In an piece today in the FT Alan Greenspan wrote; “Crony capitalism abounds when government leaders, usually in exchange for political support, routinely bestow favors on private-sector individuals or businesses. That is not capitalism. It is called corruption.”
The arbitrary setting of interest rates by the Federal Reserve Politburo however, that’s ok.
We’ve said it more than once here. One can not have a truly market economy without free floating interest rates. If a central authority declares what the cost of borrowed money is by fiat this is reflected by prices in all other areas of the economy. As such the market is undermined from the start. For Greenspan to defend free market capitalism without even mentioning how the Fed skews the free market doesn’t make much sense.
Sadly also, the crisis that Greenspan sees undermining capitalism is in large part of his making. He and the FOMC central planners kept rates too low for too long. Now, because of the failure of central planning, capitalism is on trial, with one of the key central planners defending it. Things have just gotten weird.
In fairness Greenspan’s defense of capitalism is actually pretty much spot on, that is if we didn’t have a central bank messing everything up in the first place.