A letter signed by 166 academic economists was sent to congressional leaders last week opposing the government bailout plan. One of the economists, described by CNN as "a Libertarian," is Jeffrey A. Miron, senior lecturer in economics at Harvard University, who earned his Ph.D. in economics at MIT. He says Bankruptcy, not bailout, is the right answer. He advocates
getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.
OK, suppose we do that, and replace the current system with a completely revised process of creating money for mortgage lenders through the Federal Reserve's expansion of credit, a revised process that takes into account the borrower's ability to pay, and does not promise lenders government guarantees for bad loans.
Would that be the final answer to today's "crisis?"
The fundamental cancer in our economy is the ability of the Federal Reserve to inflate the money supply. Regardless of how the money is inflated, regardless of whether or how the bankers get paid on their loans, regardless of how much regulatory "oversight and supervision" there is of the process of credit expansion, the act of inflating the money supply is immoral and unconstitutional.
And inflation leads to depression.
Miron appears to be a Milton Friedman-type libertarian. His policies might help delay depression, but until the Federal Reserve is abolished, the economy will be whipsawed between "boom" and "bust," as consumers and investors perpetually look for honesty and equilibrium, only to be misdirected by the policies of the Fed.
In a previous post we discussed "Enslaving Blacks" through mortgage lending. Here's a couple of questions nobody else is asking:
Who had the greatest lobbying effort to get the Community Reinvestment Act passed, making it possible for low-income minorities to get mortgages? Was it low-income minorities, or was it the bankers who stood to gain a quarter of a million dollars for every $100,000 they lent out?
If the government really wants to protect the United Nations-created "right to housing," why does it give money to bankers to lend to the poor at interest, rather than simply giving the money directly to the poor?
To ask the question is to answer it. The government's purpose is to reward Wall Street, not to protect "Main Street." In the case of the Treasury and Federal Reserve, "the government" is Wall Street. Treasury Secretary Paulson, Deputy Secretary of State Robert Zoellick, and Clinton Treasury Secretary Robert Rubin illustrate the revolving door between Wall Street and Washington D.C.
UPI is carrying opinion to the effect that the reaction of Wall Street to the defeat of the Bush/Paulson/Pelosi Bailout (dropping 777 points)
guarantees that a huge amount of money has been wiped off the value of 401(k)s affecting retirement plans. Tens of millions of Americans will be retiring in poverty or will not be able to afford retirement at all because of the votes those 133 Republicans and 95 Democrats made on this fateful "Fools Monday." Perhaps they might want to e-mail their representatives and tell them what they now think of their votes.
The White House is telling America that the bailout effort is not to bailout the bankers on Wall Street, but it has Americans like you and me in mind:
this is about Americans in their communities; that's what this is about. It's about family finances; it's about 401(k) retirement plans; it's about small businesses; it's about even larger businesses that do a great deal of hiring and are a strength in our economy, and we want to keep them strong.
Again, if Bush is so concerned about your 401(k), why doesn't he push for a 401(k) bailout plan in which the Fed simply creates and injects $100,000 into every 401(k) plan in America? Why give that money to Wall Street intermediaries? Could it be because Fed loans to AIG make Paulson's previous employer rich?
To ask the question is to answer it.
If the federal government is so concerned about the ability of Americans on Main Street to secure loans and credit, why doesn't Bush stop the federal government from sucking up $2.42 Billion in available credit per day?
If the government's heart is really bleeding over the ability of small businesses to make payroll and stay afloat, why didn't the Republican Congress and White House keep the promises that got them elected, abolishing wasteful, unconstitutional, and harmful bureaucracies that seize over half of everything the average business owner earns, and force businesses to grovel before lenders who were bailed out with the business owner's own money?
The Fed has stolen 95% of the value of all dollar-based investments since it was formed in 1913. The government knows its policies are making your retirement funds and social security worthless. If Bush and his Wall Street friends were really concerned about your retirement funds, they know exactly what they should do.