Great Article- a must read that really explains what is happening-

Bailout marks Karl Marx's comeback

Posted: September 29, 2008, 8:03 PM by Jeff White

Martin Masse, mortgage crisis

Marx’s Proposal Number Five seems to be the leading motivation for those backing the Wall Street bailout 

By Martin Masse

In his Communist Manifesto, published in 1848, Karl Marx proposed 10 measures to be implemented after the proletariat takes power, with the aim of centralizing all instruments of production in the hands of the state. Proposal Number Five was to bring about the “centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”

If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him.

Indeed, analysts at the Heritage and Cato Institute, and commentators in The Wall Street Journal and on this very page, have made declarations in favour of the massive “injection of liquidities” engineered by central banks in recent months, the government takeover of giant financial institutions, as well as the still stalled US$700-billion bailout package. Some of the same voices were calling for similar interventions following the burst of the dot-com bubble in 2001.
“Whatever happened to the modern followers of my free-market opponents?” Marx would likely wonder.

At first glance, anyone who understands economics can see that there is something wrong with this picture. The taxes that will need to be levied to finance this package may keep some firms alive, but they will siphon off capital, kill jobs and make businesses less productive elsewhere. Increasing the money supply is no different. It is an invisible tax that redistributes resources to debtors and those who made unwise investments.

So why throw this sound free-market analysis overboard as soon as there is some downturn in the markets?

The rationale for intervening always seems to centre on the fear of reliving the Great Depression. If we let too many institutions fail because of insolvency, we are being told, there is a risk of a general collapse of financial markets, with the subsequent drying up of credit and the catastrophic effects this would have on all sectors of production. This opinion, shared by Ben Bernanke, Henry Paulson and most of the right-wing political and financial establishments, is based on Milton Friedman’s thesis that the Fed aggravated the Depression by not pumping enough money into the financial system following the market crash of 1929.

It sounds libertarian enough. The misguided policies of the Fed, a government creature, and bad government regulation are held responsible for the crisis. The need to respond to this emergency and keep markets running overrides concerns about taxing and inflating the money supply. This is supposed to contrast with the left-wing Keynesian approach, whose solutions are strangely very similar despite a different view of the causes.

But there is another approach that  doesn’t compromise with free-market principles and coherently explains why we constantly get into these bubble situations followed by a crash. It is centered on Marx’s Proposal Number Five: government control of capital.

For decades, Austrian School economists have warned against the dire consequences of having a central banking system based on fiat money, money that is not grounded on any commodity like gold and can easily be manipulated. In addition to its obvious disadvantages (price inflation, debasement of the currency, etc.), easy credit and artificially low interest rates send wrong signals to investors and exacerbate business cycles.

Not only is the central bank constantly creating money out of thin air, but the fractional reserve system allows financial institutions to increase credit many times over. When money creation is sustained, a financial bubble begins to feed on itself, higher prices allowing the owners of inflated titles to spend and borrow more, leading to more credit creation and to even higher prices.

As prices get distorted, malinvestments, or investments that should not have been made under normal market conditions, accumulate. Despite this, financial institutions have an incentive to join this frenzy of irresponsible lending, or else they will lose market shares to competitors. With “liquidities” in overabundance, more and more risky decisions are made to increase yields and leveraging reaches dangerous levels.

During that manic phase, everybody seems to believe that the boom will go on. Only the Austrians warn that it cannot last forever, as Friedrich Hayek and Ludwig von Mises did before the 1929 crash, and as their followers have done for the past several years.

Now, what should be done when that pyramidal scheme starts crashing to the floor, because of a series of cascading failures or concern from the central bank that inflation is getting out of control? It’s obvious that credit will shrink, because everyone will want to get out of risky businesses, to call back loans and to put their money in safe places. Malinvestments have to be liquidated; prices have to come down to realistic levels; and resources stuck in unproductive uses have to be freed and moved to sectors that have real demand. Only then will capital again become available for productive investments.
Friedmanites, who have no conception of malinvestments and never raise any issue with the boom, also cannot understand why it inevitably leads to a crash.
They only see the drying up of credit and blame the Fed for not injecting massive enough amounts of liquidities to prevent it.

But central banks and governments cannot transform unprofitable investments into profitable ones. They cannot force institutions to increase lending when they are so exposed. This is why calls for throwing more money at the problem are so totally misguided. Injections of liquidities started more than a year ago and have had no effect in preventing the situation from getting worse. Such measures can only delay the market correction and turn what should be a quick recession into a prolonged one.

Friedman — who, contrary to popular perception, was not a foe of monetary inflation, but simply wanted to keep it under better control in normal circumstances — was wrong about the Fed not intervening during the Depression. It tried repeatedly to inflate but credit still went down for various reasons. This is a key difference in interpretation between the Austrian and Chicago schools.

As Friedrich Hayek wrote in 1932, “Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. ... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about ...”

The confusion of Chicago school economics on monetary issues is so profound as to lead its adherents today to support the largest government grab of private capital in world history. By adding their voices to those on the left, these confused free-marketeers are not helping to “save capitalism”, but contributing to its destruction.

 

http://network.nationalpost.com/np/blogs/fpcomment/archive/2008/09/29/bailout-marks-karl-marx-s-comeback.aspx

Deep Thought

So Sharel and I watched the Presidential Debate on Friday (yes, we realize this is very pathetic), and I had a couple of thoughts.  In my mind, the debate would have been infinitely more awesome if it had gone something like this:

 

Supposedy John McCain has a legendary temper.  I didn’t see it, but imagine if Obama somehow got that legendary temper fired up.  Then, all of a sudden, McCain blows a gasket in his brain and has a violent, Vietnam, POW flashback, ala Rambo in First Blood.  So he takes his pen and leaps over the podium and charges Obama, stabbing at waist level (since he cannot raise his arms).  Wouldn’t that have been more entertaining?

 

Seriously, some thoughts:

 

Obama got flustered quite a few times.

 

McCain put him to shame on knowledge of the Baltic region and Russia.

 

Somehow a conservative McCain showed up to this one.

 

I think, and most will disagree with me, but Obama really showed me that he has no clue what he is talking about.

 

Obama couldn’t state which large socialist programs he would need to cut given the $700billion expenditure, whereas McCain said he would freeze ALL spending with the exception of defense and some key programs. 

 

Jim Lehrer is an old fart that needs to retire already.

Deep thoughts

“Now obviously, the worst thing that can happen to a Socialist is to have himself openly identified with the work of the Communists who are generally feared and despised.  The Socialists know they cannot seize property and power by “due process of law” unless they are politically popular, therefore, they try desperately to avoid the taint of the Communists and present their program so that it appears “moral,” “democratic,” “peaceful,” and so “gradual” that people will not resist it.” – Ezra Taft Benson Church News 12/23/1961

 

“History teaches that when individuals have given up looking after their own economic needs and transferred a large share of that responsibility to the government, both they and the government have failed.  At least twenty great civilizations have disappeared.  The pattern is shockingly similar.  All, before their collapse, showed a decline in spiritual values, in moral stamina, and in the freedom and responsibility for their citizens.  They showed such symptoms as deficit spending, excessive taxation, bloated bureaucracy, government paternalism, and generally a rather elaborate set of supports, controls and regulations, affecting prices, wages, productions, and consumption.”  - Ezra Taft Benson, BYU 2/28/1962

Deep thought of the day

 

Love is the fart of every heart;

It pains a man when ‘tis kept close,

And others doth offend when ‘tis let loose.

 

-          Sir John Suckling.  “Loving and Beloved” (1640)

Gems from an ignoramus...or Welcome to my slice of hell part 2

So, I am sitting at my desk listening to the latest doom and gloom from Glenn Beck (love ya Glenn, but remember Aug. 22, 2006?) when my fellow co worker (the one from my little slice of hell) and ignoramus comes up and asks me a question relating to the current financial meltdown.

 

“Don’t you think that this whole bailout business is just a move by the Cheney administration to take power away from congress?”  Really.  I am not lying. Those were his exact words. 

 

When I got a little annoyed and walked away telling him that if he wanted to have a serious discussion he needed to drop the stupid anti-Bush rhetoric, he got a little upset.  Seems he thinks that people just take one thing he says and focuses on it instead of the broad picture.  That led to gem number two-

 

“My question was really an unbiased question and people can’t see that, I am really misunderstood.”

 

Geez, I wonder why some people would think that you are not unbiased.

 

 

And now for the rest of the story…

 

His theory is that Bush/Cheney are trying to usurp power from the legislative branch to the presidency.  After I asked for specific examples of this devious manipulation of Wall Street, he admitted that he had none.  When questioned further, it turns out he is not even sure what the mess is about, or what is being proposed to fix it.

 

 Is this Bush Derangement Syndrome or what?  When he heard something bad was happening, his automatic assumption is that somehow Bush/Cheney caused it.  What a moron.  Once again, welcome to my little slice of hell.

Why I don't like Barack- a series of essays by Danny Olsen

I will go through some of Barack Obama's ideas and will tell you why I don't like them. This is the first in a long line of series that will deal with the socialism of the Chosen One.

Series 1- the economy. All BO's ideas are straight from his website. http://www.barackobama.com/issues/economy/

Enact a Windfall Profits Tax to Provide a $1,000 Emergency Energy Rebate to American Families:Barack Obama will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills. This relief would be a down payment on Obama's long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief.

"Excessive" profits. Who gets to decide what excessive is. Will there be a formula, or is it just whatever politicians say? Guess what- taxes are paid by consumers. The oil companies won't care because they will jack up the price of gas. This was tried before- and guess what- it didn't work then, and it won't work now. All it accomplished then was a decrease in production which has a part in where we are today. Besides- this is pure socialism, and does not allow a marketplace to exist. And what is socialism- it is communism except with private property ownership.

Provide $50 billion to Jumpstart the Economy and Prevent 1 Million Americans from Losing Their Jobs: This relief would include a $25 billion State Growth Fund to prevent state and local cuts in health, education, housing, and heating assistance or counterproductive increases in property taxes, tolls or fees. Obama’s relief plan will also include $25 billion in a Jobs and Growth Fund to prevent cutbacks in road and bridge maintenance and fund school re­pair - all to save more than 1 million jobs in danger of being cut.

And where is he going to get this money? Oh, I forgot, he is an all powerful godlike wizard who should have no problem turning water into dollars. Or he could just get it through taxes. And who pays taxes? Consumers. We would like to think that if a donut cost .50 and the government imposed a tax of .02 on the baker, he would just charge us .50 and take .02 less in profit. In reality, the baker will charge us .52 and keep the same profit margin. Take a freakin business class. If you tax the rich, the ones who are business owners, they will pass their tax burden on to you in the form of higher prices. So, the so called poor and middle class will still be paying.

Provide a Tax Cut for Working Families: Obama will restore fairness to the tax code and provide 150 million workers the tax relief they need. Obama will create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family. The "Making Work Pay" tax credit will completely eliminate income taxes for 10 million Americans.

Or you could just lower my tax rate. Why is that so hard- why all the credits. Its as if they are being so kind and generous that they are giving me extra money. Money that was mine to begin with.

Simplify Tax Filings for Middle Class Americans: Obama will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama will ensure that the IRS uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return. Experts estimate that the Obama proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees.

Wow. How nice of you. I guess he really does think most Americans are too retarded to figure out the 1040A form. But, he is not an elitist or anything.

Invest In A Clean Energy Economy And Create 5 Million New Green Jobs: Obama will invest $150 billion over 10 years to advance the next generation of biofuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids, promote development of commercial scale renewable energy, invest in low emissions coal plants, and begin transition to a new digital electricity grid. The plan will also invest in America's highly-skilled manufacturing workforce and manufacturing centers to ensure that American workers have the skills and tools they need to pioneer the first wave of green technologies that will be in high demand throughout the world.

Boost the Renewable Energy Sector and Create New Jobs: The Obama plan will create new federal policies, and expand existing ones, that have been proven to create new American jobs. Obama will create a federal Renewable Portfolio Standard (RPS) that will require 25 percent of American electricity be derived from renewable sources by 2025, which has the potential to create hundreds of thousands of new jobs on its own. Obama will also extend the Production Tax Credit, a credit used successfully by American farmers and investors to increase renewable energy production and create new local jobs.

Man made global warming is a huge lie. Green like my poop after eating Fruit Loops. That is what I think of this. It is not the governments job to create jobs. I am sorry but FDR was a socialist and his New Deal is the single worst program in US history. It has done more to cripple this country than any other plan, although Johnsons War on Poverty is a very close second.

# Protect Striking Workers: Obama supports the right of workers to bargain collectively and strike if necessary. He will work to ban the permanent replacement of striking workers, so workers can stand up for themselves without worrying about losing their livelihoods.
# Raise the Minimum Wage: Barack Obama will raise the minimum wage, index it to inflation and increase the Earned Income Tax Credit to make sure that full-time workers earn a living wage that allows them to raise their families and pay for basic needs.

Do not tell businesses what they can and cannot do- this is socialism.

Create a Universal Mortgage Credit: Obama will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.

Because once again it is really hard to get a 1040A form and fill out the section with your mortgage interest amount. Guess what- this really lowers the amount you get credited from mortgage interest. Only $500? I think I pay twice that much in interest on my mortgage- what a sneaky way to raise taxes, don't you think? All because you may or may not be too much of an idiot to itemize.

Expand the Family and Medical Leave Act: The FMLA covers only certain employees of employers with 50 or more employees. Obama will expand it to cover businesses with 25 or more employees. He will expand the FMLA to cover more purposes as well, including allowing workers to take leave for elder care needs; allowing parents up to 24 hours of leave each year to participate in their children's academic activities; and expanding FMLA to cover leave for employees to address domestic violence.

If you have a crappy job and a crappy employer- then find another job. Most jobs that are successfull go to great lengths to keep quality people.

Encourage States to Adopt Paid Leave: As president, Obama will initiate a strategy to encourage all 50 states to adopt paid-leave systems. Obama will provide a $1.5 billion fund to assist states with start-up costs and to help states offset the costs for employees and employers.

See my response above. Further more- where is he going to get the money? I am sure he will tax the businesses, then give it back to them as a credit to make them give out paid leave. Once again- socialism- just look at France. If you only want to work 4 days a week and get 9 months of paid leave- move to France.

I hope you enjoyed the first part of this 493 part series entitled "Obama Is a Fart Face, or why he is a socialist marxist." Stay tuned for the next installment that will look at what he thinks needs to be done in our educational system.

Deep thought #whatever

I am voting for Sarah Palin- not John McCain.