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Source link: http://archive.mises.org/7926/none-dare-call-it-treason/

None Dare Call It Treason

March 17, 2008 by

Jim Rogers:

“They are really giving up on the dollar, they are driving the dollar down, they are printing money as fast as they can. Look, the Federal Reserve has just in the last week spent 230 billion dollars taking on loans, house loans, mortgages, out of the system. This man Bernanke was never elected by anybody, I don’t know where he gets the audacity to spend 230 billion dollars of our money to bail out a few friends on Wall St. This is totally outrageous.

He is next going to be in his helicopter going around the world collecting rent payments from people. Who gave him the authority to do that? To destroy the dollar, to destroy our currency, to essentially destroy the American economy? And, no one ever voted for the man. It is just mind boggling to me.

And then he gives more money to Bears Stearns so these guys can continue to drive around in their Maserati’s.”

{ 14 comments }

archer March 17, 2008 at 11:51 pm

I couldn’t agree more. And worse, so-called economists are saying capital flight and the debasement of the dollar are a good thing:

http://knzn.blogspot.com/2008/03/capital-flight-is-good.html

I hope you give that post the thrashing it deserves.

Joseph Schmidt March 18, 2008 at 12:33 am

I completely agree, this is totally outrageous, the Federal Reserve is way over stepping its bounds on this one. They should let the market take care of Bear Sterns, the firm deserves to fail for being greedy and chasing after bad investments! I’m about to slam my head into a wall, I think that would be less painful than watching this fiasco play out.

useless spectator March 18, 2008 at 1:27 am

Gold is now trading at over a $1000 an ounce for the first time in history and nobody seems to have noticed.

http://goldprice.org

fundamentalist March 18, 2008 at 8:00 am

Excellent perspective. Not only is the Fed rewarding bad behavior with its bail out of Bear Sterns, Congress will punish all of the companies who performed well by loading them up with more regulation and increasing their costs of operation. The government rewards bad behavior and punishes good behavior, then is mystified why they get more bad behavior.

Curt Howland March 18, 2008 at 8:41 am

I was listening to NPR last night (I do that when I’m curious just what abominations the government is doing) and they were talking about the bail-out of Bear Sterns. I’m glad to see LvMI on top of it so I can reference some real economics on the subject if asked.

What a crock of poop! Treason this is, and treason it always will be, to benefit one group of private people at the expense of everyone else who _didn’t_ make bad investments.

Taxation is a terrible thing. The next revolution must stand for getting rid of it.

lester March 18, 2008 at 8:53 am

I normally don’t like Glenn Beck but he hada great show last night with Peter Schiff and really seems to get it.

but in general there are only two philosphies out there: keynesian and chicago school.

Erik March 18, 2008 at 8:55 am

Archer’s link is interesting. Here is a point the author makes:

“If the dollar weakens, so much the better. $2/Euro. $3/Euro. In the words of Chico Marx, “I got plenty higher numbers.” It might be a problem for Europe, but not for the US (and for Europe it would be a self-inflicted wound, since there is plenty of room to expand the supply of euros if there were a will to do so).”

WOW. It seems like he thinks that every nation should inflate their currency! Maybe we could start an inflation war! Does anyone have any information on what the impact of increased global inflation would be? It would be an interesting study.

fundamentalist March 18, 2008 at 11:04 am

Erik: “Does anyone have any information on what the impact of increased global inflation would be? It would be an interesting study.”

I can’t remember which paper it was, but months ago I read a paper from the mises web site in which the author described the global inflation that took place in the 1920′s as a result of what they called the gold-exchange standard in which countries could use gold or a gold-backed currency like dollars or pounds as bank reserves. They intentionally set up the system so that the US and Britain wouldn’t lose any dollars sent to Europe for reconstruction after the war, but those same dollars would inflate the bank reserves of Europe, which in turn would inflate the money supply, causing price inflation. The world-wide depression got started with the collapse of that system. History never repeats itself, but it rhymes. Many countries still use the dollar as a reserve currency, so if the US and Europe try to inflate their way out of this financial crisis, it could set up world-wide inflation similar to the 1920′s, and that can only end in major depression.

Ohhh Henry March 18, 2008 at 4:27 pm

My buddy wrote me this after I complained about the bailout:

Keep your morality out of the picture.

Yes, the taxpayer is going to take the shaft, BUT, the present administration, rightly, believes this is far better than the consequences.

This was done for a specific reason – the amount wasn’t pulled out of thin air.

It will be easier to correct the present wrongs in a functioning system than in a system that is in total collapse.


To which I replied:

But morality is the ONLY issue. Nothing else matters. It’s not that I’m a Sunday school teacher and I’m telling you that you have to be a good boy, because God is watching, the fact is, the moral course is the only practical solution, because to permit immorality (or worse to reward immorality) in the name of expediency will only lead to more immorality.

Consider a village in which most people build their houses and shops out of solid lumber, building a house which is no bigger than what can be built with the lumber at hand. But one guy builds a house which is far bigger and taller than all the other houses, which he accomplishes by splitting all his lumber lengthwise, then splitting it again (using a mechanical process he called “leverage”), until he’s built a skyscraper out of nothing but toothpicks. For a while he looks like the richest and smartest man in the village. People line up at his door to rent apartments and shops in his tower, and they apply for jobs at businesses in the tower, and they build their houses close to the tower. But when a strong wind comes up, the tower starts to topple. The tower builder has a private chat with the mayor, and the mayor announces: “This tower is too big to fall, and too many people will be negatively affected by its collapse. As of right now, I and my henchmen are going to start taking shavings off the wood in everybody’s house throughout the village, and then we will use the wood we collect to prop up the tower. This way the hardship will distributed equitably and there will be no catastrophic collapse.”

Observe the effects which result from this:

1) Everyone’s house is now unstable, even the solid ones which were built by prudent people.

2) A tower built out of toothpicks can never be fixed by propping it up willy-nilly with more toothpicks. It will remain fragile until it finally collapses under its own weight, or is burned down in the war (see below).

3) No one will bother building solid houses or acquiring or saving lumber for a house any more, because why bother when the mayor will confiscate it for his buddies? They will throw up their hands and wait for the mayor to provide them with Lumber Relief.

4) The mayor will blame the resulting lumber shortage on the people in the next village, and will whip up his people to get them to attack the other village (it so happens that the village with the tower is named “Oosa” and the village with the wood is called “Opek”). Chaos and bloodshed result, two entire villages go up in smoke, and for another generation there is no wood to be had for buildings.

THE END

freedomofproperty March 18, 2008 at 5:04 pm

To Joseph Schmidt:
Given the current political structure, bailouts are inevitable (I am not excusing them).
We do need to highlight their contribution to taxpayer suffering and perversions of the market.

But I would suggest that we not make blanket statements (and justifications) based on the “greed” of employees of any company. That is irrelevant to the principle of a bailout and is also probably false for most employees of a failing (or any) company.

Let’s grow up a little bit and show that we can make rational arguments without (the improper and distracting) invocation of “greed.”

Let me strongly suggest a reason for this: each time the issue of “greed” enters a conversation I’ve had, all reason and logic goes out the window. “Greed”, however relevant to some (a limited few) arguments, basically turns off rational discussion and introspection.

Another problem with the “greed” angle: banks (or their employees, managers, bosses, CEOs, shareholders, stakeholders, etc.) must operate within the rules in place. It is the _rules_ that emphasize too much risk taking, not the nature of a company or even the nature of a person. People want to make a comfortable living (this is NOT Greed) within the rules with a minimum of fuss and conflict.

Commentators, to be helpful and influential, must focus on the _rules_ and how they encourage improper risk taking, NOT the actors. Most people will pick up $100 from an empty street because the rules say “finders keepers” and are perceived to be fair, and transaction costs are often too high to “fix” the rules if a finder believes the rules are wrong.

***

Bear Sterns is bankrupt and everyone knows it, even with this symbolic bailout. Get over it – focus on better and more convincing dialog to attack the root problem, the central banking system that led to the credit problem.

No one deserves what is about to happen to the system, yet we’ve voted it upon ourselves. Remember that.

fundamentalist March 18, 2008 at 5:18 pm

Ohhh Henry,
That was a good response to your friend. Some people think morality is a luxury we can afford only in good times. As you point out, morality is just taking the long view of things, as any good economist does.

Another way to look at it is to consider reward/punishment. The Fed is rewarding bad behavior and punishing good behavior. They have always done that and then are surprised when they get more bad behavior.

The financial press and the Fed is making the crisis seem worse than it is as well as the consequences of letting the market clean up itself. The Fed, media and financial experts are all part of an unholy trinity to frighten the American people into giving up more of their liberties to the government. In order to do that, they have to convince everyone that the crisis is so bad, and the consequences of doing nothing so extreme, that only the Federal government has the power to rescue us. Of course, that’s nothing but socialist BS.

If we look at the results of letting the market solve bad behavior, we have to go back to the 19th century before the creation of the Fed. It’s clear from the financial history of the 19th century that the market did a much better job of punishing bad behavior and rewarding good behavior while maintaining a growing economy. Since the creation of the Fed, the gov has rewarded bad behavior, punished good behavior, and destabilized the economy. But good luck convincing the average Joe of that when he worships at the altar of the omnipotent Federal government.

Expat March 19, 2008 at 10:18 pm

Ohhh Henry, your analogy is excellent. With your permission, I will use it to explain this greed and stupidity to all and sundry.

Ohhh Henry March 20, 2008 at 3:32 pm

Feel free to use/modify what I wrote in any way that you want.

M.Harmon November 6, 2010 at 8:10 pm

I think we are ending the”Question Authority” phase, but when and how do we change this. It’s obvious the electoral process has failed for several years now at all levels. And to reinforce that the supreme court passes anything goes campaign financing and allow the cowards to hide behind “NON PROFITS”.
To the point, when do the citizens quit talking about it and start doing something about it?

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