Stop the Madness!

Written by Frugal Libertarian on December 2, 2008 in: In the News |

Every time the news reports some new Fed or Treasury scheme to “fix” the economy I cringe.  The economy is the sum total of billions of people’s day to day decisions.  These decisions are made based on the information each person has about various incentives and disincentives.  It is unlikely that anyone at the Fed or the Treasury could ever decide which incentives or disincentives can”stimulate” the economy.

At this point, a recession is inevitable. It is the consequence of The Federal Reserve’s inflation and the malinvestment that followed.   The best thing the government could do is get out of the way and let the market work its magic.

In a previous post I suggested that mortgage companies were not restructuring mortgages that needed restructuring because of the moral hazard create by the government’s interventions, both past and present.  It looks like I might have been on to something.  Now that Paulson has said he will not buy up mortgage-backed securities, some investors are seeing it as a opportunity to buy them up at rock-bottom prices.  This most likely would have happened earlier if the holders of those securities were not sitting around waiting to see what the Treasury was going to do.  Why sell your securities for pennies on the dollar if the government may come to the rescue with other peoples money?

The new investors will be highly motivated to restructure the bad mortgages.  If they buy the securities cheap they have a lot of wiggle room and can still make a profit.

I have little hope that this bailout madness will come to an end anytime soon.  Washington is more shortsighted than a 2 year-old.  They want the instant gratification of telling their constituents that they are doing everything they can to “fix” the “broken” economy.  They can’t understand that the economy is not “broken”.  It is doing exactly what it has to in response to the previous decade of malinvestment.  Trying to stop it is not only futile but dangerous.  You can’t stop it, but you sure can prolong it.

Revenue Tickets

Written by Frugal Libertarian on November 26, 2008 in: In the News |

Just in case anyone is still under the impression that traffic cops are on the roads to promote safety, here is some more evidence that most tickets are just to generate revenue.  I guess New York City is not even trying to pretend tickets are for safety.

This is almost as bad as red light cameras.  Municipalities like to cite safety cocerns to justify cameras even though study after study has shown that longer yellow lights reduce red light violations and accidents.  I would guess that most people do not run red lights on purpose.  They just get caught in no-man’s land where stopping is not safe but either is going through.

My hometown put up cameras at the intersection up the street from my house.  I have never seen an accident at this intersection, but I have seen a couple close calls for pedestrians.   If you are a pedestrian you have to risk your life to cross because there is no crosswalk signals and the lights are set up so that there is always traffic going. (I have been darting across this intersection for years while out for a run.  I never realized how dangerous it was until I tried crossing with my baby girl in her stroller)  So, if they were really worried about safety maybe they would spend the money on some crosswalks instead of cameras.  But wait, crosswalks do not generate revenue.

At least New York City is being honest about their intentions.  I guess I can respect that.

What About Artificial Trees? Then You Don’t Have to Rake!

Written by Frugal Libertarian on November 20, 2008 in: In the News |

The are many serious problems in the world, but none are as important as keeping your lawn lush and green.  At least if you live in Garden Grove, California.  This city is pondering the all important question of whether or not they should now allow residents to install artificial grass to replace their natural grass so that they can maintain beautiful green lawns without watering them.  If you let your lawn turn brown you are breaking a city ordinance.  If you install artificial grass you are breaking a city ordinance.  There is also a state order to conserve water which means you cannot water your lawn.  What is a homeowner to do?

Beyond the obvious violation of property rights (see a previous post), this is probably the dumbest thing I have read about in a while.  I actually felt my self becoming dumber as I read it.  It is illegal to have brown grass?  And, fake, $10,000, petroleum based turf is the answer?  I don’t think I want to live in a world where we dig up real grass and install fake grass just so the neighbors will be impressed.

I have aways thought watering your lawn was a big waste of money.  Grass turns brown when it gets hot and dry.  It  just what happens.  Why try to stop it?  When it starts getting cold the leaves on the trees turn brown and fall off.  I guess if I was a good neighbor I would pick up the leaves, paint them green, climb a ladder, and glue them all back on the tree.

Good thing I don’t live in Garden Grove.

Why Are Mortgage Companies Not Acting In Their Own Best Interest?

Written by Frugal Libertarian on November 4, 2008 in: In the News |

It was recently reported that JP Morgan will modify some of their mortagages to help more people avoid foreclosure.  Over the course of the last year I have often wondered why mortgage companies have not already started renegotiating mortgages for people that could afford to pay them if only their interest rates were not adjusted upward.  The mortgages that are going into foreclosure are overwhelming those that have adjustable rates.  Sub-prime loans that have fixed rates have foreclosure rates similar to that of traditional mortgages.  So, why have lenders not offered fixed rate refinancing to those that were paying their payments on time before the rates went up.  Wouldn’t this be in their best interest?

In a truly free market, without government interventions, it would be mutually beneficial for both parties to renegotiate these adjusted rate mortgages.  Unfortunately, we do have a free market.  We have a perverted mixed economy where mortgage companies can act irresponsibly, make risky investments, and then sell their risky assets to Government Sponsored Entities (Fannie and Freddie) that have the implicit financial backing of the U.S. taxpayer.  The government’s past “bailout” of companies that behaved badly created a moral hazard.

I think this moral hazard is exactly why we have not seen more of what JP Morgan is now doing.  Why would these companies bother to modify mortgages that were heading towards foreclosure if they are sure that a “bailout” was inevitable?  Why make less money by renegotiating if they can make more by letting the taxpayer take the hit?

How do you think companies would act if there was absolutely no chance of a bailout?  I think they would do whatever they needed to do to survive and everyone would be better off.

Is There Really a Credit Crunch?

Written by Frugal Libertarian on October 27, 2008 in: In the News |

I have talked about this before, but a new report has come out from the Federal Reserve in Minneapolis that once again points out that the credit markets do not really seem frozen.  Also read Kirk Tofte talk about this more.  He wants to know why we are being led to believe there is a credit crunch if the numbers do not back it up.  I would also like to know.  Is there data that we do not have access to?  If so, why not?  I am not really that big on conspriracy theories but I think something smells fishy.  Could the people that are really in trouble be trying to make it look like everyone is in trouble so we will be more likely to bail them out? 

Also, on a similiar subject.  Paul Krugman thinks the government should use their new ownership in banks to force financial institutions to loan more money.  (Krugman won the Nobel Prize in Economics this year.  With Al Gore winning the Peace Prize last year and now Krugman, the Nobel Prize is dead to me.)  Who exactly does he want them to loan money to?  I think Casey Khan said it best:

“Even if the banks are forced to lend, what if nobody wants to borrow?
Are potential borrowers going to be forced to borrow? Who are those
borrowers supposed to be, and for what are they going to borrow from
the banks to purchase? Will there be a random generation of forced
borrowing? Will people in high tax brackets be forced to borrow? Or
will there be a progressive form of forced borrowing, where each
bracket has to borrow based on a factor of their annual income? Does
Krugman want people to borrow to buy homes, GM cars, or ant farms?”

I know I may be beating a dead horse, but I feel like it must be said until people get it.  If debt got us into this mess, how is debt going to get us out.

Obama Talking about Redistribution of the Wealth in 2001

Written by Frugal Libertarian on in: In the News |

I really have nothing to say about this audio clip  of Obama.  It speaks for itself.

Free Market is the Answer to Bond Rating

Written by Frugal Libertarian on October 26, 2008 in: In the News |

My local newspaper once again showed their complete misunderstanding of economics and their completely liberal bias.  Today’s editorial calls for Congress to do something about bond-rating agencies.  They say the problem is that the rating agencies are paid by the bond issuers and not the buyers.  This is an obvious conflict of interest.  I would agree with that, but why would Congress need to do something about that? 

In the same editorial they point out that private enterprise has already come up with a solution.  They said “One firm that’s trying to offer an alternative model is the Egan-Jones Rating Co., which is paid by investors rather than bond issuers.”  When people see that this rating agency provides a superior rating service they will flock to them.  If other rating agencies want to compete, they will have to change to a similiar model.  Problem solved. 

Still, The Star wants government intervention.

FDR Hero Worship May Finally Come to an End

Written by Frugal Libertarian on October 20, 2008 in: In the News |

The idea that FDR’s policies prolonged the great depression has always received rebuke from many who see the government as a tool to be used against the evils of capitalism.  But, now the idea may be getting some legitimacy.

A couple of economist at UCLA have put out a report saying just what the Austrian economist have been saying for many years. They had this to say: “The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

I am glad they have put out their report.  It could not come at a better time.  Let’s not repeat FDR’s mistakes.

Trying to Be Optimistic

Written by Frugal Libertarian on October 16, 2008 in: In the News |

I really need to stop reading the news.  It just makes me want to hide my money in the backyard.  I fear that we may be heading towards more than a recession.  I think I hear the footsteps of a Depression sneaking up behind us.  The way the government is responding makes me fear we have hyperinflation in our future.

Socialist Venezuelan President Hugo Chavez said yesterday that “Bush is to the left of me now…Comrade Bush announced he will buy shares in private banks.”  I think Chavez hit the nail on the head. 

The Bush administration seems to think everything will be fine if everyone will just start lending money again.  But, I have trouble seeing how debt will be the solution to all the bad debt we have in this country. The problems started when, with fiat money, we began trying to practice Capitalism without any capital.  Ron Paul said it best, “Capitalism does not exist without capital and debt is not, has never been and will never be a form of capital. Only now are we seeing the more dire implications of an economy without capital.”

The Bush administration’s socialist bank buy in does nothing to fix the real problems, it just puts a temporary band-aid that will have little positive effect.

Police Behaving Badly

Written by Frugal Libertarian on October 15, 2008 in: In the News |

Apparently 1 in 3 new recruits at the Atlanta police academy have some sort of criminal history.  Why does this not surprise me?  Too often police officers are nothing but bullies.  We allow a group of people (police) to have a certain amount of authority over each of us, but then do not hold them accountable when they step beyond that authority.  Just like we have done with the federal government, we justify police abuse because we have been indoctrinated and believe that they are doing what is best for society.  Tell me how the following examples of police behaving badly benefit society.

Here an corrections officer dumps quad from wheelchair.

Here is a big bad cop assaulting a 14 year boy, and another officer pushing a skateboarder off his board.

Here a women who is already being restrained by two officers is tasered, and here an officer tasers a woman multiple times.

Most of these cops were punished for their abuse, but do you think they would have been held accountable before YouTube?

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