Mr. Greenspan

I highly recommend reading any article about Mr. Greenspan's Congressional hearing. A few highlights as quoted by J. Chait of The New Republic:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Is this the end of the free market as we know it? I doubt it. While regulation is clearly needed and proposed by both candidates, what will it look like? As I've said numerous times, this crisis is so complex that I'm not sure anyone really knows whats going on. I highly recommend reading the recent Economist article, Link by Link: A short history of modern finance. What's clear is the deregulation has been on the rise since Milton Friedman's arguments finally defeated Keynesian ideas in the 1970s. Friedman emphasized the free market whereas Keynes emphasized government intervention.

As the pendulum swings back and forth between ideological poles, my hope is that it comes to rest in the middle. Perhaps this is one of the reasons I like Obama more and more. McCain seems to be bent on the free market, despite populist outcries at the greed and excess of wall street (can anyone explain how you can be whipping mad at big business yet still want to give them a huge tax break? not to mention the data simply doesn't show that supply side policies will really benefit or "trickle down" to everyone else).

Ironically it is the home of Milton Friedman, the University of Chicago, where Obama has formed his economic thought. This has given him an understanding of the value of the free market and its potential for growth. After all, you can't deny that deregulation has had some very positive outcomes. On the other hand, I think Obama also understands the limits of deregulation and free markets. While this might lead one to believe that soon the government will be back in control, I doubt it. Most impressively, I think Obama is unlikely to see government as the only solution to the problems of the market and will look for market solutions to market problems. I suppose only time will tell, but this is a major reason why Mr. Obama will receive my vote.

On a lighter note, I have been reading a number of endorsements for Obama lately. I have a great affinity for endorsements that are given almost grudgingly, pointing out both flaws and strengths. I respected and admired Colin Powell's greatly. I also had to chuckle when Leon Wieseltier wrote in his endorsement entitled Washington Diarist,

. . . McCain's sense of reality seems to be narrowing. The financial crisis harshly exposed these limitations: it made McCain more dogmatic and more doctrinaire, with his wild refrain about tax cuts and his unmaverick-like refusal to examine his party's cult of corporations. His economics refuted his compassion. McCain feels with his heart, but he thinks with his base. And when he picked Sarah Palin, he told the United States of America to go fuck itself.

Only 11 more days!

Greenspan concedes error on regulation