VOTE NO on $700 billion taxpayer bill for bailout
Good morning everyone,
I have no doubt that we are all watching the news regarding the
economy, listening to all the reasons our "constituent" Congressmen are
giving to us so that we all think we need this $700 billion bailout
bill. There is a reason the bill was initially voted NO on Monday, and
that is that the majority of Americans DON'T WANT THE BAILOUT, and be
stuck with the bill for the exuberance of Wall St. and their free
lending bank counterparts.
The current recession we are experiencing is mostly a result of two,
bi-partisan actions. The problems began during the Clinton term and the
"dot com" bubble, and its subsequent burst that wiped out millions from
Americans' savings. Many people during this period, who had previously
never invested in the stock market, were now borrowing money on their
credit cards and "investing" with ease online, with no stopgap or advice
as to what to expect or possible losses involved. Thus, when the market
crashed in 2000, people started to panic, began losing everything.
Instead of allowing the market to correct, and helping people absorb
some losses with minimal government intervention, President Bush dropped
interest rates and regulation on mortgage lending to allow people to
cover stock market losses with second mortgages on their homes. This,
in turn, artificially drove up the housing market, pushing home values
through the roof, causing people to continue spending, feeling more
confident in their new found "treasure" in their home equity. However,
this artificial increase in home values has proved to be just another
example of "Robbing Peter to pay Paul".
Now, we have the largest taxpayer bailout in American history on the
table of our Congressmen. Although the taxpayer, the American citizen
is in dire straights right now, Congress wants us to "pay it forward",
and bailout out Wall St. first, using our taxpayer dollars to buy BAD
debt, hoping somehow this bad debt will turn around in the future and
POSSIBLY provide a return to the government, and then FINALLY back to
us. The government wants to use our money to bad debt, "investments"
that are almost guaranteed to lose money. If we wouldn't do this with
our money at home, WHY WOULD WE AUTHORIZE CONGRESS TO DO THE SAME WITH
OUR TAX DOLLARS?
Our markets are correcting to pre-2000 levels, before the "dot com"
bubble, plus a few years of standard growth. This is needed to again
strengthen our dollar in the world, get back to true value of things
before all of this artificial inflation. The market doesn't need a
bailout, however it does need a strong and swift correction. This is
basic capitalism, healthy cycles of boom and bust. We have to trust in
our markets to absorb the losses, get back in its feet NOW, to be able
to compete with heavyweights like China and India in the years to come.
Congress points to yesterday's (9/29) market losses of 777 points to
underline the dire need for this bailout. However, TODAY (9/30) THE
MARKET IS UP 375 POINT WITHOUT THE BAILOUT.
We all talk about "green", not leaving the world polluted for our
children tomorrow. This $700 billion dollar bailout will not only put
us in severely in debt for the excesses of Wall St. today, but will put
our children and our children's children on the hook for this bailout
for generations to come.
If Congress was truly serious in "restoring" consumer confidence,
instead of using our $700 billion to buy bad debt and hope for a return
in 20-30 years for the taxpayer, they should GIVE $700 BILLION BACK TO
THE AMERICAN TAXPAYER TO BOOST THE ECONOMY. Allow the citizens to get
their paid taxes back and GIVE CITIZENS THE OPTION TO INVEST IN
OPPORTUNITIES OF OUR CHOOSING. If some of us truly want to buy bad
debt, WE ARE FREE TO DO SO AND NOT FORCED BY CONGRESS.
Please call your local congressmen and tell them to VOTE NO ON THE
BAILOUT and YES TO RETURN $700 BILLION BACK TO THE TAXPAYER FOR
INDIVIDUAL INVESTMENT.
Congress lookup:
http://w2.eff.org/congress/
Keep your chin up everyone, the market will get better. We are
experiencing a HEALTHY market correction, a bust that is crucial for
capitalism to work, cleaning out the "old guard", making room for the
next BOOM.
Yours in Liberty,
Anthony Cinelli
American Patriot
The Proservative Movement
"Progressive Action, Conservative Values"
http://www.Proservative.us
Dr. Ron Paul’s House floor remarks on the bailout
Dr. Paul’s House floor remarks on the bailout
Dr. Paul gave a quick speech on the House floor this morning concerning the bailout. Due to the nature of the debate today, he didn’t have time to read his full remarks, which were put into the congressional record and are featured below:
The process of this bailout reminds me of a panic-stricken swimmer thrashing in the water only making his situation worse. Even a “bipartisan deal”—whatever that is supposed to mean— will not stop the Congress from thrashing about.
The beneficiaries of the corrupt monetary system of the last three decades are now desperately looking for victims to stick with the bill after they have reaped decades of profit and privilege.
The difficulties in our economy will continue because the Legislative and the Executive branches have not yet begun to address the real problems. The housing bubble’s collapse, as was the Dot Com bubble’s collapse, was predictable and is merely a symptom of the monetary system that brought us to this point.
Indeed, we do face a major crisis but it is much bigger than the freezing up of Wall Street and dealing with worthless assets on the books of major banks. The true crisis is the pending collapse of the fiat dollar system that emerged after the breakdown of the Bretton Woods agreement in 1971.
For 37 years the world built a financial system based on the dollar as the reserve currency of the world in an attempt to make the dollar serve as the new standard of value. However since 1971, the dollar has had no intrinsic value, as it is not tied to gold. The dollar is simply a fiat currency, which has fluctuated in value on a daily, if not hourly, bias. This worked to some degree until the market realized that too much debt and malinvestment existed and a correction was required.
Because of our economic and military strength, compared to other countries, trust in America’s currency lasted longer than deserved. This resulted in the biggest worldwide economic distortion in all of history. The problem is much bigger than the fears of a temporary decline on Wall Street if the bailout is not agreed to.
Money’s most important function is to serve as a means of exchange—a measurement of value. If this crucial yardstick is not stable, it becomes impossible for investors, entrepreneurs, savers, and consumers to make correct decisions; these mistakes create the bubble that must eventually be corrected.
Just imagine the results if a construction company was forced to use a yardstick whose measures changed daily to construct a skyscraper. The result would be a very unstable and dangerous building. No doubt the construction company would try to cover up their fundamental problem with patchwork repairs, but no amount of patchwork can fix a building with an unstable inner structure. Eventually, the skyscraper will collapse, forcing the construction company to rebuild—hopefully this time with a stable yardstick. This 700 billion package is more patchwork repair and will prove to be money down a rat hole and will only make the dollar crisis that much worse.
But what politicians are willing to say that the financial “skyscraper”—the global financial and monetary system-is a house of cards. It is not going to happen at this juncture. They’re not even talking about this. They talk only of bailouts, more monetary inflation, more special interest spending, more debt, and more regulations. There is almost no talk of the relationship of the Community Reinvestment Act, HUD, and government assisted loans to the housing bubble. And there is no talk of the oversight that is desperately needed for the Federal Reserve, the Exchange Stabilization Fund, and all the activities of the President’s Working Group on financial markets. When these actions are taken we will at last know that Congress is serious about the reforms that are really needed.
In conclusion, there are three good reasons why Congress should reject this legislation:
a. It is immoral—Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.
b. It is unconstitutional—There is no constitutional authority to use government power to serve special interests.
c. It is bad economic policy—By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.
Monetary reform will eventually come, but, unfortunately, Congress’ actions this week make it more likely the reform will come under dire circumstances, such as the midst of a worldwide collapse of the dollar. The question then will be how much of our liberties will be sacrificed in the process. Just remember what we lost in the aftermath of 9-11.
The best result we can hope for is that the economic necessity of getting our fiscal house in order will, at last, force us to give up our world empire. Without the empire we can then concentrate on rebuilding the Republic.
Update - Here’s the video of the remarks Dr. Paul delivered this morning:
This entry was posted on Monday, September 29th, 2008 at 11:34 am
Dr. Paul gave a quick speech on the House floor this morning concerning the bailout. Due to the nature of the debate today, he didn’t have time to read his full remarks, which were put into the congressional record and are featured below:
The process of this bailout reminds me of a panic-stricken swimmer thrashing in the water only making his situation worse. Even a “bipartisan deal”—whatever that is supposed to mean— will not stop the Congress from thrashing about.
The beneficiaries of the corrupt monetary system of the last three decades are now desperately looking for victims to stick with the bill after they have reaped decades of profit and privilege.
The difficulties in our economy will continue because the Legislative and the Executive branches have not yet begun to address the real problems. The housing bubble’s collapse, as was the Dot Com bubble’s collapse, was predictable and is merely a symptom of the monetary system that brought us to this point.
Indeed, we do face a major crisis but it is much bigger than the freezing up of Wall Street and dealing with worthless assets on the books of major banks. The true crisis is the pending collapse of the fiat dollar system that emerged after the breakdown of the Bretton Woods agreement in 1971.
For 37 years the world built a financial system based on the dollar as the reserve currency of the world in an attempt to make the dollar serve as the new standard of value. However since 1971, the dollar has had no intrinsic value, as it is not tied to gold. The dollar is simply a fiat currency, which has fluctuated in value on a daily, if not hourly, bias. This worked to some degree until the market realized that too much debt and malinvestment existed and a correction was required.
Because of our economic and military strength, compared to other countries, trust in America’s currency lasted longer than deserved. This resulted in the biggest worldwide economic distortion in all of history. The problem is much bigger than the fears of a temporary decline on Wall Street if the bailout is not agreed to.
Money’s most important function is to serve as a means of exchange—a measurement of value. If this crucial yardstick is not stable, it becomes impossible for investors, entrepreneurs, savers, and consumers to make correct decisions; these mistakes create the bubble that must eventually be corrected.
Just imagine the results if a construction company was forced to use a yardstick whose measures changed daily to construct a skyscraper. The result would be a very unstable and dangerous building. No doubt the construction company would try to cover up their fundamental problem with patchwork repairs, but no amount of patchwork can fix a building with an unstable inner structure. Eventually, the skyscraper will collapse, forcing the construction company to rebuild—hopefully this time with a stable yardstick. This 700 billion package is more patchwork repair and will prove to be money down a rat hole and will only make the dollar crisis that much worse.
But what politicians are willing to say that the financial “skyscraper”—the global financial and monetary system-is a house of cards. It is not going to happen at this juncture. They’re not even talking about this. They talk only of bailouts, more monetary inflation, more special interest spending, more debt, and more regulations. There is almost no talk of the relationship of the Community Reinvestment Act, HUD, and government assisted loans to the housing bubble. And there is no talk of the oversight that is desperately needed for the Federal Reserve, the Exchange Stabilization Fund, and all the activities of the President’s Working Group on financial markets. When these actions are taken we will at last know that Congress is serious about the reforms that are really needed.
In conclusion, there are three good reasons why Congress should reject this legislation:
a. It is immoral—Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.
b. It is unconstitutional—There is no constitutional authority to use government power to serve special interests.
c. It is bad economic policy—By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.
Monetary reform will eventually come, but, unfortunately, Congress’ actions this week make it more likely the reform will come under dire circumstances, such as the midst of a worldwide collapse of the dollar. The question then will be how much of our liberties will be sacrificed in the process. Just remember what we lost in the aftermath of 9-11.
The best result we can hope for is that the economic necessity of getting our fiscal house in order will, at last, force us to give up our world empire. Without the empire we can then concentrate on rebuilding the Republic.
Update - Here’s the video of the remarks Dr. Paul delivered this morning:
This entry was posted on Monday, September 29th, 2008 at 11:34 am
Proposed Emergency Economic Stabilization Act of 2008 Leaked
September 28, 2008: Released
Proposed Emergency Economic Stabilization Act of 2008
10 Megabyte pdf - All 57 pages.
http://www.pyrabang.com/go/login/3274/new
* Don't pass the bill and let the banks fall, we get a Great Depression.
* Pass the Bill and watch the collapse of a Nation.
Have a nice day,
Eric
Stop the Paulson's Sovereign Fund Now!
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The Fascist Coup is Nearly Complete
The Fascist Coup Is Nearly Complete
By Greg McCoach | Sunday, September 28th, 2008
The fascist coup in the United States is nearly complete.
Over the past few years the U.S. government has abolished countless freedoms of the American people... all in the name of "national security."
They've spent trillions of tax dollars - forced upon citizens under penalty of imprisonment - on an imperialistic military to fight an un-winnable war on terror, while all but neglecting our growing domestic problems.
The government and CONgress protects big business to create a symbiotic business/government relationship giving supreme power to the corporate elite.
And to top it all off, they've controlled mass media (notwithstanding the internet) to put a lid on the truth.
But don't worry. They're looking out for your best interests.
One Small Step for Elitists, One Giant Leap for Fascism
Unless you've been living under a rock for the past few weeks, you've heard the U.S. government has now nationalized the entire mortgage industry with the acquisition of Freddie Mac and Fannie Mae. And now, it hopes to siphon $700 billion from American taxpayers to buy up the bad debt of financial institutions for the next two years.
Now, take a second or two... and think about how much $700 billion really is. It's seven hundred thousand million dollars! $700,000,000,000.00
Another perspective: It's enough to give every man, woman, and child in the city of Philadelphia a half-million dollars.
Listen... that $700 billion figure represents about 5.2% of the entire U.S. gross domestic product in 2007.
If approved, the bailout would raise the statutory limit on the national debt 6.6%... from $10.6 trillion to $11.3 trillion.
And what will U.S. taxpayers like you and I get in return?
Nothing. Zip. Zilch. Nada.
- There are no plans for new regulations or oversights to help avoid this kind of crisis in the future.
- There'll be no public interest givebacks to help the people whose homes are in the hands of the banks.
- And, perhaps most shockingly of all, we will get absolutely no share in the profits if these fallen-from-grace financial giants bounce back... even though we are now assuming a great deal of the risk.
The new rescue plan may restore a bit of investor confidence to battered financial markets. But investors will again begin to focus on the twin budget and current-account deficits and negative real U.S. interest rates. And eventually the government's plan will derail the dollar's three-month rally, which is, in effect...
The One Last Hurrah for the U.S. Dollar
The greenback has already started to retract. The U.S. Dollar Index, a measure of the value of the U.S. dollar relative to a basket of six foreign currencies, has pullback as much as 5.6% in the past two weeks.
Gold prices have certainly enjoyed the descending dollar. Gold has recently broken several daily movement records, including a $90.40, 11.6% one-day increase the other day. As a result, gold and gold mining stocks are starting to come back to life.
Take Action with Campaign For Liberty
Thursday, September 26, 2008
Dear C4L Member,
Yesterday, Ron Paul sent out a letter warning of the dangers of the Paulson and Bernanke bailout plan and asking you to contact your representatives and senators. A vote on this bill could literally come at any moment, and it is crucial that you immediately express your opinion to Congress.
The picture painted by the supporters of the bailout is dire. President Bush reinforced this notion in his address to the nation last night and again urged Congress to act immediately.
Remember what happened the last time the executive branch warned of horrible consequences and rushed legislation through Congress? We got the Patriot Act, which to this day threatens our civil liberties on an unprecedented scale.
We do know that our economy is in for a rough ride. These bad mortgage-related assets will have to be cleared out and the market will have to reset. The only question is how that will happen.
The easy way out is to continue the same practices that got us to this point. We can put $700 billion, for starters, in the hands of Treasury Secretary Henry Paulson (a former CEO of Goldman Sachs) and Federal Reserve Chairman Ben Bernanke, and let them spend the money on whatever they wish.
This option will only delay the economic downturn, which will only be worsened.
Or, we can take this opportunity to end the federal government's interference in the marketplace, truly embrace free market capitalism, and return to a sound monetary system.
The Federal Reserve's practices of easy credit and monetary inflation have crashed our economy, and now they're asking us to trust them to fix it.
When you call Congress to express your outrage at the bailout, tell them you want real solutions.
It is time for Congress to:
1.) End the Bailouts - Congress must revoke the Federal Reserve's authority to bail out failed businesses at your expense.
2.) Cut Taxes and Curb Regulation - If we really want to stimulate businesses and revive the market, we need to cut corporate and capital gains taxes, spurring investors to come back to the market and making it easier to attract new workers and clients. It is also time to end failed legislation like Sarbanes-Oxley, which has crippled capital markets, diminished our competitiveness, and greatly harmed small businesses.
3.) Reduce Spending - We must freeze all non-entitlement spending by the federal government at current levels and eliminate wasteful spending both domestically and in our trillion-dollar overseas budget. Our debt has to come down, and it won't until we start living within our means.
4.) Reform the Monetary System - If we are to have long-term economic progress, we must end the system of printing money out of thin air. The current laws limiting the circulation of gold and silver-backed currency must be overturned. We can no longer base our money on the empty promises of bureaucrats that it is sound.
The federal government is trying to scare us into accepting more tyranny. Don't stand for it.
Check out our action alert, and let Congress know that you will no longer tolerate the Federal Reserve's stranglehold on our economy.
Best Regards,
John Tate
President
Campaign for Liberty
The Empire Strikes Back: Microsoft Live Search vs Google
by Michael Arrington on May 22, 2008
Everyone has an opinion on today’s move by Microsoft to shake things up in the search space. Their new Live Search Cashback product shifts search advertising from cost-per-click (CPC) to cost-per-action (CPA) and give a lot of the revenue back to users. Most
writers are negative. Some excessively so. After hearing Bill Gates give the pitch and trying the service myself to make a couple of purchases, here’s what I think: It’s a bold move that goes for Google’s throat, and it will likely have a material impact on their search market share.
Our complete analysis is below. The key takeaway: Google’s search dominance is growing, and everything Microsoft has historically thrown at them has done nothing to slow them down. This new approach is both desperate and brilliant. Desperate because Microsoft is giving away most of the search revenue to get market share gains. Brilliant because they have such a small share of search revenue today that they have little to lose, and they are hitting Google hard in their core business.
The Numbers
Microsoft had to do something fairly drastic to get back in the search game. They’re third in U.S. search market share with under 9.1% of the total pie. Just six months ago they had 9.8% market share. Google, by contrast, has 61.6% and is growing steadily:
Without search market share, Microsoft can’t get search revenue market share. And it isn’t just a matter of splitting up the pie. This is a winner-take-most market: Having 9% of search doesn’t mean Microsoft has 9% of search marketing dollars. Far from it - publishers go to Google to partner on ads, which means advertisers must go there to get inventory, and a very healthy auction system pushes up prices. So not only does Microsoft (and Yahoo, and everyone else) have much fewer queries than Google, they are also generating much less revenue per query as well.
So how much revenue are we talking about? Today the worldwide online advertising market is somewhere in the $40 billion range, and there are estimates that it will grow to $80 billion by 2010. The search piece of that is big - about 40%. So $16 billion or so today, growing to $33 billion by 2010. Google gets the vast majority of that search revenue today.
Microsoft’s core revenue is derived from Windows and Office, and the future doesn’t look to be very bright for desktop software sales. Google’s revenues, currently at $20 billion a year, could someday surpass Microsoft’s (Microsoft is currently at about $50 billion/year in revenue) if nothing is done to change the game.
Remember how everyone feared Microsoft’s dominance in the OS and Office worlds in the late nineties? That’s Google today in the search advertising space, a much bigger long term market.
How To Disrupt Google
It’s clear that technology alone will not unseat Google as the dominant player in this market. Microsoft already tried that with their AdCenter improvements in 2006; Yahoo tried with Panama last year. Google’s dominance only grew.
That means Microsoft has to do something different than just build new software that improves on the cost per click advertising model. And moving to a CPA model isn’t enough - Google and others are already experimenting with that. So instead, Microsoft is taking the CPA model, which lowers risk to advertisers, and combining it with a straightforward payback mechanism to users.
This only applies to ecommerce related searches for now. But frankly that is all that matters. Only about a third of searches are commerce related, but those searches generate 80% of search revenue. Get the commerce searches and you’ve got the revenue. And here’s another interesting statistic - 68% of online purchases begin at a search engine or shopping comparison site. Only about 30% are from direct navigation to the ecommerce site itself.
Will It Work?
Yes, it will work and it will almost certainly increase Microsoft’s market share in search, particularly in commerce search. The question is, how well will it work?
A year ago Microsoft basically did a trial run of Live Search CashBack with Live Search Club, which lured searchers to Microsoft with offers of prizes to users for using Live Search. Microsoft went from 10.3% to 13.2% market share in a month, a nearly 30% rise. Live Search CashBack, which gives a much more straightforward payout to users, should see significantly better results.
And really, what does Microsoft have to lose? They have a tiny piece of the revenue pie today, pay out money-losing revenue guarantees to partners like Digg and Facebook, and the online division itself is losing a cool $1 billion a year on about $2.4 billion in revenue. This new model isn’t going to give them a lot of profit, but it isn’t a money loser, either. Sometimes, desperation is a good place to be because it forces you to try crazy stuff.
The User Experience
I made two purchases today with Live Search Cashback. Microsoft presents results in a straightforward manner with the price of the item and the rebate clearly shown. After the purchases, the rebate appeared instantly in my CashBack account. No hiccups, great user experience. I came away with a totally different opinion from others.
Google v. Microsoft
The first thing I thought when I saw Live Search CashBack was that Microsoft is hitting Google where it hurts, in exactly the same way that Google is hitting Microsoft with their free online Office offerings. Google isn’t making much money on Docs, but it sure threatens Microsoft’s core revenue stronghold.
Similarly, Microsoft isn’t likely to make much profit on Live Search Cashback, since they are giving most of the money back to users. But it hits Google in its sweet spot - commerce search. And it may have a bigger impact and a faster impact on Google than people realize. Docs is a still a future revenue threat to Microsoft - Live Search Cashback is taking money out of Google’s pockets today.
The question, as I said above, is how much money they’re taking out of Google’s pockets. That’s yet to be seen. But Microsoft also made it clear that this is just a first step in the search war, and things are guaranteed to get a lot uglier in the near future.
BreakTheMatrix.com: ThirdPartyTicket.com - Open debates and money bomb event. NEW FORMAT!
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Financial bailout? We Don’t Need the Crooks to Save Us
Posted on September 25th, 2008 by Will Marre.
The people that got us into this financial mess are telling us the only way to get out of it is to bail out the same crooks who caused it. But is that really the only alternative? Is that really the best we can do?
What if we let the institutions that took big risk just fail? Poof. Supposedly it would constipate the credit markets and none of us could get car loans or credit cards and the economy would stop…Hmmm. I wonder. I’ve been thinking of other ways to use $700 billion.
- What if we reward regional and community banks and credit unions who didn’t play in the high risk mortgage market with a large pool of low rate money they could loan to credit worthy businesses and customers? And what if we published the list of those banks and credit unions so we would all know where to get the capital we need to make our economy grow and our lives work? Maybe we really don’t need the big banks that seem to psychologically headquartered in Las Vegas.
- What if instead of expanding unemployment benefits we spend a few $100 billion on rebuilding our public infrastructure like repair bridges, roads, and water and sewage systems and put all those people who recently lost construction jobs back to work building our future?
- We must let the real estate market find its true floor. Its values were outrageously inflated. If we don’t allow for a true price correction in real estate values will remain flat for 10 years or more. So what if we start a national Real Estate Trust that buys foreclosed homes at their real value instead of some pre-negotiated-good o’ boy-bail-out value allowing the banks that made the inflated loans to eat their losses or fail. Then suppose we put the homes in a huge rent-to-own pool where people who can pay a market rent for 2 years or more earn the right to buy the home they’re renting. The supply of homes for sale would reduce and prices would stabilize. The trust would make money, Americans could live in the homes we built and people would take pride in the homes they are earning the right to buy.
The point is if we’re really interested in building our future based on principles that reward good judgment and maintain the honest value of free enterprise there are a lot of things we can do besides bail out the hand-wringing corrupt financiers of our Congress and administration. What’s the best thing we can do? Email your Congressmen and Senator today (Write Your Representative or Congress.org), forward this email if you want to. Tell your friends to as well. Make some noise, America. We went to war because we were lied to about the immediate danger of WMD’s. Doesn’t it seem like we’re being whipped into the same kind of frenzy? Let’s not fall for it!
Ron Paul's Answer to the President
Dear Friends:
The financial meltdown the economists of the Austrian School predicted has arrived.
We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.
Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I'd only be repeating what I've been saying over and over - not just for the past several days, but for years and even decades.
Still, at least a few observations are necessary.
The president assures us that his administration "is working with Congress to address the root cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?
We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.
Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).
Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."
Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?
Then come the scare tactics. If we don't give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.
It's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.
The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.
F.A. Hayek won the Nobel Prize for showing how central banks' manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own:
Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.
To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end... It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.
The only thing we learn from history, I am afraid, is that we do not learn from history.
The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?
Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people.
The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them.
I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects - the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.
H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.
In liberty,
Ron Paul
It’s Time to Move Your Money
Posted on September 23rd, 2008 by Will Marre.
It’s time to take our money away from big faceless banks and put it where it belongs. In our own communities. I’m not paranoid or anti business. To the contrary, I’m pro honest business. But I’m also realistic. For many years I worked with clients involved in mergers and acquisitions. I’ve spent time in rooms with investment bankers, financial analysts and accountants who were busy changing financial assumptions, inflating valuations and reassessing risk to make a deal “work.” These are smart guys (and gals) just making it up. I was present when some of our biggest financial institutions were training their sales forces to sell sub prime debt while they explained it would slice and dice parts of risk-drenched loans into a variety of investment portfolios until the risk of any single loan disappeared.
Someone said mixing high-risk debt with low risk debt is like putting a little arsenic in a Jamba juice. Blend it up and pretty soon the poison disappears. Guess what? It doesn’t.
Although that may not make common sense, it made great sense to a commission driven sales force ready to descend on people who had never borrowed money. No, not all these people are evil or even extraordinarily greedy. What they are is extraordinarily tempted. And one of our society’s primary restraints against great temptation is legal regulation.
But with great sadness I see once again our deeply compromised government saying one thing while intending its exact opposite. Like the Clean Air Act, which allowed for greater air pollution, this newly proposed regulatory reform of our financial institutions is simply a word trick. Double speak. Hogwash. Here’s a few tidbits:
First regulations don’t work if the regulators are corrupt. Wall Street firms have averaged paying fines of $1 million a day or $400 million a year for the past 6 years for violating current regulations. This, you see, is just a cost of doing business. It’s cheaper to break the law, pay the fine, and make a fortune.
Now Henry Paulson and the old Wall St. boys want to merge high-risk investment banks like Merrill Lynch and Goldman Sachs into a huge consumer bank like Bank of America and Wells Fargo. It’s the arsenic in the blender again. This works because tens of millions of us put our deposits into commercial banks that give the risky, greed soaked investment banks a platform for more casino games. The reason it’s so tempting is that big bank deposits are insured by you and me, the taxpayer, through the FDIC. Our insured deposits give them a new capital base.
Sure, they claim the Federal Reserve will keep a tight lid on over-the-line risk, but what regulators do you trust today? So…now all of us, the taxpayers, are going to guarantee the continuing risks of investment banks. And what do we get? Zilch.
Not only that, all these new arrangements will do is strengthen the unrestrained power of big banks at the expense of local banks and credit unions. The result could be higher consumer costs, less competition, and more shenanigans.
Our real problem began decades ago when our economy switched from a manufacturing, real value producing economy to a financial one. Real wealth is the result of serious invention and innovation, science and engineering meeting genuine human needs.
We lost our mojo of invention and high quality production into converting all our assets (like our homes) into debt instruments to be leveraged and traded. Today financial services are two times bigger than our entire manufacturing sector. In the late ‘90’s we removed nearly all regulation of banks, insurance companies and real estate debt. That’s why we have 27% interest rates on our credit cards and million dollar home loans to unemployed people. But when finance exceeds its legitimate role to just moving numbers on a spreadsheet and inventing global casino games simply to place bets with borrowed money hoping to make a financial killing, the decline of our economy is inevitable.
So, what’s the greatest thing you can do? First, deposit money in a credit union. A credit union is the bank you can own. Credit unions are owned by their own depositors.
Credit unions operate on a human scale by people like you and me. They began 150 years ago to help farmers be free from big city banks who didn’t understand real life. They have all the same services of a huge consumer bank and they loan money at low rates to their own depositors. They have an international ATM network and have more sophisticated on-line banking that lots of big banks saddled with legacy IT systems. All their accounts are FDIC insured. There is simply no reason why every American should not be a member of a local credit union.
Second, if you’ve ever considered writing or emailing your congressperson, now is the time. We don’t want investment banks and consumer banks united. It’s time to stop this nonsense, create a real economy and re-enthrone ethics. And yes to create financial institutions we can trust. We need fair, effective and enforced regulation. All of us are better off when we have to answer for our choices. It’s common sense for the common good.
Letter From Ron Paul 9-24-2008
Wednesday, September 24, 2008
Dear Friends,
Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike.
The events of the past week are no exception.
The bailout package that is about to be rammed down Congress' throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder. Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It's bailing out the financiers, the banks, the Wall Streeters."
That describes the current bailout package to a T. And we're being told it's unavoidable.
The claim that the market caused all this is so staggeringly foolish that only politicians and the media could pretend to believe it. But that has become the conventional wisdom, with the desired result that those responsible for the credit bubble and its predictable consequences - predictable, that is, to those who understand sound, Austrian economics - are being let off the hook. The Federal Reserve System is actually positioning itself as the savior, rather than the culprit, in this mess!
• The Treasury Secretary is authorized to purchase up to $700 billion in mortgage-related assets at any one time. That means $700 billion is only the very beginning of what will hit us.
• Financial institutions are "designated as financial agents of the Government." This is the New Deal to end all New Deals.
• Then there's this: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Translation: the Secretary can buy up whatever junk debt he wants to, burden the American people with it, and be subject to no one in the process.
There goes your country.
Even some so-called free-market economists are calling all this "sadly necessary." Sad, yes. Necessary? Don't make me laugh.
Our one-party system is complicit in yet another crime against the American people. The two major party candidates for president themselves initially indicated their strong support for bailouts of this kind - another example of the big choice we're supposedly presented with this November: yes or yes. Now, with a backlash brewing, they're not quite sure what their views are. A sad display, really.
Although the present bailout package is almost certainly not the end of the political atrocities we'll witness in connection with the crisis, time is short. Congress may vote as soon as tomorrow. With a Rasmussen poll finding support for the bailout at an anemic seven percent, some members of Congress are afraid to vote for it. Call them! Let them hear from you! Tell them you will never vote for anyone who supports this atrocity.
The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are about to be looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care?
When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media?
Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.
In liberty,
Ron Paul
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