In my book I outline how we can not speak of a free market when the government and the American taxpayer support market players with write-offs, bailouts, protective tariffs, tort reform protections, pet infrastructure projects, favorable legislation, fiscal policy, and a host of other subsidies that protect market players. Well check out what Bernie Madoff's bilked "investors" just fell into:
The Internal Revenue Service will allow victims of Ponzi schemes to deduct theft losses in the 2008 tax year and recoup taxes paid on phony income, Sen. Charles Schumer, D-NY, said Tuesday ... Under the IRS guidelines, victims will be able to take a deduction equal to 95% of the amount they invested, plus any investment income they believed they were earning ...With financial institutions being saved by the American taxpayer, and AIG employees receiving millions in bonuses for simply making a deal (and a bad one at that), the decision to allow Bernie Madoff's "investors" to deduct 95% of the amount they put into his Ponzi scheme on their taxes proves the point I make throughout my book: THERE IS NO FREE MARKET.
Telling market players that they don't have to keep an eye on the people who make investments on their behalf because the American taxpayer will pick up 95% of the tab is simply wrong. Seriously, at what point do market players have to learn their lesson? As well, telling market players that they can put all their eggs in one basket, and that they don't have to worry about it because the American taxpayer will pick up the tab if things go south is not capitalism. It's market socialism.
Once we realize this we can get down to the business of understanding what needs to be done to fix this mess - nationalize the failing banks, claw back bonuses with the tax code, and impose "snap-back" provisions in our regulatory system so that we return to a system that kept an eye on the market stupidity that got us into this mess.
- Mark
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