Mounting optimism that the US economy would outperform the rest of the developed world pushed the dollar to multi-month highs against leading currencies this week as the oil price resumed its downward path, providing support for equity markets.

The trigger for the greenback’s rally – and a sharp rise in European government bonds – came from comments by Jean-Claude Trichet, the president of the European Central Bank, following Thursday’s decision to leave eurozone interest rates unchanged.

The yield on the two-year German bond hit its lowest since May 20 2008.

Mr Trichet acknowledged that economic growth in the region was weakening – in effect taking further ECB rate rises off the table and underscoring the bleak message provided by a series of weak data releases, most notably from Germany. His remarks compounded increasingly gloomy outlooks in the UK and Japan.

Is the Dollar Smile Working?

www.seekingalfa.com explains, according to Stephen Jen, Luca Bindelli and Charles St-Arnaud in the Global Economic Forum, Morgan Stanley believes that the Dollar Smile will eventually work, admittedly with a delay.

As opinions among investors change - particularly those on the U.S.'s slowdown being felt primarily in the U.S., and also the low yield premium on USD assets - Morgan Stanley foresees the following effects on the dollar:

"... [a] rally this year against the EUR and the GBP. In turn, the JPY and CHF could rally against the strengthening dollar, for as long as the U.S. is in a recession, which we believe will likely persist through 1H08. One by one, various parts of the rest of the world will start to show signs of a slowdown/deceleration. Even though we are of the view that this ‘economic re-coupling’ will be tentative and partial, financial coupling will likely push investors back into ‘fear mode’ and bond rather than equity flows will, perversely, support the dollar – consistent with our ‘Dollar Smile’ framework.

On decoupling:

"... while in the past, when the U.S. caught a cold, the rest of the world got pneumonia, these days, if the U.S. economy catches pneumonia, the rest of the world's economy will catch a cold. At the same time, however, financial coupling is likely to have remained quite high, we have warned, and an outright bear market in the U.S. would likely lead to a bear equity market elsewhere – which is precisely what our equity strategists believe will be the case in 2008, at least in 1H.

... While we are of the view that the degree of economic coupling has declined substantially in recent years, financial coupling is likely to have remained high – high enough to preserve the left side of the ‘Dollar Smile’.

Effects of a strong dollar

A weaker dollar offers more benefits than a stronger one. The cheaper dollar offers a lift to American exporters by making their products competitive in many parts of the world. And while a weak dollar usually makes imports expensive, import prices have so far climbed less than other currencies’ values because foreign producers have kept prices low to preserve market share in the United States.

The dollar's strength, for example, makes it more difficult for certain U.S. industries, such as textiles and steel, to compete with foreign goods. Many export-oriented industries similarly suffer On the other hand, those industries purchasing imported raw materials or capital goods do so at a bargain, thanks to the dollar's strength. This can lower their production costs and sale price. Example: industries using steel as a primary component of their product (such as autos, major appliances, and farm machinery) benefit from purchasing less expensive steel.

Just as U.S. consumers benefit from the increased purchasing power of the dollar so too do many U.S. industries--thereby creating jobs and wealth All import-dependent industries benefit.

Recession and a strong dollar

For those of us who feel national pride in a strong dollar here is a climb down.

The above chart shows how over the years at each point of strength has coincided with recession (reflected by the grey bars). You might notice that the recession coincided with the low point for the Yen (or conversely, the strongest point for the dollar during this time period). In other words, the very strong dollar and the recession went hand in hand because the Federal Reserve raised interest rates beginning in 1999 and that led to the recession. Higher rates cause the dollar to strengthen, but they also inevitably slow down the economy. On the other hand, lower interest rates are positive for the economy, but often not for the dollar.

In short, a strong dollar means:

1. Higher interest rates
2. Lower oil and gold prices
3. Recession
4. Slow down in exports
5. Increase in imports
6. Trouble

I welcome your views on the topic

In an interview yesterday on CNBC, former Fed Chairman Alan Greenspan cast his eyes on the charred landscape of the national real estate market and offered high-minded criticisms of the obvious excesses and irrationalities that brought on the devastation. Greenspan’s attitude was akin to a retired drug dealer lamenting the urban blight caused by rampant addiction. He noted that housing prices were still too high, that too many homeowners were upside down on their mortgages, and that Fannie Mae and Freddie Mac were accidents waiting to happen. Methinks the serial bubble blower doth protest too much.

The housing bubble was Greenspan’s doing pure and simple. He gave birth to it, nurtured it, protected it, and guided it during every stage of its development. In fact, if there was a deck of playing cards featuring the key players in this debacle, Alan Greenspan would be the ace of spades. The fact that the media still holds this joker in such high esteem is a testament to just how clueless they are. Rather than fawning over his every word, journalists should be grilling him like a CIA interrogator.

In his new post-Fed incarnation, Greenspan does show an increased willingness to speak the truth … perhaps sharp candor generates higher speaking fees the murky academic jargon. However, conveniently missing from his belated admission that home prices are too high is that his irresponsible monetary policies propelled prices to those heights in the first place. In fact, even as the housing bubble was inflating, Greenspan repeatedly denied its existence. He took every opportunity to talk the real estate market up and went out of his way to justify irrationally high home prices.

His concerns about upside down mortgages are particularly offensive given his consistent praise, when he was Fed Chairman, of the ability of home equity extractions to fuel economic growth. In fact, during the final years of his tenure there was no greater proponent for cash out re-financing than Alan Greenspan. Not only did the Maestro routinely commend homeowners for their sophisticated approach to “managing their home equity”, but he applauded Wall Street and mortgage lenders for their creativity and ingenuity. Of course, home equity extractions are largely responsible for so many homeowners now owing more than their homes are worth!

His most brazen contention was that he had tried to warn us of the dangers that Fannie and Freddie could pose to the entire economy. Excuse me, but when exactly did he sound this alarm? His points that Fannie and Freddie should not exist, and that the moral hazard of private profits and socialized losses is an accident waiting to happen would have been right on point had he actually made them while still Fed Chairman. Too bad Maria Bartiromo did not remind Greenspan that the accident has already taken place. Fannie and Freddie’s flawed design may have rendered them destined to slip but it was Greenspan himself who supplied the banana peel.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

Recently, a creature that's being called the "Montauk Monster" washed up on the shores of Montauk, NY.  I don't think it's photoshopped or anything, since there were witnesses and such, but I do think it was fabricated.  It wouldn't really be that hard to make something like that and pass it off as real.  And someone took it before it could be investigated further, so...  Anyway, people seem to be fascinated by this for reasons I cannot fathom.  Well, I can, but it still doesn't make sense.

On another note, why is there no black tea ice cream available in stores?  There's green tea ice cream, but green tea flavored things always taste odd to me, and they don't taste that much like green tea either.  Today, wiggy1770 made some black tea ice cream with cashews and butterscotch swirled in, and it was really good.  So, why doesn't anyone make any?  Just something that's always bothered me...

I picked up a copy of Yen+ at Borders today.  As with all anthologies, there's some good stuff and some not so good stuff.  I haven't read quite all of it yet, but Nabari no Ou, Bamboo Blade, and Higurashi seem to be among the better things in the magazine, in my opinion.  Also, the artwork for Maximum Ride is pretty spiffy!  I read the first book in the novel series, and didn't like it that much (it wasn't awful, just not that great, IMO), but the artwork actually makes up for that enough that I want to keep reading.

~SmashingMelons

Preferred count: The advance from 95.72 is wave W in a W-X-Y complex correction and the drop from 108.57-103.76 is wave X.

Wave Y is underway towards 116 (equality with wave W). Alternate: price action from 108.57 is forming a triangle in wave X. The best strategy is to play a bullish break. Look for support in the 107.15/33 area (Fibo zone).

Bienvenidos al blog del Forex. Una nueva web que pretende comprender un poco cada vez más, el fascinante mundo del mercado de las divisas, siempre desde un punto de vista sin pretensiones y como manera de punto de encuentro de noticias sobre el sector. Esperamos que os sea de vuestro agrado.

La pasión por ello está de nuestra parte.

Fotografía Flickr Amalthya.

Leading man Toshiro Mifune and Kurosawa were a high-quality, prolific team, and definitely one of the better combinations of actor and director in the history of film, not to mention one of my personal favorites. In my book, this coupling is eclipsed only by the Johnny Depp and Tim Burton team, and that's mostly because I have a twisted sense of style. Great movies like that are few and far between.

It would be too easy to say that they don't make movies like Sanjûrô anymore, and I'm not convinced that it's altogether all that accurate, either. In an age when critics love to chastize Hollywood for cashing in on the blockbuster by churning out sequels, we forget that cheap cash-ins are nothing new. Sanjûrô is itself a sort of sequel to an earlier movie, and is, in my humble opinion, superior to Yojimbo, its antecedent.

Deep in the glory days of Hollywood --- i.e., the mid-1940s --- it was no accident for whole casts to get reunited for the cheap cash-in. After the surprise success of Casablanca, the studio powers that were got Humphrey Bogart, Sydney Greenstreet, Peter Laurie and Claude Reins back together for an astoundingly poor flick titled Passage to Marseille within a year of Casablanca's release. Naturally, the only reason Marseille has withstood the test of time rather than fade into obscurity, like so many other B-list-quality films with A-list-quality casts, is that it's a carbon copy of the Casablanca cast.

The film industry has just about always worshipped at the throne of the almighty dollar --- and yen, and rupee --- and to say that it was any different back in the glory days is to fall victim to your grandparents' nostalgia.

I hope nobody disagrees, partly because I really want to enjoy all 152 minutes of The Dark Knight and partly because I know that few of those minutes could compare to a Kurosawa film.

But what is evil really? I know exactly what evil is. Too may of us think of good and evil in ways that are defined by religion and laws. For instance it is not always evil to murder someone if that person is evil. Evil  is simply doing something that harms another individual for personal gain, tangible or intangible. If you kill an evil person then you stop that person from harming others. Therefore the gain is not only personal, although there will surely be some of that as well. Others benefit from not having to deal with an evil person infringing on their happiness to increase their own. There is something essentially good about that.

Like I said socialism attempts to spread the wealth. Some people have a problem with this because they feel that they work harder than others and are therefore entitled to more than the average person. Let’s be honest. Most rich people do not earn their money and even if they did they could never “earn” as much as they have. Once they become rich or are born rich they don’t have to work hard anymore because their money makes money for them. That’s how the economy got like it is now, from all the hedge funds, flimsy mortgaging and dollar devaluation. Aren’t we tired of competing with each other like we are all a different species? It causes us all a terrible amount of stress. Why can we not put people’s natural talents to use instead of forcing people to do things they hate so they can make enough money to support their lifestyle?

The question then becomes why do people with more money than they can ever possibly spend need to continue their possession of it? Indeed.  Bill Gates will never spend all of his money. Even his children will never spend all of it and they are still making money from what their dad is still raking in now. The right argues that capitalism encourages innovation and that socialism is evil because it squashes competition. That is complete bullshit. There hasn’t been fair, laissez-faire pun intended, competition in America for decades. All we have now are global entities that corner their markets and avoid anti-trust laws and other regulations by outsourcing. What the right wants, and increasingly the centrist left and Bluedogs, is unfair competition. Socialism may prove no better at stopping this practice but it would certainly prove no worse. There is no link between the continuity of human creativity and whether humans are disproportionately rewarded for that creativity and innovation. The right would have us believe that creativity would die unless people don’t make billions for it.

The right, and brainwashed leftists, also clamor that the USSR failed because of its communist and socialist policies but they fail to realize that there are social programs in this country and many of us wouldn’t be there is it weren’t for them. Of course the right disagrees as they think no one deserves anything for free except themselves via corporate welfare and tax cuts. But how are the right’s social networks that give them economic advantages the results of hard work? Nothing could be farther from the truth. Many deals are made on the golf course and there is no work involved there unless you count swinging the club.

The truth of the matter is that the right is projecting their own laziness onto others. They want to be able to maintain and expand their wealth with as little work as possible while others, including working class whites that support them, struggle to make ends meet. Tell a man that makes ten dollars an hour laying concrete in 100 degree weathers that he is lazy because he is not rich and he will put you under that same concrete. Income does not correlate with the mental and physical efforts exerted to produce that income. In general people are paid more to use their brains than their brawn. I disagree with that but that is another symptom of the sickness of human capitalism. When it comes down to it people are paid high salaries if their work benefits corporations and that is the crux of the issue. What benefits corporations rarely benefits humans, except for the few that don’t mind exploiting the rest of us to make more money than they could ever possibly spend in their lifetimes.

In a nutshell economic models and theories can never be evil. Only man can but capitalism lends itself to more abuse than does socialism. The USSR had totalitarianism on top of communism so obviously it was doomed to fail. The US has corporatism on top of capitalism and it is also doomed to fail. It’s the leaders that choose to exploit the people because they can and they have no remorse or sympathy for all of the suffering they cause because truly feel entitled to everything on this planet. Either these people must adapt and adopt their behavior or sooner or later, they will be killed and no amount of money will save them from the people’s wrath.

John McCain may be a charming guy in person. And he's has a warrior bio that makes conservative super-patriots weep. But he also admits to being computer illiterate (see the YouTube below), in an era when knowing how to navigate Google should be a minimum standard for competence. Remember also that McCain graduated in the bottom 1% of his class in Annapolis. And his never-ending gaffes on the campaign trail about international events would have disqualified him months ago in the Democratic party.

Don't we deserve a presidential election with two qualified candidates? When one candidate was editor of the Harvard Law Review and the other has to have his wife open his email, you would think it would be a no-brainer who would win. But voters here are coddled by the media into thinking that "character" counts more than "competence."

Until Iraq. Until Katrina. Until the current economic meltdown.

Viva Zapata is his favorite movie? If this man is elected, welcome to war with Iran.

Words above and video below posted by http://www.campaignforliberty.org follow the link to view their blog or donate to this PAC (political action committee)

Walking through LBCC's halls made me sorely miss my undergraduate days at UCSC. A lot has changed... I, for one, have changed significantly.

My first day in class brought a rush of insecurities again... It reminded me of past ridicules.

I can think of a million reasons why I shouldn't be doing this, but I made a promise and I intend to keep it. It is strange being with people who are five to six years younger than I am... WOW!

Yesterday night Toro was guarding a watermelon that was given to us. That Toro is territorial, I am considering getting him neutered very soon.

I really have to cut this blogging short because I want to finish doing some math problems. Yes, I am studious -- I have to. Oh, I bought a graphic calculator (finally). I was trying to avoid it!

Joel took his financial accounting part of his CPA exam. He's a bit beat and I am sure our conversation tonight will be short too...

Honeyee, though I can't read Japanese and have to consult one of the many free online translators whenever I visit, is a great all around site. the Blog is probably what this blog aspires to be when it goes home to its wife. And the 100 Day Blog Relay is awesomeness waiting to happen. The stores are great, even though you'll have to calculate the Yen to USD for every purchase, and hardly anything comes in an XL or XXL, for all you skin and bones lookin' boys out there (peace to Yung Joc), you'll most certainly be able to find something that both fits and interests you. Also, though no one seems to know what it is, I have a feeling this TT+TKO Project they're doing will be the greatest thing since the Beatles, which, as you know, was the greatest thing since Jesus.

We love you, Honeyee! (maybe that will get me some stickers, or a blogroll add? Plz?)

He pledged to balance the budget by the end of his first term, which is inconsistent with the lavish tax cuts he also promises. He offered the same Social Security prescriptions that President George W. Bush failed to sell, insisting that somehow a more Democratic Congress would be receptive.

Contradictions, detours and flip-flops abound. On Bloomberg Television last spring, the Arizona Republican said there had been "great progress" economically under the Bush administration; the next day, he said Americans were "hurting badly" and weren't better off than they were eight years ago.

McCain likes to joke about his rebellious youth, noting that he graduated fifth from the bottom of his 1958 U.S. Naval Academy class. The valedictorian of that class was Ronald Reagan's onetime national security adviser, John Poindexter, who barely avoided jail. This reinforces the novelist Walker Percy's admonition not to get all A's and still flunk life.

McCain gets an D in life and in most subjects. but an F in economics.

If he wants a quick tutorial, there are two useful books: "Unequal Democracy: The Political Economy of the New Gilded Age" by Larry Bartels and "High Wire: The Precarious Financial Lives of American Families" by Peter Gosselin. They dismantle many of the policies he's espousing.

These aren't ideological diatribes. Bartels, a Princeton University political scientist, says he hasn't voted in a presidential election since 1984, when he supported Reagan. Gosselin is a well-regarded national economics correspondent for The Los Angeles Times.

The Gosselin book focuses on the precarious state of many American families as safety nets - secure jobs, health coverage and pensions - have frayed.

He tells tragic tales - of a Duke University MBA who lost jobs at three financial institutions because of their bad business decisions and now works for a homeless shelter; of an insurance-firm employee whose own company denied her disability coverage when she was diagnosed with multiple sclerosis; and of a widow whose husband was denied coverage for his alcoholism.

These aren't isolated stories. The centerpiece of the McCain health-care proposal is enabling more families to buy private insurance. It's tough to find a family with a severely ill or injured child that doesn't despise its private health insurer.

"Unequal Democracy" lays out the widening gap between rich and poor. The dangers of growing income inequality in a democratic society aren't just the rantings of soak-the-rich left-wingers. Conservative central bankers from Arthur Burns to Alan Greenspan have worried about such a gap.

Bartels persuasively argues that this isn't simply a reflection of globalization or other events beyond our control. His research shows that government policies significantly affect economic inequality.

Surveying the last 50 years, he finds that real incomes of middle-class families have grown twice as fast under Democrats as Republicans, and six times as rapidly in the case of the working poor.

In this campaign, the contrast between the estate tax and various proposals to help the working poor is illustrative.

The estate tax, or "the death tax" as the Republicans, in a public relations coup, have labeled it, is assessed on fewer than 2 percent of the wealthiest Americans. For a couple, the first $7 million is exempt in 2009, as is anything given to charity; there are numerous loopholes around what's left.

McCain would raise that exemption to $10 million and lower the rate to 15 percent. The Democrat Barack Obama would keep the current 45 percent rate on estates over $7 million.

The McCain approach would cost the government $175 billion more than Obama's over 10 years, and most benefits would go to wealthy heirs who've done little to earn it - affirmative action for the rich.

Less than one-third of that amount - $50 billion - would fund Obama's proposal to expand the earned-income tax credit, money given to the working poor to offset payroll taxes that typically eat up 15 percent of their income. It's one of the most effective anti-poverty and economically stimulative measures - these people have no choice but to spend the money.

The Tax Policy Center, a venture of the Urban Institute and Brookings Institution, analyzed the candidates' proposals: The working poor would get a $1,459 tax cut under Obama, more than double what McCain proposes.

The top 1 percent, mostly Americans averaging more than $1 million a year, would get a $38,389 tax increase under Obama, compared with a $126,951 tax cut under McCain.

"Income inequality would be exacerbated under McCain," says Len Burman, the director of the center, who has objections to some specifics of each plan. "Under Obama, the distribution of after-tax income would become slightly more equitable."

McCain convincingly argues that the cost of entitlement programs must be curtailed. Sometimes the Republican nominee says higher payroll taxes are off the table, meaning the sacrifice falls mostly on middle- and working-class beneficiaries.

In an interview, Carly Fiorina, a top adviser to McCain, explains that any tax increases on "middle- and working-class" Americans are off limits. She says if a bipartisan coalition is "creative enough" to fashion tax increases on wealthier Americans, that may prove palatable.

That's encouraging, until you consider that McCain doesn't always listen to his economic advisers. A few months ago, his top advisers counseled him that any reduction in the gasoline tax was bad energy and economic policy. A short while later, he advocated suspending the 18-cent-a-gallon tax for the summer.

Later, one of those puzzled economists wondered if he had forgotten to use the word "not."

Recall that last week, President George Bush said coastal drilling was part of the "short run" answer to high gas prices. As noted here previously, that is false. The oil would take years to get out the ocean floor and into our cars. More importantly, there is too little oil off the coasts to make a serious dent in the price gas twenty years from now, let alone this year.

And yesterday, White House spokesperson Dana Perino admitted it (via Think Progress).

Asked by the reporter about the logic of trying to lower gas prices today with "oil that can't be gathered for another 10 years," Perino conceded the point:

...there's not a real good short-term answer. And we've been very explicit about that from the beginning...

...So the important thing that we need to do is continue on -- to continue the conservation measures, work on a way to send a signal to the market that we're serious about increasing domestic production here in environmentally sensitive ways, and in addition to that, find ways that we can continually express to the American people not to expect a short-term response. There's not going to be a short-term response, and it would be irresponsible for anybody to suggest there would be.

Apparently, that means President Bush is being "irresponsible." But at least now it's indisputable. The White House acknowledges that lifting the coastal drilling ban will not do anything to lower gas prices "in the short run."

That isn't stopping Sen. John McCain, who today reiterated his support for ending the coastal drilling moratorium off the coast of Santa Barbara -- the site of the infamous 1969 oil spill that enraged the public and forced the passage of a series on environmental protection legislation.

(That cracker McCain campaign staff, always thinking!)

But even at a staged event, McCain couldn't avoid hearing the truth.

McCain was joined for a roundtable discussion by Michael Feeney of the Land Trust for Santa Barbara County, who lambasted the coastal drilling plan. From MSNBC's First Read:

Feeney ... took issue with McCain's controversial proposal to lift the moratorium on offshore oil exploration: "It makes me nervous to think about those who are proposing to drain America's offshore oil and gas reserves as quickly as possible in the hopes of driving down the price of gasoline, because I think when you look at the good sources of information, were we to open up the California coast or the Alaska National Wildlife Refuge to drilling, it would be 12, 15, maybe 20 years before those resources came online and got to full productions."

Adding that some research shows that drilling in ANWR would only "reduce our dependence on foreign oil from 70% to 67%," Feeney added, "I'm not sure most Americans would think that's really worth the price of admission."

At least you can't say McCain's events are scripted.

While the facts on the impotent effect of coastal drilling become more known, conservatives pushers of drilling continue to cling to recent polls as a security blanket.

Conservative political consultant Dan Schnur argues at the NY Times Campaign Stops blog that McCain's newfound support for coastal drilling is politically astute because "national voters have adjusted their thinking on oil exploration. A Rasmussen poll released last week showed that two-thirds of Americans want to see the offshore ban rescinded." Newt Gringrich's "American Solutions" blog hyped the same poll last week in support of its dishonestly named "Drill Here. Drill Now. Pay Less." campaign.

But the Rasmussen poll asked (emphasis added) "In order to reduce the price of gas, should drilling be allowed in offshore oil wells off the coasts of California, Florida, and other states?"

After being misinformed that drilling would lower the price of gas, it's not surprising that voters would express support.

But what do you think the results would be if an accurate question was offered, such as: should drilling be allowed off the coasts of California, Florida and other states, even though it would NOT lower the price of gas in the next several years?

The mistake that politicians in support of the gas tax holiday made was taking comfort in polls that did not factor in what would happen after all the facts were laid out.

The facts on coastal drilling are coming out. Poll-driven politicians, beware.

The only time the free market swings in favor of the average working stiff (people who actually do the work in this country) is during a time of a labor shortage(meaning when there are more jobs than people to fill them.), this is usually during the inbetween time when a new industry is replacing an old industry. we saw this in the 90's with the internet boom, even internet companies needed employees.

with internet start ups and brick and mortar shops pulling from the same labor pool, it was a workers market so to speak. Lets face it when a company needs 200 new jobs filled and only 50 people show up they are going to offer whatever it takes to get you on their payroll, in the early 90's I worked at a burger king and in one day we had 4 employees(in a 12 person store) leave to work at an ISP's call center, the reason was because the job was easier and payed the same, a week later I left also, by 1995 there were 50 local ISP's in the area and all payed twice as much as fast food and were hiring anyone who walked through the door with understandable english skills. and even the fast food joints in my city had to raise their pay to compete.

And the same went for all entry level jobs across the country, then the tech bubble burst, and by 2002 america went back to a labor surpluss, a warehouse needing 20 people got 400 apps a day, and when that happens the ball is in the employers court.  and throughout history labor surplusses are much more common the labor shortages. so new industry does create jobs but so does old industry and the only time the ball is in the court of the working man, is the time between the old industry going away and the new industry taking over.

Reason #2 Competition does not work in a free market.

In a free market one entity will eventually gain the ability to crush the very possibility of competition. Witness standard oil & AT&T in the past and Microsoft today. Monopoly requires opposition and "non-free" controls to return competition to the marketplace.

My argument is a very simple, competition drives the free market. Here is the problem in order for something to be a competition you must be competing to win. What happens when there is a winner in the free market, there is a monopoly which kills the free market system, there is no longer any choice in what you buy. If you take away the competition that drives the market there is no longer any reason to produce and again the free market fails. So if you choose to leave the market alone it is bound to fail.

reason #3 Big business have lawmakers on their side.

The idea that businessmen are strong defenders of the free enterprise system is one which is believed only by those who have never studied the history of private enterprise in the Western, industrial nations. What businessmen are paid to worry about is profit. The problem for the survival of a market economy arises when the voters permit or encourage the expansion of government power to such an extent that private businesses can gain short-term profits through the intervention into the competitive market by state officials. Offer the typical businessman the opportunity to escape the constant pressures of market competition, and few of them are able to withstand the temptation. In fact, they are rewarded for taking the step of calling in the civil government.

The government's officials approve, but more to the point, from the point of view of the businessman's understanding of his role, shareholders and new investors also approve, since the favored enterprise is initially blessed with increased earnings per share. The business leader has his decision confirmed by the crucial standards of reference in the market, namely, rising profits and rising share prices on the stock market. No one pays the entrepreneur to be ideologically pure. Almost everyone pays him to turn a profit.

This being the case, those within the government possess an extremely potent device for expanding political power. By a comprehensive program of direct political intervention into the market, government officials can steadily reduce the opposition of businessmen to the transformation of the market into a bureaucratic, regulated, and even centrally-directed organization. Bureaucracy replaces entrepreneurship as the principal form of economic planning. Bureaucrats can use the time-honored pair of motivational approaches: the carrot and the stick. The carrot is by far the most effective device when dealing with profit-seeking businessmen.

Those individual enterprises that are expected to benefit from some new government program have every short-run financial incentive to promote the intervention, while those whose interests are likely to be affected adversely — rival firms, foreign enterprises, and especially consumers — find it expensive to organize their opposition, since the adverse effects are either not recognized as stemming from the particular government program, or else the potential opponents are scattered over too wide an area to be organized inexpensively. The efforts of the potential short-run beneficiaries are concentrated and immediately profitable; the efforts of the potential losers are dispersed and usually ineffective.

All of us were taught the statist "heads I win, tails you lose" political spectrum from left to right.  On this spectrum, everyone is in favor of government intervention and the sacrifice of one group of people to another.  The only thing that varies across the scale is who is the beneficiary of the plunder and the targeted areas of intervention.  For years, most of the politicians who have called themselves "pro-business" were not free market capitalists -- they spent much of their time in office sending their businessman-buddies slices of pork, zoning variations, special permission to trash other people's property (e.g. via pollution) etc.