Financial crisis shows why we should admire Freidrich Hayek: "The crash gives many more indications that Freidrich Hayek was right. Hayek argues that unregulated markets develop institutions that ensure that trust and reputation become valuable commodities. But who cares about trust and reputation when we believe that everything will be looked after by the regulators or by deposit insurance?
As far as a company is concerned, compliance with regulation has become more important than trust. The market has been allowed to generate crude economic efficiency, but trust has been crowded out by regulation.
Hayek suggests, too, that booms and busts are the product of poor monetary policy. Central banks hold interest rates too low. People consume too much and invest in business projects that would not be profitable at higher levels of interest rates. Resources then get mis-allocated. And then the whole things goes bang and we get a recession (in this case accompanied by a banking crisis)."
Required Reading: The Road to Serfdom. (Here is the Reader's Digest Condensed version)
Also, Socialism, by Ludwig Von Mises
The irony, is that government, in all its magnanimous desire to turn the rules of economics upside down by providing the illusion of a safety net and maestro, is prescribing the very poison that got the U.S. and global economy in this mess in the first place: meddling in markets, and eliminating the consequences of poor economic business decisions.