This will not help

President Obama today said “If we once again guide the market’s invisible hand with a higher principle, our markets will recover, our economy will once again thrive and America will once again lead the world in this new century as it did in the last“.

Has he actually read The Wealth of Nations, the classic Adam Smith book that coined the term “invisible hand?”  Does he even know what the term means?

Evidently not, because “invisible hand” is the term economists use to describe the self-regulating nature of markets.  I’d like for President Obama to reconcile that with his call today for increased regulation of financial institutions.

According to Reuters The economy cannot sustain “21st century markets with 20th century regulations,” Obama told reporters after the meeting with lawmakers. And Strong financial markets require clear rules of the road, not to hinder financial institutions, but to protect consumers and investors and ultimately to keep those financial institutions strong.”

If he’s serious about resolving the financial crisis, Obama will shut up, repeal the current regulations, and allow bad banks to fail.

There’s a lot more in the article, but I don’t have time to get into it all right now.  But I can’t simply disregard statements like Turmoil throughout the banking and financial system caused by the subprime mortgage crisis is at the core of the recession that has spread worldwide. and There is wide agreement among financial market experts — both in the United States and around the world — that the rules governing financial institutions are in dire need of modernization.

These same “financial market experts” are the ones who created the problem – why does anyone think they know how to solve it?

gk

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  1. […] Smith’s Lost Legacy is the name of a blog I found this evening.  I found it because of a link to my post here where Gavin Kennedy took issue with my attribution of an “invisible hand” to Adam Smith […]

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