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A response to the "bail out"

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A response to the "bail out"

Old 09-25-2008, 02:17 PM
  #1  
Nontypical Buck
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Default A response to the "bail out"

Just received this. thoughts????

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
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Old 09-25-2008, 02:21 PM
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Default RE: A response to the "bail out"

I think that Paul is one of those guys who makes a lot of sense in some areas, but then turns around and sounds like a total nutjob in others. Or, maybe i have him confused with a couple of the other Ross Perot wannabes.
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Old 09-25-2008, 02:36 PM
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Default RE: A response to the "bail out"

lol. Lanse said nutjob.
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Old 09-25-2008, 02:39 PM
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Default RE: A response to the "bail out"

I like nuts[8D]

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Old 09-25-2008, 02:58 PM
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Nontypical Buck
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Default RE: A response to the "bail out"

Youtwo please quit making a mockery of my post[:@]


I did think RP had some intelligient things to say on the issue. Would we be better to just let the economy correct?? Or is governement bailout absolutely needed????
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Old 09-25-2008, 03:11 PM
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Default RE: A response to the "bail out"

Ron Paul is correct
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Old 09-25-2008, 03:14 PM
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Default RE: A response to the "bail out"

Yes, he is correct. The only thing that disciplines the market and economy is the pain of loss.
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Old 09-25-2008, 05:19 PM
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Default RE: A response to the "bail out"


ORIGINAL: hillbillyhunter1

You two please quit making a mockery of my post[:@]


I did think RP had some intelligient things to say on the issue. Would we be better to just let the economy correct?? Or is governement bailout absolutely needed????
We can spend 700 gazillion right now, then make the situation worse for our kids, so the inevitable economic crash hits when we are old and helpless. Or, we can just let the financial industry take their lumps and gut it out now.

No, the American way is to max out your credit cards until you can't even make minimum payments, then get a consolidation loan to pay them down, and the next day take out more credit cards and max those out too.
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Old 09-25-2008, 05:41 PM
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Default RE: A response to the "bail out"

"The financial meltdown the economists of the Austrian School predicted has arrived."

As if no one in the US saw it coming??? The writing was on the wall in the mid to late 90's. The stock market was going crazy and yet companies really were not doing that well. When the checker at Walmart was giving stock tips, that is when I knew the bubble had arrived and it was time to get out. If anyone wanted to, they could see the similarity of the times with the late 1920s. Look up Joseph Kennedy and read what he said about the shoe shine giving stock tips.

It didn't take economists of the Austrian School to see this coming.

I'll tell you all something else, when there is blood flowing in Wall Street, I'll be jumping back in. Doesn't it make sense to sell high and buy low??? Did any of you buy gold and silver in the mid-90s when no one wanted them? Sure glad I did. How hard is this stuff anyway???
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Old 09-25-2008, 06:29 PM
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Default RE: A response to the "bail out"

The warning signs have been there for a long time. Thefed, congress and the white house twittled their thumbs,sat on their fat butts and let it happen; all the while claiming that the economy was wonderful.

The fed has lowered the discount rate to next to nothing in order to prop up the stock market. What comes next paying the banks to borrowtaxpayer money? One day it is all going to come crashing down in spite of all the bailouts with taxpayer money.
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