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Source link: http://archive.mises.org/9017/madmen-on-the-loose/

Madmen on the Loose

November 25, 2008 by

Has there ever been a more irresponsible clan of financial leaders than we have running show today?

NYT:

The action by the Federal Reserve on buying mortgage-backed securities brings the full force of monetary policy to bear on the credit markets. Having already reduced the benchmark federal funds rate to just 1 percent, the central bank is now effectively using what economists call “quantitative easing” to reduce the costs of money.

Instead of trying to reduce overnight lending rates in the hope of influencing longer-term interest rates for things like mortgages, the Fed is directly subsidizing lower mortgage rates. It is doing so by printing unprecedented amounts of money, which would eventually create inflationary pressures if it were to continue unabated.

For the moment, Fed and Treasury officials made it clear that the sky was the limit.

{ 18 comments }

Ryan November 25, 2008 at 11:13 am

Crack up boom here we come!

Michael November 25, 2008 at 11:17 am

Anybody have the same image in their heads: The Four Horsemen of the Apocalypse are coming! And their names are Ben, Henry, Obama and George!

J Cortez November 25, 2008 at 12:13 pm

This is like an endless parade of clowns.

How are negative real interest rates and trillions of new money going to help?

Michael Stevens November 25, 2008 at 1:32 pm

These men are not irresponsible.They simply play out their roles as The Exempt Elect/Exon…1913FRA, 1933 and no Quo Warranto, therefore Public Policy/Law Merchant, HJR192/bankruptcy,Public Natl Money Sys.suspended and we’re unable to tender in paymnt of debts. Bankrupt America re-insured by a credit policy and loses Constitutional Govmnt.,allodial title,and all law w/it. All we do is a compelled performance in discharge(not paymnt) of debts.Discharges are insurance premiums to Fed. Res.,which is a Tontine policy re-insured by a credit policy. There is no end to this power due to immense amounts of money involved…buying up businesses and controlling Govt was/is happening.In the Law a Tontine is a wagering policy. Through adhesion contracts we’re(almost) all unwittingly a part of the credit sys.of the Public Natl. Credit(Fed. Res.),involved in a Joint Maritime Venture for profit in a Tontine policy of limited liability for the payment of debt. The joint venture is the use of communal credit,etc…..On our”good ship Earth” the law of Maritime Insurance and not the Common Law operates.After the Erie Railroad decision(1938)and Schriber v. Rapp(1836) So, you see, the class A stockholders of The Tontine Life Insurance Corp. of limited liability for the payment of debt called the Federal Reserve will own everything on the face of the “good ship Earth” and we will perform as slaves. Today we non-elect reprobates are forced to use all the Exon’s phoney products so they can show a profit. These Exon are the last survivors of the Tontine swindle….Booyah? No,baloney!!!! People like Cramer and all the other sell-outs are clueless or lying. Which is it?

(8?» November 25, 2008 at 1:41 pm

Happy Days are here again!

Ron November 25, 2008 at 2:03 pm

If more money is all we need, why not just make it legal for everyone to print their own? Put images of each denomination on the internet, then we can download them and print as much “economic stimulus” as we want. Then make it illegal to refuse to accept the printed money.

Rather than the gov’t buying bad mortgages, let individuals print out billions of dollars and bid on the mortgages instead! The problem of liquidity would go away overnight. The economy would “grow” a million-fold in one fell swoop.

Same with companies that need to be bailed out because they couldn’t hang. Individuals would be able to buy companies with the printed cash, thus rescuing them from their irresponsible behavior. Although, I don’t think I’d waste the ink or paper printing money to save GM.

Stanley Pinchak November 25, 2008 at 2:28 pm

Ron,
your proposal is the logical extension of Keynesian policy. Do I detect a whiff of sarcasm? I am always amazed that the proponents of “governmental stimulus” and central economic planning are so ignorant as to not see the equivalence between your proposal and their own. Clearly this is a case of cognitive dissonance.

Horst November 25, 2008 at 2:52 pm

Ron,

I’m going to use that from now on, when discussing economics/bailout proposals. Only I’m going to pretend to be serious.

Ron November 25, 2008 at 3:09 pm

Yes, Stanley, you do indeed detect a “whiff of sarcasm”. :-)

You could carry this still further and posit that one need not have a job at all if all that were necessary to grow the economy is the printing of more money. Why should anyone work to produce if that’s the case? What’s really important is consumption, after all, so the more ability we have to consume the better off we’ll all be, right? Give consumers the means to buy, and production will follow. J.B. Say was a delusional moron.

Of course, the moment you suggest something so ludicrous (even in the most serious tones you can muster) even the most dyed-in-the-wool Keynesian will point out that too much stimulus is bad, too. They will be hard-pressed, though, to show:

  1. Where the Fed should draw the line, or
  2. How the Fed is supposed to know where to draw the line

eli November 25, 2008 at 3:19 pm

horst,

i wouldn’t do that…most people won’t know its sarcasm unless you point it out, unfortunately.

shari November 25, 2008 at 3:41 pm

I would normally agree that personal responsibility is a core issue. However (being a real estate agent), I have observed many good people who had great credit ratings a couple of years ago, money in the bank, retirement accounts and good work histories buy their homes at the height of the market. Not all (as many of you assume) went out to buy boats, motor homes and toys of all kinds. A large part of this situation started with the bad lending practices that the banks were involved in such as the sub-prime mortgage market. They found that they could make a lot more money lending to questionable credit-worthy people (through higher fees and interest rates) and when they defaulted (as the banks expected them to) they could take back the house and do it all over again. There was a lot of money being made with this strategy. That is until (the most heinous tactic of all) the locked in interest rate (teaser rate) which was set to go variable in 2 to five years began to take effect. We saw very good and hard working people watch their house payments double in as little as one month when their loans went variable. They were unable (in most cases) to refinance because a refinance would only cover about 80% loan to value. As more and more of these loans went variable more and more people were unable to refinance and unable to make their payments. Without the ability to get a stable interest rate and refinance most homeowners found themselves in a no win situation. In order to save their homes they exhausted their savings accounts as well as their retirements and borrowed from family members to stay afloat only to lose everything in the end anyway. These people were not dead beats, they were hard working people with families to feed who watched everything they worked for go up in smoke. They lost their good credit ratings, their homes, their savings and retirement accounts, often their marriages, their pride, their hope and on and on. It’s very easy to feel smug thinking that these people asked for it, but the fact is this was a racket set up by the banking institutions and backed by the politicians, then thrust on the public as a secure way to buy their home. It’s time we really look closely at the money trail. It didn’t go to the consumers it went to the bankers, CEO’s and politicians and the Wall Street traders, but definitely NOT to the consumers!

prettyskin November 25, 2008 at 3:49 pm

Printing is hot, what the hell am going into the printing business. Bernanke got an expensive education that taught him how to print and print only lots of money.

eli November 25, 2008 at 4:22 pm

shari,

i think you should look into the Community Reivestment Act and its affect on subprime loans. If a bank wanted to do just about anything (merger, acquisition, etc.) that required federal approval, the amount of subprime loans or loans to low-income borrowers was a major factor i.e. the government set up a de facto requirement for banks to make loans to financially unfit persons. The amount of these ‘teaser rate’ loans is more a function of government intervention than greedy bankers.

and i don’t think most people are gloating that people are losing their homes; just making note of the conditions and itellects involved in this whole mess.

shari November 25, 2008 at 5:10 pm

Eli,
Thanks for your information. You are absolutely right. I appreciate your expanded view and input.

William Rader November 25, 2008 at 7:46 pm

Eli,

I also wonder how many people who leave comments on this site are not worried about a further “erosion” of moral hazard following legislation that raises the FDIC insurance cap from $125,000 to $250,000. I’m sure Congresswoman Gillibrand saw this as a way to protect depositors over the short term. However, over the long term, this may simply give bank managers more incentive to gamble with depositor money and start the cycle over again. The law of unintended consequences and government interventionism.

Bruce Koerber November 25, 2008 at 7:54 pm

November 25, 2008
Destroying The Dollar Is Part Of Their Scheme!

What we see is a deliberate destruction of the dollar so that the unConstitutional coup can orchestrate its new world monetary hegemony scheme – a new worldwide fiat currency under the control of a single worldwide central bank.

That is why there is no restraint!

Right now the unConstitutional coup is unabashedly using its counterfeiting operation (the Federal Reserve in conjunction with the Treasury Department) to redistribute wealth to itself and its associates. Then when the dollar is destroyed they will proclaim themselves to be in charge of the new fiat monetary system.

Americans (the true-to-the-spirit ones) with their birthright and their cultural identity linked to liberty are key players in the destruction of this oppressive regime. The means to accomplish their demise are at our fingertips. For example, the majority of people get a significant portion of their perspectives about the news and events from the internet. Educate the masses about these crimes and these criminals.

Somehow we need to penetrate the mystery surrounding the unConstitutional coup and let the oppressed know who their oppressors are.

Varun Verma November 25, 2008 at 8:58 pm

It is common sense that unless a problem is addressed at root, it would resurface later and relapse could be more severe. I have tried to present a root cause analysis of the financial crisis and practical solutions for short term as well as long term in the article on link below. The title of the article is “Henry Paulson’s Approach is Bass Ackwards”:

http://commonsensetopics.blogspot.com/2008/11/henry-paulsons-approach-is-bass.html

DS November 27, 2008 at 7:16 am

I read the blog post above:

“The key underlying cause of the financial crisis is income stagnation and fall in real wages of the consumers.”

Wrong. Those are symptoms, not causes.

Economic growth is the not the result of consumer spending, consumer spending is the result of economic growth. Economic growth and real increases in wealth (real incomes) come from one source – increased productivity. Government spending retards productivity by diverting capital from productive enterprises to politically driven enterprises.

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