The Frugal Libertarian

As millions of people go to the polls today to vote, I am left with a sense of hopelessness.  No matter who wins I will remained scared for our future.  The only bright spot for me is knowing that there are plenty of people that understand that liberty is still our greatest hope for peace and prosperity.  Anthony Gregory is one of them.  See what he has to say about the election here.

I have always been skeptical of everything I hear.  I think it is because my brothers lied to me so much when I was little.  I like to search for my own answers.  Unfortunately this is not a common characteristic among Americans.  This is why it has been so easy for our government to grow into its current monstrousity. 

Karen De Coster talks about this more here.  I couldn’t have said it better myself.

Jeffrey A. Miron once again does a great job explaining why the Treasury’s plan will only prolong the recession.  A recession is inevitable.  It is the only possible result of the Fed’s inflationary policies.  We can let it happen or attempt futile policies that will only make it last longer.  The government needs to stop putting fertilizer on the weeds and let them be pulled.

This clip from an Australian comedy news program is the best explanation of Central Banking I have ever heard.  Check it out here.

This is a nice expanation of what should be allowed to happen in the markets. 

Bankruptcy, Not Bailout

It seems that people think that if a company goes bankrupt all their assest just disappear into some blackhole.  This is not the case.  Instead those assests are reallocated to those who can use them more wisely.

Mr. Miron also points out that if it will really be profitable to buy this bad mortgage packages like the Bush adminastration is trying to tell us, then private companies will buy them and taxpayers will not need to take the risk.

This article in the Finacial Post  also explains why the  bailout will not work and will only make things worse.

This is the email Ron Paul has sent out to his supporters. He correctly points out that we are trying to fix the problem by doing more of what caused the problem.

“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

http://www.lewrockwell.com/paul/paul128.html

He gave this speech five years ago.

http://www.mises.org/story/3085

http://www.nypost.com/seven/09032008/postopinion/opedcolumnists/a_time_warped_sexist_assault_127183.htm

This is exactly what I would say if I was a better writer. Of course, don’t mistake this for an endorsement of McCain/Palin. I still think they suck.