David Stockman on Crony Capitalism

In the video below David Stockman shares an insightful interview about how the United States is far from a free market economy. Instead, he posits, "Crony Capitalism" is supported by both parties as our current economic system--leading to a lack of accountability, the prevalence of the too-big-to-fail mentality, and a system that favors big business over free market competition. Informed on the issue or not, this is a good video that will leave you better off for taking the time to watch it.


David Stockman on Crony Capitalism from BillMoyers.com on Vimeo.

Hat Tip: TN Libertarian Republicans

Fight of the Century: Keynes vs. Hayek Round Two

Here it is--the awesome sequel to the popular "Fear the Boom and Bust" rap battle between Keynes and Hayek. I am still amazed at how these videos are so well done and properly present the positions of each economic school involved. What do you think?

Finally a Voice of Reason in the Budget Debate!

It is so refreshing to finally hear someone in Washington refusing to play the partisan game and standing up, like an adult, offering a real voice with real solutions to our national spending and debt crisis. Thank you Senator Paul for taking a stand against the status quo that is being supported by both parties.

Change of Heart Over Stimulus and FED

In a grand turn of event's Telegraph reporter Ambrose Evans-Pritchard has reversed his pro-Fed, pro-stimulus position, issued an apology, and is now calling for an end to the central bank. This marks an important milestone for those of us who call for a return to sound money. People are starting to realize that the emperor has no clothes when it comes to fiat currency and interventionist fiscal policy and are waking up from their state-induced dream. Let us welcome these new converts as they join the battle against Leviathan's central banking and fiat currency system. 

My favorite line from Ambrose reads, "My apologies. Mercy, for I have sinned against sound money, and therefore against sound politics."

 I encourage you to read the whole piece. It begins:

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.

We now learn from last week’s minutes that the Fed is willing “to provide additional accommodation if needed to … return inflation, over time, to levels consistent with its mandate.”

NO, NO, NO, this cannot possibly be true. (Read the rest here.)

Progressives Don't Understand Economics...Big Surprise

Wes over at The Humble Libertarian has posted the link to an interesting study. The results found self-described Progressives to be quite ignorant about basic economics.

Some of the results:

• 67% of self-described Progressives believe that restrictions on housing development (i.e., regulations that reduce the supply of housing) do not make housing less affordable.

• 51% believe that mandatory licensing of professionals (i.e., reducing the supply of professionals) doesn’t increase the cost of professional services.

• Perhaps most amazing, 79% of self-described Progressive believe that rent control (i.e., price controls) does not lead to housing shortages.

The conclusion:

'Those identifying as “libertarian” and “very conservative” were the most knowledgeable about basic economics. Those identifying as “Progressive” and “Liberal” were the worst.'

Check out Wes' full commentary here. (Btw, I had to use his picture...brilliant!)

America Owns a Hotel Chain?!?!--Thanks to the Federal Reserve

Here is a must-watch presentation on the House floor in which Alan Grayson (D-Florida) lays out why we own the Red Roof Inn thanks to the Federal Reserve. Clearly, we need an Audit (and ending) of the FED!!!!



Hat Tip: The Daily Paul

Goldman Sachs is a Scapegoat for Uncle Sam

Over the past few days I have witnessed behavior in the halls of Congress that makes me sick to my stomach. The Goldman Sachs hearings are nothing short of a crucifixion. Without question the financial giant deserves both scorn and punishment, but this should come at the hands of wronged clients--not government minions. Even former President Clinton noted that while there was no perceived merit in Goldman's behavior, he was "not at all sure they violated the law." So how do we explain the actions of Congress?

What makes the harsh words and congressional ridicule levied at Goldman Sachs so upsetting is the misplaced blame across the board. Listening to the congressional hearings, one would think that the financial giant single-handedly caused the economic collapse. Apparently, Goldman has d-bags working for them; this fuel poor investment; that led to our economic ruin; and now we need to strictly regulate financial markets.

I'm sorry to sound like an apologist for the financial institutions, but their actions were mere symptoms of a greater evil, not the problem itself. Sure malinvestment was to blame, and that malinvestment was fueled by the government.

By continually betraying free-market principles and wedding the actions of these giants of Wall Street with those of the federal government, an atmosphere of poor business practice was created and rewarded. When failed policies are rewarded through bailouts, grants, loans, and unrealistic interest rates, there is little incentive for responsible business practice. And, of course, our old friend the Federal Reserve was the chief actor in causing the the economic turmoil we now face. It kept interest rates at ridiculously low levels, fueled malinvestment, and encouraged poor behavior.

So what is the solution proposed by Congress in the financial reform package before the Senate? More bailouts, more government intervention, and more power to the FED. Such would be a grave mistake!

Michele Bachman comments:

Sen. Reid thinks he can paint Republicans as in the pocket of Wall Street, but that’s not going to cut it because it’s flat out wrong. This bill is seriously flawed and only perpetuates a “too big to fail” mentality through permanent bailouts of Wall Street, with or without the $50 billion reserve fund. Sen. Reid has painted himself into a corner, and I think he is drastically overestimating the American people's support for his approach to financial reform. There are better ways to go about it like those proposed by Republicans that will stop the Democrats’ permanent bailouts, protect taxpayers and create jobs, address Fannie Mae and Freddie Mac reform, and rein in the out-of-control Federal Reserve.

Back to the Goldman Sachs hearings, it is obvious that the timing is a tool to stir up emotional support for the Democrat's reform package. People should be upset at the matter, but they should be upset across the board without letting emotion driving bad policy. Even President Clinton notes the timing of the Goldman Sachs suit is "suspect." He is right, and the approach of those behind this financial reform package is definitely suspect.

Once again we face misdiagnosis of the problem, a bad subscription, and another attempt for a Washington power grab by our "leadership."  

Great Article on Austrian Economics

This article is well worth the read.

“Peter, you have been mocked on all of these financial shows going back to 2005. Going back to 2005! Not only did you predict problems, you actually explained what was going to happen. Why didn’t anybody listen? You were Cassandra!” — MSNBC commentator Joe Scarborough to “Austrian school” economics adherent Peter Schiff on Morning Joe, March 25, 2009

Scarborough’s reference to Cassandra — the character from Greek mythology given the gift of prophecy and the curse that nobody would believe her predictions — was particularly apropos to the Austrian school of economic theory until the latest economic crash. The name of this free-market economic school acknowledges the fact that many of the school’s “founding fathers” were Austrian nationals and disciples of the Austrian economist Karl Menger. Of course, the “Austrian school” is not a school in the traditional sense of the word denoting a physical structure; the term defines those who believe in pure free-market economics and laissez-faire principles. The Austrian school has a long history of amazingly accurate economic predictions while at the same time being completely ignored by the political establishment and virtually ignored by the mainstream media. (Continue reading here).

Hat Tip: Lew Rockwell

Regulatory Reform Support Shows Misunderstanding Across the Board

Politico reported yesterday:

The Republican rhetoric sounded tough on financial regulatory reform early this week...

...But behind such tough talk is a realization within Republican ranks that several of their own may find themselves voting with Obama when the final Wall Street reform deal comes together.

Of course, this sort of behavior is nothing new. In it we see more evidence of talk lacking action in Washington, and we see that principle has little place in the actions of many in government. When pressed on the issue I would venture that many of those who support the financial regulatory reform package would claim to support free market economics. Their support for such a measure, however, points in the opposite direction.

More than just lacking principle, anyone supporting the proposed legislation must also lack sound economic understanding. Simply put, the regulatory reform bill is indicative of the incorrect diagnosis going around as to what cause the recent financial collapse.
William L. Anderson correctly notes:

The meltdown did not occur for lack of regulation, but because of moral hazard. When the government agreed both tacitly and openly to backstop Wall Street losses, and when huge pyramids of "investments" were piled on mortgage securities (also tacitly backed by the government) that turned bad, a meltdown was inevitable.

The meltdown did not occur in a "free market orgy." Indeed, the market exposed the foolishness on Wall Street, which long ago had jumped into bed with the politicians.(Wall Street has been a major campaign contributor, and politicians don't want to lose their cash cow.) Furthermore, the bailouts have not prevented us from going into a depression; they only have prolonged the financial agony.

Dr. Anderson is dead on. An incorrect storyline is going around regarding to the cause of the economic collapse. The free market was not to blame for our crisis, contrary to the cries of statists and economic fools. Rather, the free market was not even able to operate! Instead, the government's involvement in the market drove malinvestment and created moral hazard. This resulted in economic ruin, just as the Austrian free market folks predicted years in advance.

In addition to the failed reasoning behind the bill, it is also bad policy (here's why)--plain and simple. Folks on the left and right both fear that the bill will harm upstart businesses, and others are concerned about the impact it will have on the greater world of business, investing, and on our economic system itself. Still others feel that more government influence is not the solution. Indeed, it was the government that brought about our problems in the first place.

The Republican senators looking to jump on-board the Obama Administration regulatory reform wagon, should do their homework before they support poor policy based on bad information. And if they do support such a measure, they should never claim support for the free market system again. Instead, they will forever show their statist colors.

Tax Day Quotations

In honor of our beloved tax day, here are some quotations on the subject...

Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay.--Milton Friedman

The point to remember is that what the government gives it must first take away.--John S. Coleman

Income tax returns are the most imaginative fiction being written today.--Herman Wouk

America is a land of taxation that was founded to avoid taxation.--Dr. Laurence J. Peter

There is no such thing as a good tax.--Winston Churchill

To force a man to pay for the violation of his own liberty is indeed an addition of insult to injury.--Benjamin Tucker

Collecting more taxes than is absolutely necessary is legalized robbery.--Calvin Coolidge

 Taxes may be levied for public necessity, but beyond this “to impose them upon the common folk without cause is tyrannical extortion.”--John Calvin

"To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical." --Thomas Jefferson

"To lay taxes to provide for the general welfare of the United States, that is to say, 'to lay taxes for the purpose of providing for the general welfare.'For the laying of taxes is the power, and the general welfare the purpose for which the power is to be exercised. They are not to lay taxes ad libitum for any purpose they please; but only to pay the debts or provide for the welfare of the Union." --Thomas Jefferson

"What at first was plunder assumed the softer name of revenue." --Thomas Paine

"If, from the more wretched parts of the old world, we look at those which are in an advanced stage of improvement, we still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping the spoil of the multitude. Invention is continually exercised, to furnish new pretenses for revenues and taxation. It watches prosperity as its prey and permits none to escape without tribute."--Thomas Paine

“Taxation: how the sheep are shorn.”--Edward Abbey

   “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.”--James Madison

State of the State of the Union: Uneventful

If you missed the President's State of the Union Address last night, you did not miss much. It was "surprisingly unsurprising," if I may borrow an analysis from a Cato scholar's live blogging during the event. I couldn't agree more.

President Obama started doing what he does best--painting word pictures, presenting broad platitudes, and offering no real policy meat. But unlike his success in the past two years, these words seemed to fall flat. I don't think anyone across the political spectrum was truly please with the speech. There was no "game changing" statements, no signal to the left that he was going to be the liberal they want, and no signal to the right that he would become the moderate they can tolerate.

There were some new policy directions announced. For example, President Obama announced his intent to overturn "Don't ask. Don't tell." For this he should be commended. Whether or not you are pro gays in the military. "Don't ask. Don't tell." has been a ridiculous and failed policy that needs to be done away with. Morover, in his speech, Obama announced a few other new policies such as new bank taxes, his "spending freeze" which is nothing more than an attempt to save face and preserve current entitlement spending (Anyone against runaway government spending should be against this "spending freeze."), and a host of other "new" economic policies. The truth is that these "new" policies are not really that new. They are merely different ways to continue government interventionism into the economy. Do not be fooled.

Moreover, the President's speech had a number of highlights for policy wonks, if you knew where to look. When speaking on trade, Obama seemed to endorse the practice of mercantilism in his call for balanced import substitution. Mercantilism is dangerous and misguided as it has always been. We need to produce more. We need to export more. But we do not need artificial trade barriers which will end in ruin. Likewise, the President's emphasis on the economy in general was misguided as it placed the government at the center of all. The policies laid out by the President such as his "small business tax credit," his call for equal pay for equal work, and his continued call for government spending on unnecessary projects to create short-term and unnecessary work programs, are misguided and will only worsen the current economic climate. These policies at their heart are nothing more than the continuation of the interventionist policies that have gotten us into this mess.

Perhaps most striking from the speech was President Obama's attacks on Republicans and the Supreme Court. Though the partisan attack can be written off as mere tackiness, the attack on the Court flies in the face of proper behavior when considering our nations system of separation of powers. First, the President went out of his way to attack a non-legislative branch of government at a questionable time. Secondly, his statement was completely false, not grounded in one bit of truth. A disagreement with a ruling is one thing. An false attack for one's own populist gain is another.

As I have already said, not much earth shattering came out of the President's speech, but maybe that is because we have heard much of it before. Just look at how Obama's SOTU measures up with those of Bush.

Sadly, in a speech clearly playing to populist emotions, the populace was unable to find hope for the State of the Union.

Hayek v. Keynes Rap Battle

I am no fan of rap, but this little ditty does a good job laying out the opposing views of Keynes and Hayek.

Ron Paul on a Whole Slew of Issues

From Hatti to the FED...