September 2008


30 Sep 2008

If George W. Bush, John McCain, or Barack Obama had any honesty and integrity, they would approach the current banking malady in much the same way that President Andrew Jackson did. In discussing the Bank Renewal bill with a delegation of bankers in 1832, Jackson said, “Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.” -Chuck Baldwin, from an excellent article (read it!) on this situation.

26 Sep 2008

Watching this financial crisis unfold, we are seeing lots of stories like this showing misdirected anger. I call this “stupid populism.” It’s egged on by supposed populist (but actually leftist) politicians like our U.S. Senator, Sherrod Brown. It’s this idea that private businesses are full of crooks and we need the government (i.e. politicians and bureaucrats) to protect us from them. Now, we certainly do need protection from businesses getting in bed with the government, but seriously, do you really think this protection is going to come from politicians and bureaucrats who benefit from the arrangement?

It is true that rich, connected people will benefit from all this, as will other sleazy entities with their hands out at the federal trough. However, at root it’s the government that is at fault for this situation. Yes, the same politicians and bureaucrats who are telling us they now must have $700B to “avert” a collapse.

The core of the problem is that the federal government has a weapon that state and local governments thankfully don’t have: the Federal Reserve’s ability to create money out of thin air (for example, by maintaining artificially low interest rates). That’s what sets up these boom/bust cycles. It enables the government to spend massive amounts of money that it doesn’t have. It enables banks to lend money that they don’t have in reserves. It enables destructive quasi-government entities like Fannie and Freddie to “guarantee” mortgages, which in turn (along with other government policies) provided enough false signals for lenders to go to town.

Back when we signed our home mortgage in the early 2000s, they were handing out mortgages and lines of credit like candy. Yesterday, it was “we need to let everyone participate in the American dream of home ownership.” Today, it’s “how could you lenders have been so irresponsible?”

Mises.org has created a compendium of articles on the situation.

18 Sep 2008

It was the singular achievement of Murray Rothbard’s America’s Great Depression to have demonstrated that the Great Depression was a crisis manufactured and prolonged by the attempts to stop an inevitable downturn. The policy response — creating more money, propping up prices, ginning up employment, and a host of other devices — took a stock-market price collapse and a banking liquidation and spread the mess throughout every sector of the economy. What might have lasted a year to 18 months instead lasted 16 years. –Lew Rockwell

There are libertarians who have a fixation with hemp products, and then there are serious ones. Do you want to know what is going on with our economy? Read Mises.org.

Financial analysts on the talk shows (like the one on in the background at the hotel now) blame our latest economic fiascos on irresponsible companies, failures of government oversight, greed, etc. Politicians want to “do something” (read: spend a lot of money) to appease the restless natives. However, no one blames the primary source of the problem: the Federal Reserve.

What is the source of the disease and why are investment banks so heavily infected by it? The root of the problem is the Fed’s very loose interest rate policy and strong monetary pumping from January 2001 to June 2004. The federal funds rate target was lowered from 6.5% to 1%. It is this that has given rise to various malinvestments, which we label here as bubble activities. … We define a bubble as the outcome of activities that have emerged on the back of loose monetary policy of the central bank. In the absence of monetary pumping, these activities would not have emerged. Since bubble activities are not self-funded, their emergence must come at the expense of various self-funded or productive activities. This means that less real saving is left for real wealth-generators, which in turn undermines real wealth formation. –-Frank Shostak, 3/18/08

The Fed is best thought of as a large counterfeiting operation. They will finance all these bailouts by creating debt and money out of thin air, thus decreasing the value of every dollar. Ron Paul’s book Revolution has a helpful chapter on the topic on the matter of our money supply. Whatever other schemes the politicians and bureaucrats are cooking up now will do nothing but prolong the agony because they are trying to prevent what the market is trying to do.

When you see a self-proclaimed “fiscal conservative” who isn’t focused on the money supply and the baneful impact of the Fed, then you can be certain of one thing: you’re not dealing with a serious fiscal conservative.

15 Sep 2008

I took her hand in mine, and we went out of the ruined place; and, as the morning mists had risen long ago when I first left the forge, so, the evening mists were rising now, and in all the broad expanse of tranquil light they showed to me, I saw no shadow of another parting from her. -Charles Dickens, Great Expectations

I’m in the midst of a long business trip, and it reminds me yet again how I hate partings. I have always hated them, but moreso as I age. I long to be home and see my wife and family, as Paul longed to see Timothy. Amid such melancholy, what a joy it is to consider that one day these “former things” will pass away. (Rev 21:4)

02 Sep 2008

I missed this the first time through; from 3/31/08.