There is a new drugstore test called the E.G.T. (Early Government Test). You pee on a stick. If the lines appear, you are no longer living in a free market.
Of course, it may be a temporary condition. A few months of gestation, a painful birth, and about 18 years before you are back to your old self. But I suspect it is a little more permanent.
Most takers of the test this week will find that they are no longer living in a dot com country – welcome to dot gov.
It is not difficult to track the arc of the free markets. As an engine of social change, the Industrial Revolution celebrated capitalism with a religious fervor. By the turn of the century, the fits and sputters of market had to have some monopoly busting, but by the 1920’s, American markets were the wonder of the western world.
With the pain of the Great Crash came silence from Washington. Adam Smith’s hand was nowhere in sight. In that moment of confusion, New Dealers found an audience. Government intervention and regulation was the new world order.
And so it has been. The prosperity and pain of the free markets have grappled with the prosperity and pain of the regulators for most of our American history.
The debate is not between a totally free market and a totally regulated market. Rather, like so many other things, it is a matter of degrees. I am just a little nearer to the free market side than our modern day New Dealers.
The news about Citi today brings the issue into sharp relief. After falling an appalling 60% last week to $3.77, the board of directors is said to be talking to the Treasury about creating a separate bank to hold all the bad stuff that is dragging Citi down. The new entity would of course have some sort of federal backing to share in the losses beyond a certain tolerance.
An idea? This proposed other bank should probably be called something that rhymes with Citi Group but starts with an ‘sh.’
None of it should be a surprise. The stick had lines. The dot com was dropped for a dot gov. We are in a season of extraordinary things. I know the markets need more transparency. I know areas of the market need more regulation. But is it so hard to recognize that nothing good has ever come from over reaction?