Brock Lorber
Blog: Bloody Mary Breakfast
The Red Market  
Pete Boettke's worried about conflating isms.  The problem with the isms is, while they have definitions and hallmarks, popular parlance often conjures a mental picture quite contrary to the technical meaning of the ism.

Boettke is correct, as he so often is, that the current US economy is not yet socialism.  As of today, although a large portion of new credit is in the fumbling paws of government, all the capital remains in private hands.  Socialism depends on government control of the capital. 

Rather, this accelerated system of private profit and socialized losses, combined with government control of new credit, better fits the description of fascism.  With each new czar created by the Obama administration and regulatory authority handed to the Federal Reserve, the economy is returning to the fascistic model so popular in the US and Europe in the 1940s and 50s. 

However, until the industry groups are formally cartelized with regulatory teeth, one cannot properly describe the US economy as fascist either.  Today, it defies all standard definitions and lies in a confused state where individuals control the means of production, and the mob controls the means of producing future means of production.

Simple, pithy, and completely descriptive, “The Red Market” may be just the phrase everyone's looking for.  I have found references to the red market both in trade with the former Soviet Union and in regards to violent trade, such as with the mafia or violent drug cartels.  Both of those uses are congruous with government takeover of credit markets today.

As with the black market, participation in the red market is at your own risk.  Contracts can be made, but only enforceable if you have power of some sort equal to or greater than your trading partner.  Banks which, however willingly or unwillingly, got in bed with the federal government in October 2008 are already seeing the terms of that participation changing without their concurrence.

Unlike the black market, however, participation in the red market is mandatory for taxpayers.  Like any extortion scheme, under the guise of “for your own good” an attempt to avoid participation will result in violence enacted against your person or property.  The very existence of the red market is contrary to any moral, ethical, legal, or natural principles; it would be folly to imagine red market enforcers suddenly discovering principles when dealing with resistance to participation.

But, just because you may be compelled by the threat of violence to participate in the red market on one side of the transaction, does not compel you to participate on the other side.  As the full implications of the red market are realized, the moral and ethical vacuity accompanying deals with red market participants will become clear.  To be frank, any contact you currently have with any bank, financial institution, manufacturer, or lobby either participating in or encouraging the red market is contrary to your own well-being.

Your possessions and labor are already providing the liquidity on one side of the red market.  If you provide the liquidity on the other side of the red market transactions by doing business with red market participants, you are only encouraging further takings of your property and labor.  Private capital has already figured this out; capital markets are all but closed to red market participants.

Citigroup: down to $1 from a 52-week high of $27.35. 

Bank of America: $3 from a high of $43.46.

AIG: 35 cents from $49.50.

JP Morgan Chase: $16from $50.63.

Wells-Fargo: $9 from $44.75.

General Motors: $1.50 from $24.24.

Goldman Sachs: $76 from $203.

Morgan Stanley: $17 from $51.80.

PNC Financial Services: $18 from $88

US Bancorp: $9 from $42.23.

Capital One: $8 from $63.50.

American Express: $10 from $52.

You have been repeatedly told these companies are just leading a broad market downturn.  But, if red market participation was seen in any way, shape, or form by private capital as a good thing, these companies would act as market buoys, not anchors.  They may not be able to hold the market up, but they certainly wouldn't be dragging it down.

Private capital knows, as should you, that doing business with red market participants is anathema to life " both yours and that of your grandchildren.