The financial crisis is not over. Neither tax rebates nor low interest rates nor higher or lower exchange rates can do the job of reviving an economy that is burdened by debt loads that are too high. On the contrary: the policy measures that the US authorities have been applying will prolong the agony. Be prepared for the challenges of extended financial turmoil and economic stagnation. FULL ARTICLE
Source link: http://archive.mises.org/8538/whats-behind-the-financial-market-crisis/
What’s Behind the Financial Market Crisis?
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Dr. Mueller: Your 9/18/08 Daily Article is the best analysis of our problem that I’ve read. Government and the wizards of finance have proven that smart people can be stupid lemmings. Thanks, TK
So, trade deficits are bad after all? I had thought otherwise.
When it comes to free-market, why is the government(enforcing body) assumed to be outside the market system. Why is it not considered just a part of this system, as a set or group of people, who want to make more profits for themselves or have greater controls for themselves. If there would be no government control then these set of people would exist in some other form in the system, still acting in the same way, still creating price controls etc to make more profits,have more controls for themselves. Every allegation saying “govt. did it” or “fed did it” seem to miss on these people acting behind the screen.
Because without a monopoly on the legal use of violence bureaucrats would have no power to do the things they currently do.
@kalagi:
The “people acting behind the scene” are the bankers and their precious, unaccountable Fed:
http://mises.org/books/fed.pdf
Dr Mueller:
Outstanding article. Something Henry Hazlitt wrote in I think the 3rd revision or so of ‘Economics in One Lesson’ c. 1979 has stuck in my mind during this entire sub-prime catastrophe:
“Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general tax payer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment.”
Mr. Mueller,
I thank you for the informative article and the informa-
tion imparted. Unfortunately, the American public does
not see any of this except by chance on the internet!
Does the Mises Institute mail any commentaries such
as yours to the general public? It seems such a waste that the truth about such subjects is only known by a small segment of the American public!
Thank you,
Erick Tippett
Chicago, Illinois
I don’t see China unloading their U.S. securities at this juncture, even if it would be an economically rational thing to do. This is one sense in which our military power actually does protects us…..
Yet many investors stay put because they have been conditioned to believe that government will bail them out.
These so called “investors” are either foreign private financial institutions at the behest of their government via some form of backroom guarantee or foreign government wealth funds themselves.
What private citizen would risk their own money knowing an investment bank could be worthless overnight?
Nice try Tony. Better luck next time.
N. Joseph Potts wrote:
So, trade deficits are bad after all? I had thought otherwise.
Joseph,
Thanks for catching this. Generally, I thought the article was not bad but over and over Mr. Mueller seemed to appeal to mercantilism in his view toward trade policy and he seemed to favor a weak dollar as against a strong dollar. I believe that most of us would hold that the dollar based on the price of gold is currently too weak. We do need to stabilize the dollar but not to engage in social engineering the trade balance.
Wake up people!!, the government solution to this housing mess will be AMNESTY for illegal aliens following the November election, hence Obama vs McCain. That is why Fannie-Freddie was nationalized before the election. These 20-30 million newly minted “citizens” will become eligible for taxpayer subsidized low-interest mortgages to sop up the excesses in the housing industry. This surge in demand will “maintain” housing “value” even as the many predictable foreclosures will be covered by the government printing press. Mortgage lenders will become “healthy” again as they make lots of money while we become the bagholders. Say goodbye Constitutional government, national sovereignty, goodbye retirement, and hello hyperinflation, hypertaxes, and hypersocialism.
Dear Andy
Why do you insist on calling the federal reserve ‘the US federal reserve system’ – as you well know there is nothing federal about the federal reserve.
It is a private for profit organisation that has the obscene right granted by the american government to add liquidity to the market by simply prinitng money out of thin air – then charging the US treasurterest forusing it. WOW thats the kind of job i am sure money similar private companies would like. Just tell me where do i sign ??
Sadly not alot of americans know that and your use of the phrase ‘the US federal reserve system’ aint helping none.
So my american neighbours across the pond: your government in cahoots with this private bunch of bankers misleading called the Federal Reserve get you to fund the largese of this private company to the tune of trillions of dollars, whilst they pick up assets dirt cheap.
Funny how the bankers always come out sunny side up and it is always the little old tax payer with homes about to repossessed who are made to pay – even as part of the rescue package !!
The typical government response to this secondary crisis is to limit our freedoms. We see this playing out already in the Fed’s demand for more bank regulation. Soon the American banking system will resemble that of the former Eastern Bloc under communism with the banks merely taking orders from the government and filling financial allocation quotas to certain industries. Many former Eastern Bloc bankers have attended the Graduate School of Banking, University of Wisconsin. They all had a hard time understanding that banking can be a competitive business just like any other. Soon we will have this mindset and the roles will be reversed.
The most troubling aspect of the failing economy from my perspective is the refusal to acknowledge the responsibility of the players in its demise. In days past I used to shake my head and think how could anyone be that stupid… Now I believe that there are no accidents. Does anyone out there really believe that the central bankers(a fundamental plank in the advancement of communism) don’t understand the nature of what they are doing? The taxpayers are bailing out the banks who loaned money to people who they knew couldn’t pay it back.
The taxpayer is forced to eat the cost of these bad loans. The people that bought houses they couldn’t pay for are getting to stay in those houses and the banks are continuing to collect interest on the bad loans they made. Isn’t stealing a crime? Isn’t the common theme here that no matter what happens to the economy of the USA that the bankers keep making money. If they can’t make a living by collecting interest from the people making the loans they will use paid for political capital to facilitate money from the taxpayer. They can’t lose.
Why not just take the houses from the thieves and punish the bankers by not allowing them to collect interest (money from taxpayers) on the bad loans they made. If taxpayers are bailing out banks, why aren’t they getting loans at prime instead of 5-15 %?
What if the whole point of this is to create a massive increase in government housing? Do people think that all those foreclosures will just be demolished? Or is it possible that the government will once again step in and “save” that industry by subsidizing it all so that everyone can “own” a home.
Perhaps the best thing to do is take an objective look at the workings of the Federal Reserve. How about printing a list of its shareholders and the amount of dividends they receive? How about telling the American public that it is a private company and not a government agency.
The big picture is not that a few bad apples are ruining the financial infrastructure of this country. The problem is that the system is running exactly as it was intended. For those of you pundits who think that communism is dead, look around…Government control of banks and wealth distribution, massive goverment subsizing housing, massive failing federal education and eventually healthcare. Does this look like Laissez Faire? Pretty much all that is left before the USA abides every plank of the Communist Manifesto is the abolition of the right to self defense. Once that is gone are we even going to be able to talk about this stuff anymore? Solve the real problem and lets quit wasting time talking about the symptoms.
Well, some have knowledge some not and now?
Get real, if a minority as the community here knows solutions, will change this the ongoing reality? It didn’t in the past.
Irish government guarantees all bank deposits
http://uk.reuters.com/article/hotStocksNews/idUKWLA044420080930
I still don’t think that anyone has any idea of what is going on. I think it will be like that for the next few years.
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