Question: What’s the difference between Halliburton and the Post Office?
Answer: You can buy stock in Halliburton.
No, that is not a joke. From an economic point of view, that really is the only difference. (If I had answered, “the cool sunglasses,” that would have been a joke.)
Question: What’s the difference between Halliburton and I.G. Farben?
Halliburton is an American company and I.G. Farben was a German company.
Question: What’s the difference between Halliburton and General Motors?
Answer: Sixty years.
General Motors prospered during World War Two and then grew bloated and inefficient and eventually needed a government bailout. Halliburton is prospering now during the occupation of Iraq, but will inevitably become bloated and inefficient and need a government bailout.
Question: What’s the similarity between Halliburton and General Motors?
Answer: At the time of their government bailout, pundits can/will be heard exclaiming, “But we must! They’re too big to fail!”
Those same pundits are/will be conspicuously silent on how the entire economy came to be held hostage by one big company.
Question: When Freddie Mac and Fannie Mae needed to be bailed out by the government, the Federal Reserve could have either opened the Discount Window to them or purchased their stock outright. What’s the difference?
Answer: Fascism or socialism.
“Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission,” said Henry Paulson, "Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies." Indeed, the government did choose to keep its current form: fascism. The Venezuelans can follow Hugo Chávez down the road to socialism, but George Bush will stick with fascism, thank you very much. “You know, there is an implicit guarantee,” he said.
Question: From the point of view of the average American, what difference does it make?
Answer: None, unless he’s into reading the Sunday editorial page.
Under a fascist regime, editorialists will bemoan the existence of “those damned privately controlled bankers” and try to convince us that socialism would be better. Under a socialist regime, editorialists will bemoan the existence of “those damned lazy government workers” and try to convince us that fascism would be better.
Question: So what’s the best economic system?
Answer: Free enterprise. Specifically, free banking.
No, that was not a trick question. I never said that the choice had to be between fascism and socialism. You just allowed the preceding questions to lead you into making that assumption. And we all know what happens when you make assumptions: You make an ass of you and me. Well, I won’t be made an ass of – I came down firmly in favor of free enterprise in my 1999 book, Axiomatic Theory of Economics, and I stand by that position.
Question: So, under your proposed free banking regime, what will the dollar be worth in gold?
In a free banking regime, each local bank issues its own currency and those currencies are individually redeemable in commodity money. The dollar will no longer exist.
Question: But those currencies will be backed up by gold, right?
Answer: I never used the word “gold” in my book. I spoke only of commodity money. In ancient times, commodity money was cattle. In modern time, it is gold. In the future, who knows? Maybe oil. See my paper, An Answer to Stephen Zarlenga, to learn more about the origin of money.
Question: Do you discuss free banking on this website?
Answer: Briefly, in my Simplified Exposition. But to get the full treatment, you will have to buy my book.
Also, see my related paper, Socialism without Seizure is still Socialism.
This paper was written at the time that Fannie and Freddie were being bailed out, but before AIG was bailed out. Now, at the time that Paulson is ramming his $700B bailout through Congress, the socialists are out in force, conflating free enterprise with fascism. For example, Stephen Zarlenga writes, "The private sector has failed. The public sector is expected to rescue them and it will. Therefore the public sector should control the money system to benefit the country."
Frankly, the ostensibly free-market economists are not helping to clear things up. Their silence at the time that the Federal Reserve and Government Sponsored Enterprises were prosperous gave such institutions their implicit stamp of approval. So, when socialists now say "the private sector has failed," it sounds revisionist when free-market economists suddenly find their voice and argue that the financial crisis is actually a failure of government. To compound the confusion, when strident fascists like Henry Paulson demand that our relatively mild form of fascism be replaced with a much more overt form of fascism, they denounce him as a socialist, which just makes them sound ignorant.
So get it straight: Paulson is a fascist, Zarlenga is a socialist and I am a free-market economist - apparently the only consistent one.