Scientism for the win! Social Engineering for the win! Oh civilization where art thou? The demise of the Chicago School for the win so the more radical Keynesians can take over after Obama’s first term.

It’s almost hilarious how Obama is going to do all the wrong things for all the wrong reasons. Hopefully he takes the Chicagoite ideology with him into the abyss.

It seems to me the large public has lost any understanding of what capitalism or even socialism are. Therefore, you get the let’s blame free-market capitalism crowd even though you could see that wasn’t the system we have in place in the world, let alone in the US (At least, in its pure form).

Shall we trade Greenspanese for Volckerese?

Volcker is credited with stopping the stagflation of the ’70′s by reining in the Fed when he was made chairman by Carter. Yet he continues to spout a mix of sensible “free market” slogans that almost suggests some understanding of Austrian principles, and in the next breath blaming “irrational exuberance and pessimism” of investors and talking about regulating and monetary manipulations as the way to fix things.

Here is how Herr Volcker explained the current crisis last spring:

The Economic Club of New York – Paul A. Volcker – April 8, 2008

…the bright new financial system – for all its talented participants, for all its
rich rewards – has failed the test of the market place. To meet the challenge, the Federal Reserve
judged it necessary to take actions that extend to the very edge of its lawful and implied powers,
transcending certain long embedded central banking principles and practices. The extension of
lending directly to non-banking financial institutions – while under the authority of nominally
“temporary” emergency powers – will surely be interpreted as an implied promise of similar
action in times of future turmoil. What appears to be in substance a direct transfer of mortgage
and mortgage-backed securities of questionable pedigree from an investment bank to the Federal
Reserve seems to test the time honored central bank mantra in time of crisis — “lend freely at
high rates against good collateral” — to the point of no return.

The implications of these decisions, and the lessons from the unfolding crisis itself,
surely deserve full debate and legislative review in the period ahead. It is certainly right that in
this instance, the Federal Reserve acted with full support of the Secretary of the Treasury. In
their technical details, the issues are terribly complicated. That is true in large part because of the mind-bending complexity of the world of derivatives and securitization. There are also cross-
cutting bureaucratic and political concerns – political concerns at the high level of the proper use and allocation of government power and at the low level of embedded economic interests.

In sum, it all adds up to a clarion call for an effective response.

Before turning to the specifics of the needed debate, I want to emphasize that we are not
dealing simply with problems of financial structure and regulation, of repairing or papering over
weak links in markets, or of realigning supervisory responsibilities. Financial crises typically
emerge after a self-reinforcing process of market exuberance marked by too much lending and
too much borrowing, which in turn develop in response to underlying economic imbalances…

[and then]

Mathematical modeling, drawing strong inferences from the past, has demonstrably failed
to anticipate unexpected events of potentially seismic importance. The commonly cited “two
sigma” or “once in a 50 years” event has materialized too frequently to validate that approach.
Part of the problem, as I understand it, is that mathematical modeling simply cannot deal with
markets where it is not random or physically determined events but human instincts that cause
self-perpetuating waves of unwarranted optimism or pessimism.

The combination of herd behavior, opaque loan characteristics, and breakdowns of
market function at times of crisis has also raised important questions about the characteristics
and usefulness of “mark-to-market” accounting, particularly its extension in uncertain and
illiquid markets to what is euphemistically known as “fair value” accounting. That is too
complicated a subject for me to linger on today. Suffice it to say there cannot be much doubt that
“mark-to-market” is an essential discipline for trading operations, hedge funds and other thinly
capitalized financial firms. What is at issue is the extent to which it is suitable for regulated,
more highly capitalized intermediaries, including commercial banks. Their ongoing customer
relationships, the value of which is not automatically correlated with reversible swings in market
interest rates, cannot be easily reduced to a market price or a mathematical model.

[and]

The recitation of particular market vulnerabilities, of supervisory lapses, of failure to
close gaps or end disagreements among regulators is not surprising. In the United States,
informed observers, market participants, officials themselves have long been aware of
fragmented responsibilities, competing and overlapping institutional objectives, and ingrained
resistance to change. Established agencies haven’t been able to keep up with all the complexities.
The drumbeat of lobbying pressure has not been for more effective supervision; to the contrary,
it’s been fear of allegedly heavy handed and intrusive official intervention damaging to the
competitive position of institutions operating in international markets.

Perhaps most insidious of all in discouraging discipline has been pervasive compensation
practices. In the name of properly aligning incentives, there are enormous rewards for successful
trades and deals and for loan originators. The mantra of aligning incentives seems to be lost in
the failure to impose symmetrical losses – or frequently any loss at all – when failures ensue. The
point has been made time and again, yet, with rare exceptions, compensation committees and
their consultant acolytes seem unable to break the pattern. That may not be an area that law or
regulation can, or should, deal with effectively. Surely it is a matter for the leadership of large
institutions, particularly those sheltered by official support….

[and]

The recitation of particular market vulnerabilities, of supervisory lapses, of failure to
close gaps or end disagreements among regulators is not surprising. In the United States,
informed observers, market participants, officials themselves have long been aware of
fragmented responsibilities, competing and overlapping institutional objectives, and ingrained
resistance to change. Established agencies haven’t been able to keep up with all the complexities.
The drumbeat of lobbying pressure has not been for more effective supervision; to the contrary,
it’s been fear of allegedly heavy handed and intrusive official intervention damaging to the
competitive position of institutions operating in international markets.

Perhaps most insidious of all in discouraging discipline has been pervasive compensation
practices. In the name of properly aligning incentives, there are enormous rewards for successful
trades and deals and for loan originators. The mantra of aligning incentives seems to be lost in
the failure to impose symmetrical losses – or frequently any loss at all – when failures ensue. The
point has been made time and again, yet, with rare exceptions, compensation committees and
their consultant acolytes seem unable to break the pattern. That may not be an area that law or
regulation can, or should, deal with effectively. Surely it is a matter for the leadership of large
institutions, particularly those sheltered by official support.

[and finally...]

In dealing with the challenge, a number of points seem to be of fundamental importance:
.
- The role of the Federal Reserve as lender of last resort and as regulator does
need clarification. Those functions are inextricably linked to the extent
particular institutions are protected by borrowing privileges. The plain
implication of recent actions is that in time of stress investment banks deemed
of systemic importance are to be so privileged. Unless the Fed’s initiative can
somehow be contained to a single aberrant incident – which seems quite
unlikely – a direct responsibility for oversight and regulation follows. I do not
see how that responsibility can be turned on only at times of turmoil – in
effect when the horse has left the barn.

- If the Federal Reserve is also to range further, to have clear authority to carry
effective “umbrella” oversight of the financial system, internal reorganization
will be essential. Fostering the safety and stability of the financial system
would be a heavy responsibility paralleling that of monetary policy itself.
Providing direction and continuity will require clear lines of accountability
(running, for instance, to the Vice Chairman of the Board and to relevant
Reserve Bank Presidents), all backed by a stronger, larger, highly experienced
and reasonably compensated professional staff.

- A case can be made for consolidating all supervisory and regulatory
responsibilities for “safety and soundness” into a single “super agency”.
While starkly contrary to the American tradition of more specialized agencies,
it is the path taken by the U.K. and a number of other countries to assure
consistent effective coverage. However, as recent U.K. experience
emphasizes, close liaison and cooperation with the central bank would be
absolutely essential for anticipating and managing crises.

- No one will benefit from regulation and supervision which is unduly intrusive
and arbitrary. Venture capital and equity funds have been two successful,
creative and valuable parts of American capital markets. By their nature, they
are dependent on strong and sophisticated investors, so systemic implications
of failure of particular funds is unlikely. Consequently the case for either
official liquidity support or direct regulatory intrusion is weak.

Just what exactly did he say? He wants the Fed to become the “super-agency” uber-regulator? The economic Gestapo?

Paul Volcker was a founding member of the Trilateralists. He is on the Council on Foreign Relations, attends the Bilderberg Group meetings and is David Rockefeller’s boy.

He is also head of the Group of Thirty, that wishes to set the rules for international finance and pave the way for one world government.

Can you say “New World Order?”

A true green politician, Obama is right on target practicing recycling very well. All he has given us, thus far, is a reusable Clinton administration. Regrettable, the voters could have done this with Hillary. That’s why they didn’t vote for her. Now, he has refitted, readjusted, and redirected Hillary to his liking.

Wait, these folks (Emanuel, Geithner, Goolsbee, Napolitano, Jones Jr.) are of all the same mindsets (socialists). The people have been led away by media and Obama.

Yes of course Obama will not only fail, but make things worse. But I am afraid that once again free markets will be blamed.

I can imagine 15% unemployment and over 10% inflation rate, and most experts and analysts saying that it would have been much worse if not for the harsh response of the current administration. They will see 2 milion jobs created artificially by Obama, and say look at those 2 million jobs! If it wasn’t for Obama, we’d have 2 million more unemployed.
I am afraid that after this crisis, China will be more capitalistic then us.

So is it now known that Paulson and Volcker are out-in-the-open, exposed members of the inner circle of the unConstitutional coup?

They probably feel safe since it is impossible to imagine any of the ‘President’s men’ or of the members of Congress ordering their seizure for being part of the horrific economic terrorist ring. Their false sense of security is what brings them out into the open.

What can be done to bring them to justice? What can be done to ‘convince’ them to reveal the names of the other traitors?

We know one thing for sure, the government will protect these criminals.

It depends on what you mean by: “There is a lot here that Austrian Economics would agree with.”

There is a wide spectrum of economic persuasion and there are some who jump around on that spectrum depending on the specific issue.

The range of that spectrum where Austrian economics resides is in the range that can be classified as classical liberalism. There is a test, one that is easy to use, to identify the authenticity of those economists who may appear to overlap into the ‘Austrian economics’ portion of the spectrum.

The test is the real world! The test is deeds not words! Here is the test in the clearest of terms: Is the ‘economist’ an interventionist? It is a yes or no proposition. There is no gray area.

Now since we know that Volcker is an interventionist, does it help to have an interventionist of his type among the inner circle of the unConstitutional coup? Can any of these economic terrorists separate out which injustices around the world that they had less of a hand in? Is treason a gradation?

We are living in a time when fuzziness in identifying true economics from fallacious economics does a tremendous disservice. I am not talking about intolerance, I am talking about economic science versus quackery.