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Planned Chaos!!![]() Submitted by Peter Cresswell on Tue, 2008-10-07 00:02
Well, that worked, didn't it! The overnight collapse of world stock markets, led by a seven percent one-day drop in the US Dow Jones index, shows just how well the trillion-dollar bailout worked to arrest economic collapse. In two words: It didn't. One trillion dollars of printed money just disappeared down the black hole marked "failed economic theory." The lesson is obvious to those who know what they're looking at. The naked emperors of mainstream economic theory have no clothes. To everyone else however -- and sadly, "everyone else" seems to describe most of the emperors themselves: the people with their hands in the till, their heads in the sand and their hands on the legislative tillers -- the failure of the bailout is only going to lead to more calls for more bailouts, more regulation and even more government control of the economy. And like the leeches and blood-letting of an earlier age, the cures will only exacerbate the disease, and credit crunch will lead to credit crunch which will eventually lead to near-complete state takeover of the financial system.
For most of the ignorati in positions of power and influence, the state played no part in the economic collapse. No part in the government-sponsored mortgage banks and the state's insistence on lending to people who couldn't pay for it; no part in the state's restrictions on land and lack of restrictions on their own destructive spending; no part in setting up and backstopping the inherently bankrupt fractional reserve banking system
Talk about ignoring the obvious: especially the multi-billion dollar golden shower that Alan sprayed over financial We sure are, some from people who should know better, but most from people in a position to do even more damage:
Well, no it hasn't, but it's going to be a hard job convincing the ignorati of that. The plaintive cries are almost messianic -- a clear and present danger when the present US election pits two economic ignoramuses against each other, one of them with a messianic aura not seen since Franklin Roosevelt hit the White House and began to strangle the US economy. Roosevelt is a reliable litmus test of statism: as an unreconstructed apostle of big government, exuberant interventionism, voodoo economics, and state welfare used as an electoral club, anyone who calls himself an admirer can be seen immediately as a statist of the first water. There are two admirers just one election away from the White House.
We are in a crisis of political economy. The crisis is economic; it was caused by politics. As Chris Sciabarra argues, "The current state and the current banking system require one another; neither can exist without the other. They're so reciprocally intertwined that each is an extension
The present banking system needs the state's imprimatur to maintain its dangerously fraudulent (and fragile) fractional reserve system, and the credit spigot of the world's central
The crisis was caused by governments.
When we see the destruction caused by the depression of the thirties and the means by which the Roosevelts of the world both extended it and then used it to permanently enthrone big government, it should be clear to anyone with eyes to see that what politicians do in the next few months will effect us all for good or ill for at least a generation. I urge all readers of NOT PC who do understand the issues at stake to make your voices heard. Loudly!
As
Two invaluable resources for intellectual ammunition are the Mises Institute's Bailout Reader and the Ayn Rand Center's Financial Crisis website. Bookmark them now. UPDATE 1: "Regulators cannot avert the next crisis," says Johan Norberg in The Australian, but they can and probably will make it much, much worse. UPDATE 2: European commentators are now screaming for the printing presses to be turned up high to rescue all the blunderers. Screams one idiot in The [UK] Telegraph:
Well, no, the imminent and present danger is more of what caused the problem in the first place, which is more and more money pouring off the government's printing presses. The Telegraph commentator quotes approvingly US Fed chairman Ben Bernanke from his 2002 "helicopter" speech extolling the virtues of his inflationary central bank:
As Lew Rockwell explained a year ago, when the cost of Bernanke's printing press was already obvious to those who knew what they were looking at:
As Austrian economists, and some of the saner mainstream economists have been saying to little notice, the pain caused by Bernanke's printing press is now inevitable -- the only choice is whether the pain is dragged out for years and even exacerbated by meddling and interventionism, as Roosevelt did in the thirties; whether it's dragged out for a decade of stagflation, as it did for Japan in the "lost decade" of the nineties; or whether we bite the bullet and have our
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We'll soon see
I've said before the Euro, and Brussels, is doomed to failure and then another Europe-originated war.
There, there is more red tape and corruption on a massive scale.
This will be interesting and with luck (?) not apocalyptic.
The Euro
It looks reeeeaaaallly bad in Europe. The dollar might end up sitting pretty compared to the Euro. It seems almost self-evident that when the going gets tough the European Union will splinter.
If you don't mind a personal question,
Peter, are you related to the philosopher, Max Cresswell?
= Mindy
Thanks Peter!
Excellent, Peter. Thanks for posting this.
I expect 3-5 yrs of pain before we Americans figure out that government caused the problem. It may happen sooner. I am pleasantly surprised that the people made it absolutely clear that they were against the 700 billion dollar bailout. That sentiment will find a target at some point.
My guess is that it will get quite a bit worse economically with spiking unemployment, businesses unable to fund operations, and so on. But we are an impatient country today. We have been living the high life. The knowledge is too obvious to miss when times get really hard. In fact, I think it's a fine time to be an Objectivist.
That said, I'm hearing that Iceland is broke, California has about enough money left to pay teachers and firefighters for 2 more weeks, and Massachusetts (hahahaha!!!!) is interested in taking out a loan. I've never heard about anything like that so the whole map could be changed in a month or two.
The nightmare scenario is that it all breaks apart along the lines of what Dr. Peikoff presents so brilliantly in The Ominous Parallels. And that wouldn't surprise me a bit. But my guess is that we'll be able to patch things together at least one more time.
Peter- Awesome article. I'm
Peter-
Awesome article. I'm glad you link in Mises institute info too, and even like the (appropriately) crass imagery with 'the multi-billion dollar golden shower that Alan sprayed over financial markets'.
Even Hewey, Dewey and Louie get what's going on.
Kasper-
It's not - yet - as explicit as taxes or printed money, but we'll see within the next few years. The $ comes from the federal budget. Ultimately every dollar spent by the federal government is either funded by direct confiscation (e.g. income taxes, excise taxes, tariffs), or via outright creating money (inflation) which indirectly robs anyone holding dollars by reducing their value. But which will happen isn't known yet, since much of what the government does is go into debt, which defers these. It can go into debt such as selling treasury bills (often to Japanese or Chinese banks in recent years), but it's doubtful the US govt can sustain doing this much longer. Barring it outright reneg'ing on paying back debt (an idea I'm actually for from an ethical standpoint, but which would have serious economic consequences of its own), the US govt will ultimately have to pay the debt, and then it comes down to more $ from taxes or the printing press.
Aaron
PC
Excellent post Peter. Fantastic links.
A question from an ignorant point of view is: The $700 billion payout was printed money, or earned money from taxpayers.
I was under the impression from media releases such as the NZ herald that it was produced money (taxes) and not printed?
kkulak
Yes, a great, informative
Yes, a great, informative post. Mises is such an excellent site.
I linked your NotPC blog of the same to a post on Hooten's blog.
You're very welcome.
You're very welcome.
Cheers, Peter Cresswell
* * * *
'NOT PC.'
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Great Peter
I already emailed this article from Not PC to a few poor MBA graduates I know. Thanks too for the links to the PDFs in "Parlous plonkers."
Excellent Peter
I admit that reason is a small and feeble flame, a flickering torch by stumblers carried in the starless night, -- blown and flared by passion's storm, -- and yet, it is the only light. Extinguish that, and nought remains.- - Robert Green Ingersoll