An excerpt from an article at the Ayn Rand Center:

“Why then should capitalism take the blame today–when capitalism doesn’t even exist? Consider the current crisis. The causes are complex, but the driving force is clearly government intervention: the Fed keeping interest rates below the rate of inflation, thus encouraging people to borrow and providing the impetus for a housing bubble; the Community Reinvestment Act, which forces banks to lend money to low-income and poor-credit households; the creation of Fannie Mae and Freddie Mac with government-guaranteed debt leading to artificially low mortgage rates and the illusion that the financial instruments created by bundling them are low risk; government-licensed rating agencies, which gave AAA ratings to mortgage-backed securities, creating a false sense of confidence; deposit insurance and the “too big to fail” doctrine, whose bailout promises have created huge distortions in incentives and risk-taking throughout the financial system; and so on. In the face of this long list, who can say with a straight face that the housing and financial markets were frontiers of “cowboy capitalism”?”

Doug French writes for Mises.org reminding us that this is not the first time in history free-markets have been falsely blamed for government-created economic havoc:

It is often said “there are no atheists in a foxhole.” The other week, as world financial markets melted down, CNBC go-to wise man Art Cashen put a market spin on that familiar line drolly saying, “there are no libertarians in a market crash.”

The crusty Cashen is certainly right for the most part. Plenty of financial talking heads who argue for free markets and smaller government on a daily basis suddenly screamed that government must intervene to “save capitalism.” Of course, the idea that government must print multiple blizzards worth of money to save a system where individuals and businesses trade with each other unfettered makes as much sense as presidents who claim that war must be waged to “protect the peace.”

The fact is that what we’ve been enjoying since the Federal Reserve was created is anything but free-market capitalism. The value of the dollar has been pushed down 99 percent and the economy has been a series of booms, followed by busts, ad nauseam since J.P. Morgan partner Harry Davidson and other big bank chieftains secretly took a train to go duck hunting on Jekyll Island in 1910. Of course, the ducks were safe, but Americans since have paid the price for the Federal Reserve–system idea that was hatched that weekend.

Great letter to the editor of the Michigan Daily by SFE student Vincent Patsy:

U.S. capitalism fails because it isn’t really capitalism

The most important word in the phrase “free market capitalism” is free. Freedom, I believe, can only be defined as the absence of coercion. Free market capitalism is the economic system where all property (and therefore means of production) is privately held and all exchanges are voluntary.

Recently, much disdain and derision has been directed at free market capitalism. But we don’t have a purely capitalist system. To blame capitalism for the latest economic crisis is like blaming the spread offense for Michigan’s losses this year. Whether it’s a monetary manipulation, price controls or the lack of a running quarterback, it is clear that the idealized system can’t be blamed if it doesn’t exist.

What is often called capitalism today is actually closer to corporatism or fascism. We have a market, but due to a manipulation of prices, we have influenced the allocation of goods away from what consumers want. In a free market system, there would be no Federal Reserve, no Department of Energy or Education and certainly no World Trade Organization or International Monetary Fund. When I was reading the Daily’s review yesterday of the film “Battle in Seattle,” it wasn’t clear if the author was able to make this distinction (Seattle calling, 10/14/2008). This is a common error. People from the right like Larry Kudlow and those from the left like Eleanor Clift have presented our system as free market capitalism.

Free market capitalists would protest and fight alongside whoever wanted to abolish the WTO or the IMF. Add the Federal Reserve to this list, and I will drive the tank.

Great article from Mises.org on how absolutely stupid it is to claim that laissez faire caused the credit crisis.

A fundemental rule of sound argument is to define your premises.  In this statement, “laissez faire caused the crisis”, one of the premises is that we currently live under a system of laissez faire.  This requires a definition of laissez faire, which is seldom given by those making the claim, yet the phrase gets defined de facto in the context of the article in which the statement appears.  And it ussually comes to mean completely unleashed free-market capitalism - a definition which would destroy the original statement, since we do not live under such a system.

Read the article.

A great post by SFE blogger vapatsy on why the business cycle is NOT a product of capitalism:

Somebody’s started a business off of the Lions’ failure.  I love capitalism.