Supposedly, Fed Chairman Ben Bernanke is an expert about the Great Depression. I even own his book on the Depression. I bought it a long time ago and haven’t read it again. Ron Paul decides to school him on Austrian Economics. Here it is:
~PCCapitalist
When Mike Huckabee first started his campaign, he seemed like the Conservative that could unite all wings of the party. Especially, the Economic conservatives with the Social conservatives. As the campaign went on, his rhetoric changed and didn’t seem as economically sound. This is what I think is his downfall. Now he has a PAC and he sent this out with his criticisms and his own plans:
“Frankly, I’m disappointed and disgusted with my own Republican party as I watch them attempt to strong-arm a bailout of some of America’s biggest corporations by asking the taxpayers to suck up the staggering results of the hubris, greed, and arrogance of those who sought to make a quick buck by throwing the dice. They lost, but want the rest of us to cover their bets so they won’t be effected in their lavish lifestyles as they figure out how to spend their tens of millions and in some cases, hundreds of millions in bonuses and compensation which was their reward for not only sinking their companies, but basically doing the same to the entire American economy.
It’s especially disconcerting to see the very people who pilloried me during the Presidential campaign for being a “populist” and not “understanding Wall Street” to now line up like thirsty dogs at the Washington, D. C. water dish, otherwise known as Congress, and plead for help. I thought these guys were the smartest people in America! I thought that taxpayers like you and I were similar to the people at the U. N. who have no translator speaking into their headset – that we just needed to trust those that I called the power bunch in the “Wall Street to Washington axis of power.”
The idea of a government bailout in which we’d entrust $700 billion to one man without Congressional oversight or accountability is absurd. My party or not, that is insanity and I believe unconstitutional.
Will there be far-reaching consequences without some intervention? Probably, but we honestly don’t know since we’ve really never seen this level of greed and stupidity all rolled into one massive move. But may I suggest that letting “Uncle Sugar” step in and bail out the billionaires who made the mess will be far worse and will start a long line of companies and individuals who will demand the same of the government—which last time I checked means that they will be demanding it out of YOU and ME. This is not money that Congress is risking from THEIR pockets or future, but ours. Many if not most of us have already experienced lost value on our homes, retirement accounts, and pensions. Now they’d like for us to assume some further risks so they won’t have to.
What happened to the “free market” idea? Is that only our view when we WIN and when we LOSE, we ask the government to come in and take away the pain?
If you are a small business owner, is this the way it works at your place? When you have a bad month, a bad year, or face having to close, can you go up to Congress and get them to write YOU a fat check to take away your risk?
Some of what contributed to this disaster is too much government in the form of Sarbanes/Oxley. Some is due to the tax structure that created the hunger for companies to “game” the system. Some is the common sense that was ignored like loaning money to people who can’t pay it back.
Wall Street has become Las Vegas east, but at least in Vegas, people KNOW they are gambling and they don’t expect the government to cover their losses at the tables. In Wall Street, they do. And the American taxpayer burdens the responsibility.
If Congress wants to do something, here are some suggestions:
1. Eliminate ALL capital gains taxes and taxes on savings and dividends right now. Free up the capital and encourage investment. This is the kind of economic stimulus the Fair Tax would bring and if Congress is going to lose money, let them lose it with lower taxes, not with public dollar bailouts of private market mistakes.
2. Repeal Sarbanes/Oxley. It has failed. It was supposed to prevent this. It didn’t. Kill it.
3. Demand that the executives who steered their ships into the ground be forced to pay back the losses of their companies. Of course, they can’t, so let them work and give back to the government and they can live like the people they put on the streets or kept there. It makes no sense to put them in jail—that’s just more they will cost you and me. I’d rather them go out and earn money—just not get to keep so much of it this time. I’m not talking about limiting CEO salaries—just those of the people who now are up in Washington begging for help because they ruined their companies.”
I have to say, I am utterly impressed. His analysis is good and so is his plan for the most part. He would increase investment, which is actually the Austrian solution to the business cycle.
~PCCapitalist
Dear Republican Party,
As I was browsing the internet for some news, I found that I couldn’t escape the news of this bailout plan. First, we have a Republican President George W. Bush crowning Secretary Paulson economic Czar. Second, you are asking for $700 billion dollars for this new plan, making you the biggest socialist we have ever seen in executive power. FDR looks like Adam Smith right now. Third, we hear how your former archenemy John McCain support this act and would like to add more government to the mix. Yes, George W. Bush’s $700 billion dollar bailout plan is “more right wing” than John McCain’s rubber stamp with a little more bureaucracy. Meet the two wings of the party. We have the socialists and the socialists plus 1.
I am sure right now the Communist and Socialist parties are extremely upset. As not only have the Democrats stolen their platform since 1930ish but now the Republicans are doing it in the 2000’s. Republican Party, it is not all of your fault, as it is people like me who helped you guys get elected by believing in you. Believing that you were the “party of lesser evil.” That you were the party of “free market Capitalism.” That you were the party that slows government growth.
I used to claim that the Republican Party should get on the deregulation platform. Instead of changing the subject or talking about national security, when Democrats come up with socialist domestic issues your first reaction should have been deregulate. Oh, those were the golden days. Now I would have been happy with the “Republicans, we grow government – slower.” Instead, it is not “Republicans, we tell you that we won’t grow government but we have been beating Democrats at it for the past eight years.”
This brings me to the Republican Party Platform and back to my browsing the internet. I found this over at Reason’s blog:
“We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself.”
This is from the 2008 Republican Party Platform. Maybe it would be true that if the Republican Party still held these beliefs that I would vote for them. That day is long gone. When I think back on the times when Hoover was expanding the size of government after Cooledge kept the government relatively small but both were running under the Republican party ticket, What did the Republicans do then?
Do you split the party? Do you ignore it? If you ignore it, how much do you ignore? When FDR was growing the size of the government and he met almost no force from the Republicans, what do you do? What is a small government pro-market capitalist suppose to do? We aren’t there yet but in the Soviet Union they fled. Where would we go today? I love this country just as much as the next and I guess that is why I am writing this letter.
I can disagree with a Democrat on a billion issues, but I will never win with my own team using their tricks. Republican Party, you must get this through your head:
I will take a Democrat who says he is a Democrat, anyday over a Republican who is really a Democrat.
Your old friend,
~Marxsevelt
Letter sent to Washington –
To the Speaker of the House of Representatives and the President pro tempore of the Senate:
As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.
Signed
Acemoglu Daron (Massachussets Institute of Technology)
Adler Michael (Columbia University)
Admati Anat R. (Stanford University)
Alvarez Fernando (University of Chicago)
Andersen Torben (Northwestern University)
Beim David (Columbia University)
Berk Jonathan (Stanford University)
Bisin Alberto (New York University)
Boldrin Michele (Washington University)
Buera Francisco J.(UCLA)
Cassar Gavin (University of Pennsylvania)
Chaney Thomas (University of Chicago)
Chauvin Keith W. (University of Kansas)
Chintagunta Pradeep K. (University of Chicago)
Christiano Lawrence J. (Northwestern University)
Cochrane John (University of Chicago)
Coleman John (Duke University)
Constantinides George M. (University of Chicago)
Crain Robert (UC Berkeley)
De Marzo Peter (Stanford University)
Dubé Jean-Pierre H. (University of Chicago)
Edlin Aaron (UC Berkeley)
Ely Jeffrey (Northwestern University)
Faulhaber Gerald (University of Pennsylvania)
Fox Jeremy T. (University of Chicago)
Fuchs William (University of Chicago)
Gao Paul (Notre Dame University)
Garicano Luis (University of Chicago)
Gerakos Joseph J. (University of Chicago)
Gibbs Michael (University of Chicago)
Goettler Ron (University of Chicago)
Goldin Claudia (Harvard University)
Guadalupe Maria (Columbia University)
Hansen Lars (University of Chicago)
Harris Milton (University of Chicago)
Hart Oliver (Harvard University)
Hazlett Thomas W. (George Mason University)
Heaton John (University of Chicago)
Heckman James (University of Chicago – Nobel Laureate)
Henisz, Witold (University of Pennsylvania)
Hertzberg Andrew (Columbia University)
Hite Gailen (Columbia University)
Hitsch Günter J. (University of Chicago)
Hodrick Robert J. (Columbia University)
Hopenhayn Hugo (UCLA)
Hurst Erik (University of Chicago)
Israel Ronen (London Business School)
Jaffee Dwight M. (UC Berkeley)
Jagannathan Ravi (Northwestern University)
Jenter Dirk (Stanford University)
Jones Charles M. (Columbia Business School)
Kaboski Joseph P. (Ohio State University)
Kaplan Ethan (Stockholm University)
Karolyi, Andrew (Ohio State University)
Kashyap Anil (University of Chicago)
Ketkar Suhas L (Vanderbilt University)
Kiesling Lynne (Northwestern University)
Koch Paul (University of Kansas)
Kocherlakota Narayana (University of Minnesota)
Koijen Ralph S.J. (University of Chicago)
Kondo Jiro (Northwestern University)
Korteweg Arthur (Stanford University)
Kortum Samuel (University of Chicago)
Krueger Dirk (University of Pennsylvania)
Lee Lung-fei (Ohio State University)
Leuz Christian (University of Chicago)
Levine David I.(UC Berkeley)
Levine David K.(Washington University)
Linnainmaa Juhani (University of Chicago)
Manski Charles F. (Northwestern University)
Martin Ian (Stanford University)
Mayer Christopher (Columbia University)
McDonald Robert (Northwestern University)
Meadow Scott F. (University of Chicago)
Mian Atif (University of Chicago)
Middlebrook Art (University of Chicago)
Miguel Edward (UC Berkeley)
Miravete Eugenio J. (University of Texas at Austin)
Miron Jeffrey (Harvard University)
Moro Andrea (Vanderbilt University)
Morse Adair (University of Chicago)
Mortimer Julie Holland (Harvard University)
Nevo Aviv (Northwestern University)
Ohanian Lee (UCLA)
Pagliari Joseph (University of Chicago)
Papanikolaou Dimitris (Northwestern University)
Peltzman Sam (University of Chicago)
Perri Fabrizio (University of Minnesota)
Phelan Christopher (University of Minnesota)
Piazzesi Monika (Stanford University)
Piskorski Tomasz (Columbia University)
Reagan Patricia (Ohio State University)
Reich Michael (UC Berkeley)
Reuben Ernesto (Northwestern University)
Roberts Michael (University of Pennsylvania)
Rogers Michele (Northwestern University)
Ruud Paul (Vassar College)
Safford Sean (University of Chicago)
Sandbu Martin E. (University of Pennsylvania)
Sapienza Paola (Northwestern University)
Scharfstein David (Harvard University)
Shang-Jin Wei (Columbia University)
Shimer Robert (University of Chicago)
Siegel Ron (Northwestern University)
Sorensen Morten (Columbia University)
Spiegel Matthew (Yale University)
Stevenson Betsey (University of Pennsylvania)
Stokey Nancy (University of Chicago)
Strahan Philip (Boston College)
Strebulaev Ilya (Stanford University)
Sufi Amir (University of Chicago)
Thompson Tim (Northwestern University)
Tschoegl Adrian E. (University of Pennsylvania)
Uhlig Harald (University of Chicago)
Ulrich, Maxim (Columbia University)
Van Buskirk Andrew (University of Chicago)
Veronesi Pietro (University of Chicago)
Vissing-Jorgensen Annette (Northwestern University)
Weill Pierre-Olivier (UCLA)
Witte Mark (Northwestern University)
Wolfers Justin (University of Pennsylvania)
Zingales Luigi (University of Chicago)
~PCCapitalist
If we’re in the midst of a financial collapse, why aren’t executives jumping out of office buildings?” I don’t know about you but when I learned about the Great Depression that was the depiction I got. When I got to undergraduate school, my economics professor told me that was a myth. Let’s see what she has to say; here is her reason:
“Because the current situation hasn’t had nearly as devastating an effect on people’s personal finances. The Great Crash of 1929—and, to a lesser extent, the crash of 1987—did lead some people to commit suicide. But in nearly all of those cases, the deceased had suffered a major loss when the market collapsed. Now, due in large part to those earlier experiences, investors tend to keep their portfolios far more diversified, so as to avoid having their entire fortunes wiped out when stocks take a downturn. In addition, some of the worst declines in the past week have been limited to a smaller number of companies (such as Lehman Bros., Morgan Stanley, and Goldman Sachs), further limiting the potential damage to individual investors.”
Well this would lead you to believe that we are smarter investors than we were in 1929. Of course, none of this says anything about the government being the reason.
“Tall tales about panicked speculators leaping to their deaths have become part of the popular lore about the Great Crash. But although jumping from bridges or buildings was the second-most-popular form of suicide in New York between 1921 and 1931, the “crash-related jumping epidemic” is just a myth. Between Black Thursday and the end of 1929, only four of the 100 suicides and suicide attempts reported in the New York Times were plunges linked to the crash, and only two took place on Wall Street. (There were some crash-related suicides that didn’t involve fatal jumps: The president of County Trust Co. and the head of Rochester Gas and Electric both killed themselves, but they used a gun and gas, respectively.)”
There you go. My Economics Professor was right and my high school history teacher was over exaggerating.
Side note: This is funny:
“Will Rogers quipped that “you had to stand in line to get a window to jump out of“; and soon Eddie Cantor was joking that hotel clerks were asking guests if they wanted rooms “for sleeping or jumping.”
Little did they know it was an over exaggeration. Now this brings an important point. First, are we that bad off? and second who decided that it was okay to teach our children myths. These myths make Capitalism look bad, even though this problem is the governments. The education system already pens the Great Depression on unstable Capitalism and now Capitalism is killing people. If schools were private then we would have a much better chance that the information being taught would be better researched.
The rest is here.
~PCCapitalist
This is from an forwarded email but is great satire for what actually happens in the agricultural sector:
“Honorable Secretary of Agriculture Washington, D.C.
Dear Sir:
My friend, Ed Peterson, over at Wells, Iowa, received a check for $1,000 from the government for not raising hogs. So, I want to go into the “not raising hogs” business next year.
What I want to know is, in your opinion, what is the best kind of farm not to raise hogs on, and what is the best breed of hogs not to raise? I want to be sure that I approach this endeavor in keeping with all governmental policies. I would prefer not to raise razorbacks, but if that is not a good breed not to raise, then I will just as gladly not raise Yorkshires or Durocs.
As I see it, the hardest part of this program will be in keeping an accurate inventory of how many hogs I haven’t raised.
My friend, Peterson, is very joyful about the future of the business. He has been raising hogs for twenty years or so, and the best he ever made on them was $422 in 1968, until this year when he got your check for $1,000 for not raising hogs.
If I get $1,000 for not raising 50 hogs, will I get $2,000 for not raising 100 hogs? I plan to operate on a small scale at first, holding myself down to about 4,000 hogs not raised, which will mean about $80,000 the first year. Then I can afford an airplane.
Now another thing, these hogs I will not raise will not eat 100,000 bushels of corn. I understand that you also pay farmers for not raising corn and wheat. Will I qualify for payments for not raising wheat and corn not to feed the 4,000 hogs I am not going to raise?
Also, I am considering the “not milking cows” business, so send me any information you have on that too.
In view of these circumstances, you understand that I will be totally unemployed and plan to file for unemployment and food stamps.
Be assured you will have my vote in the coming election.
Patriotically Yours,
PS: Would you please notify me when you plan to distribute more free cheese?”
~PCCapitalist
This I found to be utterly hilariously and true from David Friedman. When people ask me why I am so angered with the Republican Party, which is suppose to be the party of small government. Yes, even with these massive bailouts. Here it is:
“Someone had asked another Usenet poster:
“How do you feel about the line, “I want you to vote for me, because I support smaller government”?
I replied:
1. It gives me very little information about what he will do if elected.2. But it does mean that, since he is pretending to be one of us, we will get blamed for what he does, even if it has nothing to do with the views we support.
That’s why, on the whole, I thought it would be better if Bush had lost the most recent election–not that his opponent would have been any better but that at least we wouldn’t have gotten blamed for what he did.”
This is perfect. This is the exact thing you see when someone blames Capitalism for the current crisis. Also when these bailouts fail the country miserably small government Republicans are going to be blamed for that too. This is the biggest small government bailout in history.
David Friedman’s post is here.
~PCCapitalist
This is a great article about how the budgetary system works. This is something I have always wanted to say to people whenever you hear about the powers of the President. Here it is from The Washington Times:
“All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.”
How many times have we heard politicians, pundits and guardians of our news media say President Bush cut taxes, or Barack Obama is going to raise taxes? The fact is that presidents have no power to raise or lower taxes. They can propose tax measures or veto them but Congress has the ultimate power to raise or lower taxes since they can, with a two-thirds vote, override a presidential veto. The same principle applies to spending.”
This is Williams on the current credit crunch and he is saying the same stuff I have been saying for a long while:
“Many politicians and pundits claim the credit crunch and high mortgage foreclosure rate is an example of market failure and want government to step in to bail out creditors and borrowers at the expense of taxpayers who prudently managed their affairs.
These financial problems are not market failures but government failure. The Community Reinvestment Act of 1977 is a federal law that intimidated lenders into offering credit throughout their entire market and discouraged them from restricting their credit services to low-risk markets, a practice sometimes called redlining. The Federal Reserve, keeping interest rates artificially low, gave buyers and builders incentive to buy and build, producing the housing bubble.”
This a great article you will have to read for yourself. I have put up the best but there is also a very good part on, does the President actually create job?
The rest of the article can be found here.
~PCCapitalist
The Public Choice Capitalist 