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What part of free market capitalism would impose a Federal Reserve banking cartel by federal law that could loan into such a bubble?
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What part of free market capitalism would take the US dollar of gold via presidential edict allowing for the unlimited expansion of money and credit into markets in 1971? ( https://wtfhappenedin1971.com )
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What part of free market capitalism would have this state imposed central bank lend a trillion dollars into subprime via government created corporations Freddie Mac and Fannie Mae? And have them lend that to minority families, even if the banks deemed it not prudent?
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What part of free market capitalism would have this state imposed central bank loan money into a housing bubble at 1.5% APR? Do you know any capitalists who are satisfied by a 1.5% APR return on investment?
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What part of free market capitalism would have this state imposed central bank cover counter party risk on CDO's, also causing CDO insurance to become mis-priced, until it didn't?
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What part of free market capitalism would run to the banks rescue with a 1 trillion dollar bailout, to cover them till the fed could lower interest rates back down to zero?
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What part of free market capitalism would reflate the housing bubble with 0% apr interest rates? Which seems to now be causing a bubble in every sector of the US economy.
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For the most part, a free market capitalist system is self regulating. Set your prices too high, a competitor will step in to undercut you. Reduce the quality of your product or service, again, a competitor will come along to offer something better. These natural forces act to keep the market in check. Some regulation is necessary, but I believe only to serve these three purposes: 1) Prevent parties to a transaction from committing fraud. 2) Prevent business (or individuals) from producing and/or selling products that cause harm (ex. excess pollution, unsafe products and foods, etc.). 3) Limiting monopolies. Beyond those three things, regulations that seek to "level the playing field", or that chose winners and losers in the market, tend to do more harm than good.
The systems to regulate our societies have to be extremely disciplined in their duties to regulate.
Jordan Peterson gave a good explanation of the law of accumulation which describes the tendency of wealth to accumulate to the very top, i.e. the "One Percent" (no, that is not a strictly American nor capitalistic feature). The problem then is that there is so little wealth at the bottom that if you start near 0 then it becomes statistically improbable to move up. This is not saying that its impossible but does emphasize the disparity of the situation that arises. People with nothing to lose start to reject the hierarchy and system that relegated them to poverty amd are more likely to revolt.