Krugman and the Hoover Fallacies

One of the economic myths that Paul Krugman, along with most politicians, journalists, and academics, promotes is the outright lie that Herbert Hoover organized his presidency to promote free market economics. Furthermore, he tells us (ad nauseum) that during the last three years of his presidency, Hoover did nothing to stop the Great Depression, leaving it up to Franklin Roosevelt and his New Deal to mitigate the effects of the downturn.

Thus, when Krugman refers to someone as a "Herbert Hoover," he is saying that he or she is not embracing the Keynesian paradigm and, instead, claims that we must "be responsible" in not spending beyond our means. Yes, Krugman believes that such "responsible" behavior actually is irresponsible, at least during a depression.

Thus, in his recent blog post, "Fifty-One Herbert Hoovers," Krugman claims that spending cuts by state and local governments are dragging down the economy:

...I think it’s fair to say that state and local cuts largely offset federal stimulus.

And David Broder thinks this is a good thing, that Washington should be more like the states.

What amazes me is that Broder doesn’t even seem to be aware that there’s an argument on the other side, let alone that most economists are dismayed by the effects of fiscal austerity. If Broder is a guide to Beltway conventional wisdom — which he usually is — we’ve got a big problem. (Emphasis mine)

Krugman even has a graph that "proves" his point:



First, Krugman is more correct than he realizes, if he claims that the states are emulating Hoover. Murray N. Rothbard (a much better economist than Krugman could claim to be) laid out Hoover's many government interventions in his classic, America's Great Depression. However, I don't think that is what Krugman wants us to believe.

Second, Krugman seems to be living in Wonderland if he believes that state and local governments can spend money they don't have. (This is why he is demanding that the federal government print a lot of money and give it to the states.) Third, if one looks at the graph, one can see that the economy recovered after the 2001 recession when state spending was down. (No doubt, Krugman will claim that state and federal spending, which increased during the recession of 2001, was the reason for the recovery.)

Now, the "recovery" after 2001 turned out to be a faux recovery, or what I called a "boomlet," which I predicted would end in a worse downturn. However, to Krugman, boom conditions can last forever, just as long as government provides enough "free" money to keep the punchbowl filled. Unfortunately, that is not the case.

There is another point as well. One of the reasons that we are not seeing a real recovery (and only one of the many reasons) is that state governments have become hostages of public employee unions. (Steven Greenhut has written a great book on this subject, appropriately called Plunder.)

State spending has become extremely voracious, and states are raising taxes left and right to fund their generous pensions and pay that unions extracted when the economy seemed to be in better shape. The notion that states raise even more taxes to continue spending at a drunken rate is irresponsible, and the notion that most economists believe that such actions would be good for the economy is pretty pathetic. If most economists believe this nonsense, then the academic profession is in worse shape than I had thought.

Note: I am blogging from the Austrian Scholars Conference at the Ludwig von Mises Institute in Auburn, Alabama.

How Little He Knows Economics

Apparently, believing that whenever government not only does things to create unemployment, but also subsidizes it is going to have the effect of there being even more unemployment is immoral. How do we know that? Why, Paul Krugman tells us so.

His proof? He takes a partisan screed from Washington Monthly as an unquestioned authority. Then he finished with some lines from "Treasure of the Sierra Madre" (a great movie, by the way) as even more proof of the intelligence and morality of his position.

What happened, as I pointed out in my last post, is that Krugman claims that he was not contradicting himself at all, but rather turns to Historicism as his claim that in a recession, all of the rules of economics are turned on their heads.

So, when times are good, he says, generous welfare benefits to the unemployed create more unemployment, but when unemployment is high, then generous welfare benefits stop unemployment slide. Go figure.

Krugman's Methodenstreit

The longest continuing battle in economics is not between socialists and free-marketeers but rather between historicists and those who believe that the laws of human action are immutable throughout time. Perhaps the most famous battle between these two groups came between Gustav Schmoller of the German Historical School and Carl Menger, the founder of the Austrian School of Economics, the battle taking place during the late 1800s and aptly being named the Methodenstreit, or the debate over epistemology.

Given the lack of philosophical training among modern economists, who seem to believe that all they need to know are mathematical algorithms, I doubt that many newly-minted econ Ph.D.s even can define "epistomology" and certainly know nothing about the Methodenstreit, given that most doctoral programs in economics no longer include History of Economic Thought. (Why bother with history when everything we need to know is contained in the latest edition of American Economic Review?

Yet, the Methodenstreit lives on, whether or not economists and others recognize it. While Marxism, which is based upon both Historicism and the Labor Theory of Value (which also was debunked by Menger and other Austrians) dominates the U.S. academic professions of English, History, and the various "Identity Studies" programs that pretty much run academics in the larger and more "prestigious" universities, it has relatively small impact on U.S. economics departments.

However, nearly every department engages in historicism whenever someone presents the various Keynesian models of the economy, and especially list the Keynesian "solutions" for economic downturns. Thus, we see Paul Krugman unwittingly (Or maybe wittingly, who knows?) engaging in historicist arguments when he claims that economic rules are changed during recessions and depressions.

The latest incident involves what I pointed out last week on the blog about Krugman contradicting, well, Krugman. Not surprisingly, Krugman has an answer (I include it in its entirety):

I hear through the grapevine that the usual suspects at the WSJ have put out something along the lines of “Krugman says that unemployment benefits won’t raise unemployment, but in his textbook he says they will, neener neener.” Are they really that stupid? Probably not — but they you think that you, the reader, are that stupid.

But anyway, maybe this is a good time to explain the difference between determinants of the NAIRU — the minimum rate of unemployment consistent with a stable inflation rate — and the determinants of the unemployment rate at a point in time.

So: there are limits to how hot you can run the economy without inflationary problems. This is usually expressed in terms of a non-accelerating-inflation unemployment rate; yes, there are some questions about whether the concept is quite right, especially at very low inflation, but that’s another issue.

Everyone agrees that really generous unemployment benefits, by reducing the incentive to seek jobs, can raise the NAIRU; that is, set limits to how far down you can push unemployment without running into inflation problems.

But in case you haven’t noticed, that’s not the problem constraining job growth in America right now. Wage growth is declining, not rising, and so is overall inflation. A wage-price spiral looks like a distant dream.

What’s limiting employment now is lack of demand for the things workers produce. Their incentives to seek work are, for now, irrelevant. That’s why comments by the likes of Sen. Kyl are so boneheaded — anyone who thinks that high unemployment in the first quarter of 2010 has anything to do with workers getting excessively generous benefits must not get out much.

And the truth is that unemployment benefits are a good, quick, administratively easy way to increase demand, which is what we really need. So right now they have the effect of reducing unemployment.

This is Historicism at its purest; when the rate of unemployment is high, economic incentives no longer matter, as all that matters is spending. However, when unemployment is low, then we really can have too much spending.

In other words, incentives matter only part of the time, as to be determined by Krugman.

However, the statement, "What’s limiting employment now is lack of demand for the things workers produce. Their incentives to seek work are, for now, irrelevant," is pure socialism, which also is a Historicist construct. This is another term for what socialists say is the chronic problem under capitalism is the inability of workers to "buy back the products" they create.

In other words, there is no real connection between production and consumption. The ability of people to consume comes from money, which must be supplied by the state, since production and consumption are independent of one another.

Fortunately, economists dealt with this issue long ago, although we can see that this socialist fallacy continues to rear its head. The problem is not the inability to "buy back the products." Instead, it is the problem of malinvested factors of production during the previous boom that either must be liquidated or changed to uses that fit with the time preferences and desires of consumers.

In modern Krugman-speak, the problem is chronic underconsumption or overproduction (two sides of the same coin). Austrians, however, see the issue as revolving around malinvestments that cannot be sustained. As I have written many times before, Keynesians (and all Historicists) believe that factors of production are homogeneous and that they will operate no matter what as long as government provides enough money so workers can "buy back the products." Such a contention should be false on its face, but as we can see, the Historicist myths live on...and on.

Whoops! Paul Krugman Contradicts, Well, Paul Krugman!

In my recent post about Paul Krugman's attack on Jim Bunning, it seems that Krugman has managed to contradict himself regarding the effect of generous unemployment and welfare benefits on unemployment. The source is the textbook that he and his wife, Robin Wells (who, according to the recent fawning piece in the New Yorker, spices up the partisan lines in his columns). Take this line, for example:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of "Eurosclerosis," the persistent high unemployment that affects a number of European countries.

However, the new, unimproved, hyper-partisan Krugman apparently now believes this:

What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

Of course, that depends upon which textbook one uses. If one uses the text by Krugman and Wells, then the Krugman/Wells contention in the column is, well, wrong.

(Hat tip to Bruno De Gourville)

Is Jim Bunning Immoral?

Paul Krugman today has chosen to write about Sen. Jim Bunning's recent attempt to hold up the extension of unemployment benefits, and it is clear his column could have been written by a DNC ghostwriter or by an editorial writer at the New York Times. What also is clear that this column was not written by an economist; it is pure political partisanship created by a political operative.

However, there was one difference between Krugman's column and the many other pieces of undisguised partisanship that has filled the airwaves and editorial pages: Krugman claims that the extension of benefits aids the economy. Don't take my word for it; here is the Nobel Laureate in his own words:

What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

This is classic textbook Keynesianism with some political partisanship included. We are in recession, according to Krugman, because we are not spending enough money. Give money to people, let them spend it, and out of this comes economic recovery.

Lest one think I exaggerate, here is Krugman in his own words, displaying both his partisanship and his Keynesianism:

But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

Krugman goes on to call this position "immoral," so the only way to interpret that is to say that according to the Economics of Paul Krugman, the only moral position one can take today is that of John Maynard Keynes. (I guess this is Krugman's version of a Keynesian theocracy.)

I would like to provide some counterarguments. First, Bunning said forthrightly that not only was he not against extension of benefits, but that he also was following President Barack Obama's dictum that we "pay as we go," and that there had been no budget allocation for this $10 billion expenditure. While Krugman and the Democrats (and most of the media) were declaring, "It's only $10 billion," Bunning replied that if Democrats could not even demonstrate some fiscal discipline in a relatively small amount of money, then they were incapable of dealing with the larger budget issues that threaten to swamp our entire country in a sea of unpayable debt.

Second, Kyle is correct; studies have demonstrated that indefinite extension of unemployment benefits also keep people from finding new jobs and ending their term of unemployment. Furthermore, as Murray N. Rothbard wrote in America's Great Depression, which clearly runs counter to Krugman's inflationary Keynesianism, that continued government spending only extends the downturn and makes it worse. He writes:

If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don't interfere with the market's adjustment process. The more the government intervenes to delay the market's adjustment, the longer and more grueling the depression will be, and the more difficult will be the road to complete recovery. Government hampering aggravates and perpetuates the depression. Yet, government depression policy has always (and would have even more today) aggravated the very evils it has loudly tried to cure.

He goes on to list the various ways that government makes things worse, and it is a textbook description of everything that Krugman claims will end this economic nightmare:

1. Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further, etc.

2. Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments, which, in their turn, will have to be liquidated in some later depression. A government "easy money" policy prevents the market's return to the necessary higher interest rates.

3. Keep wage rates up. Artificial maintenance of wage rates in a depression insures permanent mass unemployment. Furthermore, in a deflation, when prices are falling, keeping the same rate of money wages means that real wage rates have been pushed higher. In the face of falling business demand, this greatly aggravates the unemployment problem.

4. Keep prices up. Keeping prices above their free-market levels will create unsalable surpluses, and prevent a return to prosperity.

5. Stimulate consumption and discourage saving. We have seen that more saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved-capital even further. Government can encourage consumption by "food stamp plans" and relief payments. It can discourage savings and investment by higher taxes, particularly on the wealthy and on corporations and estates. As a matter of fact, any increase of taxes and government spending will discourage saving and investment and stimulate consumption, since government spending is all consumption. Some of the private funds would have been saved and invested; all of the government funds are consumed. Any increase in the relative size of government in the economy, therefore, shifts the societal consumption-investment ratio in favor of consumption, and prolongs the depression.

6. Subsidize unemployment. Any subsidization of unemployment (via unemployment "insurance," relief, etc.) will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.

Why the great divide between Rothbard and Krugman? Krugman believes that recessions simply are episodes of reduced spending while Rothbard and the Austrians hold that recessions are the inevitable result of massive malinvestment of capital and resources. To Krugman, a recovery simply happens, and that in the interim, government needs to replace private spending by any means possible.

Austrians, on the other hand, recognize that there can be no substantive recovery until the original malinvestments are liquidated and the economy returned to a structure of production that is sustainable. Thus, if anyone is being dishonest, it is Krugman, who really, according to the Austrians, is advocating that the depression be extended and deepened.

Now, I am sure that Krugman and his Keynesian (and leftist) supporters would argue that Krugman wants the depression to end and that the Austrians want it to continue so they can enjoy watching people suffer. For years, Krugman has framed his arguments in such a manner to which anyone who disagrees with him does so because of innate hatred for humanity.

Yet, as we enter what is a third year of this depression with no end in sight and with the government continuing to prop up malinvestments through borrowing and printing money, just who is being immoral? Krugman is advocating a Big Lie. Had presidents Bush and Obama listened to the Austrians instead of the Keynesians, we would be out of this downturn and headed for a real recovery. Instead, the economy flounders and will continue to flounder.

So, whether or not Krugman and his allies want to claim that Bunning took his stand because he is evil, nonetheless, Bunning was right; the extension of these benefits, paid by money that will be borrowed or printed, only will extend the problem. Thus, Krugman is advocating the very policies that make our situation worse. Who is being immoral?

Krugman's Chilean Fantasy

Paul Krugman never ceases to amaze me with how he dishonestly rewrites history. Indeed, he does not so much give us history as he does Democrat-Socialist talking points, which he shouts out while holding his ears shut.

In this blog post, Krugman claims that relative free markets established after the Marxist Allende government fell in 1973 had nothing to do with Chile's prosperity today or the fact that the recent earthquake that hit the country -- one of the most powerful earthquakes ever recorded -- had a relatively small death toll, especially compared to the carnage in Haiti. As usual, the post has a number of howlers. Take the following, for example:

Actually, as you can see from the chart above, what happened was this: Chile had a huge economic crisis in the early 70s, which was, yes, partly due to Allende and the accompanying turmoil. Then the country experienced a recovery driven in large part by massive capital inflows, which mostly consisted of making up the lost ground. Then there was a huge crisis again in the early 1980s — part of the broader Latin debt crisis, but Chile was hit much worse than other major players. It wasn’t until the late 1980s, by which time the hard-line free-market policies had been considerably softened, that Chile finally moved definitively ahead of where it had been in the early 70s.

So: free-market policies are applied, and presto! prosperity follows — fifteen years later.

Ah! Where does one begin? First, Krugman glosses over the fact that Allende was trying to establish a full communist state. His government seized businesses, both foreign and domestic, printed money out the wazoo (creating 1,000 percent inflation), erected huge tariffs and trade barriers, and decimated civil liberties. Yeah, I guess that would cause some economic problems.

Next, just why might have Chile experienced some capital inflows following the overthrow of Allende? Maybe it was because the new government promised not to seize capital invested in Chile by foreign firms, and maybe because the government lowered many of its trade barriers.

Chile was hardly the only country to experience a serious recession in the early 1980s. As I recall, a country named the United States of America suffered its biggest downturn since the Great Depression, and, like Chile, had a robust recovery. There is no doubt that Chile has a much more free economy than do most Latin American countries, and also has a higher standard of living. (I'm sure Krugman has another explanation for Chile's prosperity. Maybe it finally is experiencing the "good effects" of all that money Allende printed nearly 40 years ago.)

As for the country's survival rate following the earthquake, Krugman writes:

As a number of people have pointed out, there’s this little matter of building codes. Friedman wasn’t exactly fond of such codes — see this interview in which he calls such codes a form of government spending, because they “impose costs that you might not privately want to engage in”.

First, building codes by themselves are meaningless. One must have the wherewithall to build structures that actually meet codes. Second, Chile has a strong record of private property rights.

Haiti, on the other hand does not. I recently read that about 80 percent of Haitians live on land of which no one holds clear title. That means that people basically are squatters, and squatters do not build strong buildings. (I am sure that Haiti also has building codes, but even the presidential palace was heavily damaged and the Haiti earthquake was not nearly as strong as what recently hit Chile.)

Being a good socialist, however, Krugman is going to claim that Chile's survival rate following the earthquake is due entirely to state power. And there is one more issue to address: the false notion that economic booms immediately follow economic liberalization.

That often is not the case, as what we saw in the early 1980s. Economies that are heavily regulated or have a lot of state ownership engage in malinvestments that cannot stand after an economy is liberalized. Indeed, given the massive malinvestments and the utter chaos that accompanied the Allende government, I would expect Chile's recovery to take a long time after liberalization, and that is what happened.

However, Keynesians believe that all economies are homogeneous, and that all a government needs to do is add money. Interestingly, that is exactly what Allende did, and even Krugman's little graph does not show that the communist government brought prosperity.

Guess Krugman needs to go back to the drawing board.

What Constitutes "Financial Reform"?

In a recent column, Paul Krugman raises a very important issue, and while he goes through his usual partisan attacks, nonetheless I think this is something that should be up for discussion. What actually constitutes legitimate "financial reform"? Indeed, what does?

First, everyone is in agreement that Wall Street, not to mention financial houses across the globe, are in big trouble. Why? The fundamental reason is that they throw trillions of dollars into investments that ultimately could not give the anticipated returns and, in fact, many of those investments completely went bust.

Second, I think most people are in agreement that we cannot go back to business as usual, or the arrangement that gave us the actions by bankers and others in the financial world that brought about the meltdown and subsequent depression. Thus, the question is not if we should have reform, but rather what kind of reform should it be.

That being said, one can be sure that Krugman and the Austrians (including me) are going to be on opposite sides of the issue. Krugman wishes to bring back what Austrians refer to as banking cartel that was established during the New Deal. Beyond that, we also are in major disagreement about the role of the Federal Reserve System in financial reform. (OK, I'll be honest. We Austrians want the Fed to have no role at all because we don't want the Fed to be in existence.) Krugman writes the following:

Many opponents of the House version of banking reform present their position as one of principle. House Republicans, offering their alternative proposal, claimed that they would end banking excesses by introducing “market discipline” — basically, by promising not to rescue banks in the future.

But that’s a fantasy. For one thing, governments always, when push comes to shove, end up rescuing key financial institutions in a crisis. And more broadly, relying on the magic of the market to keep banks safe has always been a path to disaster. Even Adam Smith knew that: he may have been the father of free-market economics, but he argued that bank regulation was as necessary as fire codes on urban buildings, and called for a ban on high-risk, high-interest lending, the 18th-century version of subprime. And the lesson has been confirmed again and again, from the Panic of 1873 to Iceland today.

The question is this: Why is this proposal a "fantasy"? I suspect Krugman would answer that in nearly every banking crisis, it always has been government to the rescue. For that matter, Murray Rothbard, who cut his teeth on banking crises by writing THE authoritative book of the Panic of 1819 (from his doctoral dissertation at Columbia University), pretty much has said the same thing.

Thus, Krugman would argue that when it comes to finance, we always must operate within a Second Best atmosphere, that the "best" form of regulation is not available because governments never fail to rescue the banks after they begin to fail systematically. OK, but that now brings us to the second problem: If we are agreed that government intervention is inevitable (and Austrians are not convinced that it is or has to be this way), then what is the best way to do it?

Krugman has argued for a return to what essentially was a banking and finance cartel that existed from the New Deal all the way until the early 1980s. He claims that Ronald Reagan was the culprit, bringing in "free-market ideology" in which banks somehow were totally deregulated and that banking regulators fell prey to the same myopic ideology that bewitched the politicians.

Here is the problem. We are looking at two different philosophies of regulation. The one that Krugman espouses is this: Regulators (who truly believe in the Greatness of Government) hover over the system, dispensing wise advice, stopping banks from making loans for idiot investments, and generally directing the system toward creating a wonderful economy.

This is what Progressivism always was about. Progressivists believed that "good government" would hire the "best and brightest" as regulators and decision-makers, and they would guide all of us with their expertise. The belief was (and, apparently, still is) that the experts knew all of the answers in how to successfully run an economy.

One does not even need to have read F.A. Hayek's "The Use of Knowledge in Society" to enlist one's b.s. detectors. Rothbard once noted that if these regulators were so brilliant and far-seeing -- indeed, much more far-seeing than most entrepreneurs -- then they obviously would have the requisite skills for taking part in the markets, making lots of money. Furthermore, under the kind of regulatory system that Krugman and others favor, people who have no vested interest in the success or failure of a set of investments nonetheless would be the ones making the decision of whether or not it should be allowed.

This should ring alarm bells on its face, for there is no way that such a system is sustainable. Ultimately, as we know, the system tends to be "captured" by the participants, and specifically the politically-connected producers. Furthermore, what ultimately happens is that the government essentially forms a cartel for producers. Whether in transportation, production of electrical power, or finance, government regulatory bodies have stifled innovation, forbade the entry of new firms into a regulated industry (at the behest of established firms), and held back economic growth.

For all of Krugman's reminiscing about the good old days of finance, it is easy to forget that the moves to "deregulate" the system did not come about because of ideology, as I outline in an academic paper I recently sent to a journal. Instead, the movement came because the system with its regulations on interest rates could not attract new money because inflation was outstripping interest gains, and people were putting funds into alternative investments, such as money market accounts, which not only were liquid but also were paying upwards of 8 percent or more. Banks simply could not compete.

Another problem was that banks were not prepared to deal with the new generation of technology and investments. For example, Ted Turner could not finance his proposed Cable News Network operation with conventional bank financing (banks were not interested in this far-flung idea that had, they believed, no chance of success). Instead he turned to Michael Milken of Drexel Burnham Lambert. Milken underwrote the operation by issuing low-rated, high-return bonds (what detractors called "junk bonds").

Because Milken was not part of the banking-finance cartel, ultimately his detractors were able to join forces with Rudy Giuliani and the New York Times (which is eternally fighting capitalism), and destroy Milken and his company. Perhaps the greatest financial mind of our generation was lost because of this.

I can say forthrightly that no great financial minds come out of the kind of regulated system that Krugman and others are demanding. However, I will concede this important point: throughout history, whenever the banks have fallen into trouble, the government has responded by trying to prop up these failing institutions, and the Federal Reserve System has been the mode of choice in the last three recessions. Furthermore, by promising not only help from the Fed but the expansion of deposit insurance has raised the moral hazard problems and made it inevitable that not only will the banks and financial houses take unnecessary risks, but that they are more likely to engage in what Austrians call malinvestment, that is, investing in unsustainable lines of production.

In my view, the only real financial reform would be to cut the banks and financial houses loose from central banking and from government deposit insurance. They would have to bear the costs of errors and would not be able to rob the taxpayers when the markets have declared their investments null and void. Unfortunately, even though this cold shower would not be politically acceptable, it is the only kind of reform that actually would work.

Krugman can quote Adam Smith all he wants, but somehow, I don't think that Ben Bernanke makes for a very good "invisible hand." We can argue about reform all we want, but in the end, the standard "reform" is not reform at all, but just the establishment of another financial cartel.