Comments from my geeklist concerning Enron (not a free-market based company)-

“Enron provides a perfect example of the dangers of corporate subsidies. The company was (and is) one of the biggest beneficiaries of Export-Import Bank subsidies. The Ex-Im bank, a program that Congress continues to fund with your tax dollars, essentially makes risky loans to foreign governments and businesses for projects involving American companies. The Bank, which purports to help developing nations, really acts as a naked subsidy for certain politically-favored American corporations- especially corporations like Enron that lobbied hard and gave huge amounts of cash to both political parties. Its reward was more that $600 million in cash via six different Ex-Im financed projects.

One such project, a power plant in India, played a big part in Enron's demise. The company had trouble selling the power to local officials, adding to its huge $618 million loss for the third quarter of 2001. Former president Clinton worked hard to secure the India deal for Enron in the mid-90s; not surprisingly, his 1996 campaign received $100,000 from the company. Yet the media makes no mention of this favoritism. Clinton may claim he was 'protecting' tax dollars, but those tax dollars should never have been sent to India in the first place.

Enron similarly benefitted from another federal boondoggle, the Overseas Private Investment Corporation. OPIC operates much like the Ex-Im Bank, providing taxpayer-funded loan guarantees for overseas projects, often in countries with shaky governments and economies. An OPIC spokesman claims the organization paid more than one billion dollars for 12 projects involving Enron, dollars that now may never be repaid. Once again, corporate welfare benefits certain interests at the expense of taxpayers.

The point is that Enron was intimately involved with the federal government.

…Few in Congress seem to understand how the Federal Reserve system artificially inflates stock prices and causes financial bubbles. Yet what other explanation can there be when a company goes from a market value of more than $75 billion to virtually nothing in just a few months? The obvious truth is that Enron was never really worth anything near $75 billion, but the media focuses only on the possibility of deceptive practices by management, ignoring the primary cause of stock overvaluations: Fed expansion of money and credit.

The Fed consistently increased the money supply (by printing dollars) throughout the 1990s, while simultaneously lowering interest rates. When dollars are plentiful, and interest rates are artificially low, the cost of borrowing becomes cheap. This is why so many Americans are more deeply in debt than ever before. This easy credit environment made it possible for Enron to secure hundreds of millions in uncollateralized loans, loans that now cannot be repaid. The cost of borrowing money, like the cost of everything else, should be established by the free market- not by government edict.”




I agree with you on this. They fail because of artificial credit expansion (via Federal Reserve) inevitably leading to a boom/bust cycle. I recommend my geeklist for how this occurs-

http://www.boardgamegeek.com/geeklist/33566




The dot com bust was predicted by the free-market Austrians long before it happened. See Reisman’s August 1999 piece-

http://www.capitalism.net/articles/stockmkt.htm

“What is directly and immediately responsible for the current bull market is a sustained and rapid increase in the demand for stocks. This increase in demand in turn has been the result of the repeated pouring into the market of large sums of new and additional money, created by the banking system under the umbrella of the Federal Reserve System and related government intervention

…Today, the new and additional money is paper, i.e., checkbook money, which is being rapidly created virtually out of thin air and is being spent mainly in the stock market, with the result of comparably high and, almost certainly, comparably fleeting valuations of many securities. Since December 1995, the money supply as measured by M2 has grown by almost twenty-five percent. Even more significantly, the increase in deposits specifically of the kind commonly held with brokerage houses, i.e., so-called money-market-mutual-fund accounts, has been at double digit rates: 17.5% in both 1996 and 1997 and 29% in 1998.

…The end of the stock-market boom is something earnestly to be desired. This is because its continuation entails a growing state of mania, in which fortunes are created without any rational cause, merely by virtue of the pressure of a flood of money seeking outlet in channels no more real than empty hopes and dreams, and in which increasing numbers of otherwise highly intelligent and perfectly sane people are lured into sacrificing the serious work of their chosen occupations to the pursuit of such causeless and ultimately ephemeral wealth.

At the same time, because the mere inflation-induced appearance of wealth is made to substitute for the fact of wealth, the boom gives rise to a consumption that takes place at the expense of essential saving and capital accumulation and thus serves ultimately to cause impoverishment.”




I'd rather have a Democrat in power pushing big government policies than Republicans who give lip service to the free-market but end up discrediting it for various reasons.