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Source link: http://archive.mises.org/8717/bailout-blame-game/

Bailout Blame Game

October 7, 2008 by

It may be that, 25 years from now, economic historians will note socialized credit markets came to America in exchange for production credits for “marine renewables” and new regulations for “residential top-load clothes washers,” which were among many of the riders added to the bailout legislation as the infamous week wore on. FULL ARTICLE

{ 33 comments }

Adam October 7, 2008 at 8:58 am

You can add to the list every person you see walking down the street who does not care enough to dig a little deeper and attempt to understand the causes of this mess.

CG October 7, 2008 at 9:00 am

Don’t forget Alan Greenspan.

Joe Stoutenburg October 7, 2008 at 9:16 am

I was thinking something along the lines of what Adam wrote. A line from V for Vendetta comes to mind:

“Well certainly there are those more responsible than others, and they will be held accountable, but again truth be told, if you’re looking for the guilty, you need only look into a mirror.”

Mike October 7, 2008 at 9:40 am

My goodness. Look at the public!

The politicians – for years – have merely been reacting to the public demand to “help us.” Help us with our housing! Help us keep mortgages “affordable”! Protect us from bad, evil banks!

In the current crisis, the public demands that the government “do something” to protect us from further pain, and the politicians, predictably, oblige.

It is satisfying – and somewhat correct – to blame politicians, just as it is satisfying and somewhat correct to condemn the Vegas hooker for “enticing” her clients. But to leave the customers blameless misses a big part of the story.

Mitch October 7, 2008 at 9:49 am

Great article. Though, I think you are missing the important piece, You and Me. Where were we when this all went down? Are we helpless against the power of government? Can we do nothing to turn the tide of total collectivism? Is it right for us to stand idly by and pray to the free market to save us? In the long term it will of course oblige, but what is the quote the socialists so often use, “In the long term we are all dead.”

So I must agree with Adam we should blame every person that refuses to understand, but we must also blame ourselves. We who do understand, but let it happen anyway. Tu ne cede Malis.

EnEm October 7, 2008 at 10:08 am

I was holding on until I read “Barney Frank”. Then I threw up. I don’t like communists, you see.

Kevin Schaefer October 7, 2008 at 10:19 am

Add to the list the American public education system. There should be constant discussion of our Constitution, branches of government, CSPAN broadcasts to fuel discussion on current legislative efforts. Less attention to race, diversity, fairness, feelings; that sort of thing, although important, must defer to economics, government, states v federal rights, personal responsibility, civic duty. Families teach values, schools teach the mechanics of society. Hey, can I bum a Victory smoke, brother?

Lucas M. Engelhardt October 7, 2008 at 12:02 pm

Ah… “My Congressman”.

Mine was actually one who voted it down on Monday. I wrote him a letter of thanks for his opposition to that terrible bill. I later developed the idea that, perhaps, a “contingent vote” campaign might convince some Representatives to vote no. (The idea: people send a message saying “if you vote for the bailout, I won’t vote for you in November”.) I sent him a notice that voting for the bailout would mean that I would be unable to vote for him this November.

I am now unable to vote for him this November.

Though, honestly, I wasn’t planning on voting for him until I thought it might be an incentive for voting against the bailout… and I would have voted for him if he had voted against it on Friday. Now I won’t.

Eh, well. That’s politics, eh?

joebhed October 7, 2008 at 12:22 pm

You name a lot of people and then Wall Street.

Would that be the free hand of the markets, there?
I might like to talk to them.

The bailout represents a small portion of today’s losses, much of which has been enabled by the deregulation of the financial services industry over the past 30 years.

But the real blame for those losses are more fundamentally in the debt-money system of the private bankers at the private federal reserve.

So, if you look at the scale being brought about by insolvency-enabling deregulation, and the flawed basic system being the FRS, then why didn’t you pick out some arcane contributor to the National Monetary Commission, or some politician in the hands of the private bankers that pushed creation of the FED back in 1913?

Were we to restore the money-creation power to the government from where it came, and institute the 100 percent reserve requirement on private bankers, we would begin to end the climb to debt-based prosperity, and the need for any future bailouts.

craig jones October 7, 2008 at 12:53 pm

As a proud Texan let me point out that George W. Bush, and the Bush Family, is not from the Lone Star State. Recall, if you will, that one brother was the Governor of Florida and another a Savings and Loan investor in Colorado. The Bush family consists of political opportunists and came to Texas in pursuit of oil-patch wealth, as with many others whom we also disdain.

Enjoy Every Sandwich October 7, 2008 at 1:44 pm

What you said about FDR is certainly true…most people I know soil themselves if I say that his policies didn’t “save” the U.S. from the Depression.

Interestingly, my parents and grandparents (and their various siblings) are not in that group. They lived through the Depression and WW2; they were nowhere near as enamored of him as most folks.

Cyd Malone October 7, 2008 at 2:16 pm
joebhed October 7, 2008 at 2:35 pm

And, by the way, how about a link to the email that you are using as proof that FDR prolonged the depression, rather than a link to Mr. Murphy’s office.

And, can we presume there is proof that the prolonged FDR depression was longer than the unprolonged depression would have been without his actions?

Finally, Uncle Miltie?
His support of 100 percent reserve banking was the only thing that gave ANY credence to letting the markets take it from there.

So again, where are y’all Mises folks on money creation exactly?

billwald October 7, 2008 at 3:01 pm

Franklin Raines – As I recall he bankrupted at least one bank in Seattle before he went to the other Washington.

Most of the people on this list are so far down the food chain . . . our owners learned from the French and Russian revolutions. They keep hidden so we can’t identify them.

hassan October 7, 2008 at 3:26 pm

why not the arch-evil economist Keynes?! You can also add to the list people in CATO and WSJ and…………………………………..(sorry the list goes for ever!)

Michael October 7, 2008 at 5:36 pm

In my opinion, and its not humble :-) has been the same right from the start, the ‘Bale Out’ only delays the enevitable ‘final’ crash. This is not the first bale out! Its been going on for years. The resheduling and enevitable waiver of third world debts in the past are symptoms of the same problem, which has still not been addressed by this ‘Bale Out.’

The debt in this case was not a third world debt, nor even a debt of the US government, its an accumulated debt of many businesses and of people both rich and poor, who should not have been provided with credit they could not afford.

What has occurred is no different to you or I getting into too much debt and instead of being made bankrupt, the government has stepped in and said, ‘Don’t worry about it, we will help you out and the tax payer can pay for it, or we can print some more money.’

Even if this ‘Bale Out,’ works this time, another ‘Bale Out,’ down the track is going to be called upon. Not until the cause is fixed will we be free of boom, busts and bale outs. (The three B’s, I like that, good title for a book hey :-)

The fix (my fix, you wont read about it elsewhere) is three fold and radical…..

1) Legislate, ‘you cannot sue for debt.’
2) Replace fractional reserve banking with 100% reserve banking.
3) Introduce a world wide commodity based currency and allow it to compete with national currencies at both the domestic level and the international.

Michael October 7, 2008 at 5:37 pm

In my opinion, and its not humble :-) has been the same right from the start, the ‘Bale Out’ only delays the enevitable ‘final’ crash. This is not the first bale out! Its been going on for years. The resheduling and enevitable waiver of third world debts in the past are symptoms of the same problem, which has still not been addressed by this ‘Bale Out.’

The debt in this case was not a third world debt, nor even a debt of the US government, its an accumulated debt of many businesses and of people both rich and poor, who should not have been provided with credit they could not afford.

What has occurred is no different to you or I getting into too much debt and instead of being made bankrupt, the government has stepped in and said, ‘Don’t worry about it, we will help you out and the tax payer can pay for it, or we can print some more money.’

Even if this ‘Bale Out,’ works this time, another ‘Bale Out,’ down the track is going to be called upon. Not until the cause is fixed will we be free of boom, busts and bale outs. (The three B’s, I like that, good title for a book hey :-)

The fix (my fix, you wont read about it elsewhere) is three fold and radical…..

1) Legislate, ‘you cannot sue for debt.’
2) Replace fractional reserve banking with 100% reserve banking.
3) Introduce a world wide commodity based currency and allow it to compete with national currencies at both the domestic level and the international.

Matt October 7, 2008 at 8:19 pm

“Bailout Blame Game”

Well, Well, Well, the finger pointing goes in all directions as is usual in this type of mess.
One I have not heard is ‘we are all at fault therefore no one is at fault’ …but lets get real and point to where the pointing should be. The fault rests in ETHICS practiced for the past two thousand years or more.
The Ethics of Self-Sacrifice preached from every pulpit and every politicians’ podium.

Sacrifice of what to whom? Sacrifice of the Individual to the collective. Sacrifice of the competent to the incompetent, sacrifice of the productive to the unproductive. Sacrifice of the responsible to the irresponsible.

This of course is NEVER said outright, but read between the lines and you will see it.
Unfortunately there is more pain ahead, even if the present crisis is resolved, there will be another, probably even bigger until that true cause is identified and acknowledged… and yes many of us will be dead and long forgotten when they look back at the Decline and Fall of the Second Roman Empire.

David Ch October 8, 2008 at 2:12 am

JK Galbraith?

David Ch October 8, 2008 at 2:21 am

Blaming ‘ourselves’ is all very well post hoc, but I dont think that we need to wear hair shirts here and self flagellate.

Show me one Austrian who , in the context of an inflationary monetary regime that he personally can’t undo single-handedly, stood up and said ‘No, I will not borrow money to buy this house at these rates, because I believe it is artificially set too low’.

No, if he sees value in the house purchase , and takes the best deal he can find on the mortgage market ( And, being an Austrian, is very careful to keep it within the bounds of affodability), and makes his hay while the sun shines. He’d be a fool to do anything different.

Graham October 8, 2008 at 4:07 am

President Lincoln and his Legal Tender laws, which were declared unconstitutional by the Supreme Court – which he ignored.

bert October 8, 2008 at 1:26 pm

To the list add the American voter. For being uninformed ,lazy and too preoccupied to pay attention to important issues . It is sad that we are getting the type of government that we have because of apathy and ignorance and voting on feelings instead of facts.

Fred October 8, 2008 at 7:59 pm

I would like to add my long dead Congressman Henry S. Reuss from Milwaukee. He was head of the banking committee and absolutely confirmed my conviction in gold when he stated waaaaay back in the seventies …… “if it wasn’t for the government gold would be worth about six dollars an ounce”.

Fred again October 8, 2008 at 8:09 pm

Allow me to add another: my ECON 101 professor at the University of Wisconsin – Madison. Professor Somers, who was on Lyndon Johnson’s Council of Economic Advisors informed this lecture of over 400 students ….. “we should be emulating the Russian model of economic organization”.

Looks like he got his wish.

Dustin Hodges October 9, 2008 at 8:33 am

I’d like to add big oil, politicians who support big oil, and every person responsible for the death of the electric car; for without rising fuel (and resulting food prices), far fewer people would be defaulting on home mortgages and more money could be ‘trickling up’ through the economy… Of course when you point a finger at them, you’ve still got three pointing right back at ‘ya…

mpolzkill October 9, 2008 at 9:34 am

Craig Jones already said what I came to say. You can’t blame Texas, & I’m not even from Texas.

Jeff Albertson October 9, 2008 at 9:49 am

Speaking of Econ101, and I only took one econ course “Money and Banking” in 1975, so I’m not really qualified to comment, but here goes…
This was my introduction to Milton Freidman and monetarism which was quite revolutionary at the time. My takeaway was that since the Fed existed and wasn’t going away, monetary authorities needed to resist “fine tuning” the money supply by constantly altering rates to hit some moving target, and that, due to lag times this fine tuning would almost always be too little (or too much) and too late. I believe Freidman recommended a steady 3% inflation rate as optimal, but even Keynes recommended caution and that counter-cyclical moves be applied gradually in both directions i.e., applications of brakes and throttle.

I realize that these models have been disproved by reality, however, I think that the actions of the Fed in the last 15 or so years lends strong credence to Uncle Milty – specifically Greespan’s lowering of Fed Funds rates to well below inflation, followed by Bernancke’s raising them to above at least the official rate has delivered the fatal one-two combination that precipitated the current mess. Again, I don’t have the chops to defend Freidman, but it does seem that his steady inflation would have been preferable to the purely political manipulation that has actually come about. Freidman is also the father of income tax withholding, a policy so diabolical that his other contributions of whatever worth can never balance.

Curt Howland October 9, 2008 at 12:19 pm

I’m glad someone is holding Friedman accountable. So many of the “public” seem to believe him to be the archetype of “Libertarian” beliefs.

Michael A. Clem October 9, 2008 at 2:20 pm

But Milton is the archetype of libertarianism–moderate or “pragmatic” libertarianism, that is, and not fully-principled libertarianism. Nonetheless, while I discovered libertarianism with Friedman and Rand, I still ended up a full anarcho-capitalist anyway.

Barry Hildebrand October 9, 2008 at 7:22 pm

Hey folks! Don’t we have to lay most of the blame on the fractional (or is that “fractured”) banking system that we have in the Fed? That system allows member banks to create multiples of amounts lent to them out of nothingness. Poof! Isn’t that the start point for all of the credit mess that we have now, and which the government seems all too eager to right using the taxpayers?

Robert October 9, 2008 at 7:57 pm

We the people ultimately need to accept responsibility for drinking the socialist kool-aid. Not Bush, not Congress, we the people are at fault. They are responding to our desires and we are rewarding their actions by re electing them to office. It is that simple.

CliffRosson December 31, 2008 at 3:46 pm

The people and the consumer are not responsible. People were acting completely rational as humans. It’s not like we had thousands evil borrows that came out of the woodwork to cause evil things!

The people’s rational decision making was however altered due to price fixing of a commodity known as credit.

If we take banana’s as an example, and price fix them to be below market value then we can expect a boom in the purchasing of banana’s until there is shortage of banana’s. This is exactly what has happened with credit. The price of credit was artificially held low, naturally the consumer is attracted to the low prices. Eventually you end up with a shortage which is what we call the CreditCrunch. Banks were also encouraged to lend due to a large influx of reserves again from low interest rates. Unfortunately, unlike banana’s, manipulating credit and the monetary supply causes much more harm then a shortage of banana’s would.

There is no clean way out of this. The price of credit needs to rebound and it will hurt when it does. Either that or we continue down the path of hyper-inflation. The end result is the same only more drastic.

Do you want to blame someone? Blame the fed. People didn’t force the Fed to keep interest rates low. Blame Keynesian theory which is what our government and monetary modules are based on.

Please see the following article.
http://mises.org/daily/3130

Carlo Medvec July 18, 2011 at 1:16 pm

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