Most Americans seemed to understand that the $700B bailout Congress eventually passed would fall onto them and future generations to pay, which is one reason why there was so much resistance to the scheme.

Contrast that with the shenanigans Bernanke and Paulson have been up to these last three months. I doubt that 1 in 100 have any notion of what the Federal Reserve is or what it does. But sit someone down that has an open mind and ask him some simple questions.

For instance: If the government is trillions in debt already, where did it suddenly get this pile of money? If they’re borrowing these vast sums, doesn’t it mean we have to pay it back…with interest? If it isn’t being borrowed, it must mean that our central bank is creating it, right? And if you haven’t produced anything more, but now there are more money tickets in circulation chasing the same amount of goods, doesn’t that spell trouble for you and your family?

Ask people these questions and even the dim-wits will see the light. Our government is running the largest financial scam in the history of the world, and we are its victims. They make Madoff look like a piker.

Revolution, anyone?

Yes, this article goes at least 3/4 of the way to functional understanding. I don’t have the entire remaining 1/4, but I offer three additional things to consider:

1) When in the stampede, it behooves all to go in the same general direction to avoid being get trampled. That is why “good” bank managers or “good” mortgage lenders simply had to go along. If they had refused to play in that game, they would have had very little business, and would have failed, precisely because they were conscientious.

2) Governments, even local governments, find inflation to be in their favor. Governments run on taxation, and inflated money raises their revenues. In many cases (see tax appraisals on real estate or paper gains on investments), governments tax “added value” before it is realized, so governments can extract more money from the same property, merely by declaring it to be “worth” more.

3) Though we publicly lament the “worthlessness” of fiat paper money, we ignore its very real value: if we give enough of it to the government, we can avoid losing all our possessions; ultimately, we can avoid going to prison.

As Mel Brooks said, “It’s good to be the king.” The ruling class always does OK, except in the heat of revolution. That is why our rulers will continue to throw money at us until they finish squandering the wealth of every private individual in the nation. Only then will the majority of the people pay attention; and then it will be too late for any kind of civilized recovery.

The only question remaining is the timing of the ultimate collapse.

How does one save money today? Rockwell says “investing” in stocks is not saving. I believe that real interest rates are basically negative, so keeping money in a bank account is a losing proposition. What do the Austrians recommend?

A very good article.

One of the many irritating things about the current situation is the fact that the main stream media act as if the warnings of the Austrian school did not happen.

Publications such as “Newsweek” even have articles even have sneering articles attacking libertarians efforts to explain the present crises as the result of this or that government intervention (the sneer being that any “nonfanatical” person would understand that this is “market failure” that can only be responded to by yet more statism), whilst totally ignoring the fact that Austrian school people predicted the whole mess (and predicted in writing – again and again) as the result of the increase in the money supply – the credit/money bubble.

Yet it is the “mainstream” (in both the media and academia) who say that “science is prediction” and that economics is “empirical” – but they both ignore evidence (such as the repeated failures of more government spending in Japan to restore prosperity) and ignore the fact that Austrian school economists repeatedly said that trying to finance lending (“investment”) on the expansion of credit/money (rather than soley on real savings) was bound, sooner or later, to lead to what is comming to pass.

It seems that wicked a priori folk have more respect for evidence and prediction than the so called empiricists.

COMMENT: Doesn’t it occur to you that Madoff may have been making the same point that Lew Rockwell is making here?

greg:

Mark wasnted to “save money” in a similar manner to traditional bank savings rather than investing. Gold still sounds like a decent answer to his question.

Im glad that I bought gold at $290 in 99 for today I can go to my local coin shop and they will buy at $875. Not a bad profit….paying $25 over spot
Go for the gold.

Most of the people who rail against funny money or fiat money, are almost always working up a mob for a newer definition of wealth like gold. Will gold prove that much better than dollars? I doubt it. Different people would value the same thing differently. And the same person may value a thing differently at different times. To assume that we can design a market mechanism to value things correctly for everyone is too simplistic. As long as we continue to believe that everything in the world can be monetized, and that monetary unity like a single god is essential, we will end up giving control to a manipulative system.
I always found it funny when someone says that people in sub-saharan areas live on less than a dollar a day. By introducing dollars into a place and context where it is simply irrelevant, you give the dollar and its pursuit much power than what it really has in the big scheme on things.

As G.K Chesterton wrote, when men cease to believe in God, they don’t believe in nothing, but *anything.*

Madoff, wealth, socialist nirvanas all seem to qualify well

Great article.
Yes, the Madoff scheme and Social Security have alot in common. However, there is one difference as I see it. Social Security is supposed to be there for all of us when we reach age to collect. The government has not been a good steward of those funds and eventually a generation is going to be left out in the cold. Basicly the rich have gotten richer because of some political scheming. Madoff allegedly stole from the rich and gave to the poor, through all those so-called victims creating charities (and don’t forget, there probably was alot of tax write-offs because of their charity work), but the money got to the poor, like a modern day Robin Hood.
Now we all know that somewhere in the near future there is going to be a book and a movie created over all this. I suppose this will create some large royalty payments to a few individuals. Maybe those individuals could get a conscience starting right now and do some good with those payments. Not by giving it back to the supposed victims, maybe putting it into the coming biggest charity of them all, Social Security. (with some strict rules attached so as the government can’t squander those funds also).

Of course, there is always a degree of reciprocity involved in any human activity. We usually reap something of what we sow, even if the exchange isn’t always equitable.

There are those, however, who amass huge fortunes
without working for them. In the case of people like Richard Fuld, Michael Milkin, Ivan Boesky, they will live to enjoy the benefits of the lucre they have taken off the hands of those who sweat for their daily bread.

They have escaped any real justice for their misdeeds, and the saddest part is that we praise a judicial system which makes that not only possible, but predictable.

Is there something wrong with the Madoff “confession” ?
Did the WTC fall because the battleship grade hi-strength steel 6″ thick got “tired”?

Madoff’s marketing was, in its’ latter-day versions, nothing if not sophisticated, and to some of the most sophisticated purchasers on the planet. And we’re to believe that of the hundreds and hundreds of these hi-grade customers, not ONE did ANY due diligence… Come on people! Get real! There was NO “fraud” as had there been it would have come up in all the due diligence checks over decades…

The explanation of the supposed fraud lies elsewhere. Read the IRS regulations for a hint.

Felice Navidad to all

M. G.

“Money spent to make money is not consumer spending. It is capital spending.”

Well, in the case of Madoff, the investor in his scheme thought it was capital spending, but instead it was being used for a certain amount of consumption. I don’t think much because Ponzi schemes require that old investors be paid off. It could be that Madoff siphoned of only a small percentage for the personal consumption of himself and his employees.

“Buyers of houses for the last decade or two have usually not been able to say whether their expenditure was a capital or a consumer expenditure and have ended up regarding it as both at the same time–a big mistake”

It’s perfectly possible for it to be both. Likewise it is perfectly possible for a good to be both a close to consumption consumer good, and a capital good. It depends on how it is used. Use Gas to drive your car to the store, and it’s a consumptive good. Use it to drive to work, or to drive machinery at work, and it’s a capital good.

Heck, lemonade is a capital good if you are supplying it to your workers.

“to obscure the important difference between the rulers and the ruled”

“We” are individually both investors and workers. “We” are individually “rulers” and “ruled”. You boss your kids around, right? You rule over producers with your spending, right?

Heck, we are individually, both criminals and victims, via the State when the state violates rights. We can’t avoid it without living in a cave.

The posting by Mark is a most intelligent response to Rockwell’s article. The Gov’t achieved that savings–through stored money alone– were not possible. Stored money did not equal savings. Stored money became a wasting asset. –That is, one’s stored money was something that diminished in value, rather than something that maintained its value. Any person who wanted to maintain his true net worth had to go beyond merely storing his money. He had to take on some degree of risk (investment) as well. Here we have a semantic dilemma: In order to “save” (in the sense of maintining value of one’s accumulated money), one necessarily HAD to partake of non-saving behavior (risk). This is the first fact to notice in understanding the credit crisis.