Market Correction

3 October 2008

Editor, Vanity Fair

Dear Editor:

Despite being a Nobel laureate in economics, Joseph Stiglitz needs a refresher course in basic trade theory. He's simply mistaken to assert that increasing purchases by Americans of foreign oil would, by putting upward pressure on the trade deficit, "force the U.S. to continue borrowing gargantuan sums from abroad, making us even more indebted" ("Reversal of Fortune," November 2008).

Not a single dollar earned by foreigners who supply imports to Americans need be borrowed back from these foreigners by Americans. Americans CAN borrow these dollars from foreigners, of course. But John Doe in Denver or Jane Roe in Roanoke (or Uncle Sam in Washington) is no more "forced" to borrow back the dollars they spend buying oil from Sheik Faisal in the middle east than they are "forced" to borrow back the dollars they spend buying beef from rancher Frank in the Midwest.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

3 October 2008

News Editor, WTOP Radio
Washington, DC

Dear Sir or Madam:

At about 7:40 this morning your co-anchors, Bruce Alan and Mike Moss, spoke to a Wall Street reporter who, like so many others these days, asserted that credit markets are "frozen" - that ordinary Americans cannot find credit even for "basic needs" such as buying household appliances. Neither Mr. Alan nor Mr. Moss questioned this claim.

At about 7:50 Mr. Alan read a report that Toyota Motor Co. has just announced that it is offering zero-percent financing to customers who buy its automobiles.

Isn't it clear that this latter announcement contradicts the "frozen-credit-markets" claim - and, indeed, evidence against the veracity of conventional reporting about today's economy and the alleged "need" for a bailout?

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

2 October 2008

Editor, The Washington Times:

Dear Editor:

Members of Congress from both sides of the aisle are confidently predicting an economic calamity if the bailout package isn't passed ("Senate passes rescue; House in doubt," October 2). From where does this confidence come? Most of these people have proven track records as economic ignoramuses and as political opportunists.

For example, in today's Wall Street Journal Reps. Barney Frank and Maxine Waters, along with Senators Chuck Schumer and Chris Dodd, are quoted as saying publicly in 2003 that concerns over the soundness of Fannie Mae and Freddie Mac were unjustified - that, in Rep. Frank's words, "we see entities that are fundamentally sound financially." Given the foolishness of these judgments, can you explain why Americans should now trust politicians' claims that a bailout is necessary?

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

1 October 2008

Editor, Washington Post
1150 15th St., NW
Washington, DC 20071

Dear Editor:

Harold Meyerson joins the chorus of pundits chanting that the turmoil in credit markets signals "the collapse of laissez faire" ("Slow Rise for a New Era," October 1).

The American Heritage Dictionary defines "laissez faire" as "An economic doctrine that opposes governmental regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws." No one who examines the American economy in general, or credit markets in particular, can truthfully conclude that laissez faire has reigned in recent years. Indeed, were Mr. Meyerson to read George Will's column appearing beside his own in today's edition of your paper, he'd get a partial list of the many government interventions that have paved the path to this crisis ("A Vote Against Rashness," October 1).

To blame today's crisis on laissez faire is akin to blaming the death of a heroin junkie on exercise, eating right, and sobriety.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

30 September 2008

Editor, The New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Deeply upset that the House of Represetatives voted against the bailout plan, David Brooks writes that "We're living in an age when a vast excess of capital sloshes around the world fueling cycles of bubble and bust. When the capital floods into a sector or economy, it washes away sober business practices, and habits of discipline and self-denial" ("Revolt of the Nihilists," September 30).

So, pray tell, how will a massive government bailout of persons who behaved imprudently - a bailout inevitably injecting hundreds of billions of dollars of additional paper capital into the economy - solve the underlying problem?

As my colleague Richard Wagner points out, markets aren't intoxicated by large flows of capital per se. Such bubblicious drunkenness results from capital that is politically supplied and directed - just the sort of capital promised by the bailout plan.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

30 September 2008

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

V. Nagarajan suggests that the financial turmoil on Wall Street combines with the fact that most winners of the Nobel Prize in Economics are American to reveal that economics is a discipline unworthy of Nobelity (Letters, September 30).

While some laureates are indeed undeserving of such high distinction, Mr. Nagarajan's presumption that Uncle Sam's economic policies are fashioned after the advice of distinguished economists is unwarranted. One of America's greatest economists is my colleague James Buchanan, winner of the 1986 Nobel Prize. Jim's life work shows that government officials seek office, not truth - and that success at their venal endeavor too often entails not merely ignoring sound economics but positively fleeing from it as if it were a fast-expanding cloud of anthrax spores.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University