no management of the economic cycle or monetary policy, no safety nets for consumers and no government bailouts. Depositors usually responded with panic, creating bank runs that destabilized institutions and the entire financial system... 

'Free market' does not accurately describe the financial services industry in the world today. Government agencies regulate the entry, exit and combination of financial institutions; they oversee the transparency of financial reporting and securities underwriting; they influence credit and capital policies of lenders; they manage the money supply through which they drive interest rates and inflation expectations; and they provide the electronic system through which vast quantities of cash are transferred." (Emphasis Mine.)

What has died is the notion--idiotic from its inception--that an unregulated market backed by government guarantees would benefit everyone in roughly equal fashion. When you tell the players that their mistakes are covered, and let those players bring in suckers--"clients"--as part of the game, you have the very basis of a financial bubble, whose only possible outcome is failure on a massive scale.