Mish explains:
…you can’t lose what you did not have. Capitalism did not fail, government regulation as it inevitably does, failed.
Fannie Mae, Freddie Mac, FDIC, Social Security, government bailouts of failed institutions have nothing to do with capitalism. Nor do tax breaks that favor housing over rent, nor does a government running HUG or FHA to support social goals.
The SEC took a perfectly fine credit rating system based on actual performance and turned it into sponsorship of Moody’s, Fitch, and the S&P. After SEC sponsorship, the “Big Three” got paid on the basis of the volume of business they did instead of how accurately they did business.
Virtually everything that failed can be traced back to government intervention into the free markets, especially the creation of the Fed itself.
Of course, when we say “capitalism” we really mean, “free markets”. The word “capitalism” is a socialist concept – an assertion that in a free market, there is actually a central control using its power to exploit the masses. Actually, in a free market, things are free and while individual con artists might sucker some individuals, there is no means to, say, create a Fannie Mae or Goldman Sachs to loot the economy. To be entirely honest about it, the capitalists started the ball rolling towards non-capitalism – in the late 19th and early 20th centuries, when the Trusts were created to restrain trade and drive up prices. Teddy Roosevelt took a stab at them, but eventually they were smart enough to get on side with Big Government, and the two grew together. At this point, there’s no difference in functional terms between Big Government and Big Corporation outside of a slightly better efficiency in Big Corporation (and it really is only slight).
Our task, as conservatives, is to reform this – to return our economy back to a genuine free market, and then conserve that for future generations. We have to break up both Big Government and Big Corporation – if we can do that, then we, the people, can start creating wealth again for ourselves, rather than the maw of Big Government, or the pockets of Big Corporation.
UPDATE: The Myth of the Multiplier; case closed against the asinine concepts of Keynes.
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