Tag Archives: Money/Economy/Taxes

Government Regulation, Business and Public Perception

In high school, I remember learning about government’s heroic anti-trust break up Rockefeller’s Standard Oil. Yay, government! That was long, long ago. I’ve since come to regard government not as the thin gray line between the public interest and corporate greed, but as the instrument of corporate greed. Here, I think, lies the difference between liberals and conservatives.

In debates with my liberal friends, their underlying assumption often seems to regard government as a benevolent force, which would cure our ills if only we surrendered more wealth, more liberty, and more power to it.

Here are several stories which, I hope, shatter the myth of government benevolence:

– Regulator Let IndyMac Bank Falsify Report. A senior federal banking regulator approved a plan by IndyMac Bank to exaggerate its financial health in a May federal filing, allowing the California company to avoid regulatory restrictions only two months before it collapsed, a federal inquiry has found. (Read more from washingtonpost.com)

– Press reports document criminality of US financial elite. Recent press reports make clear that the Madoff affair is not an aberration. It is indicative of pervasive fraud and criminality in the highest echelons of the financial establishment, aided and abetted by government regulatory agencies. (Read more from inteldaily.com)

– Antitrust’s Greatest Hits. The government’s victory against Standard Oil had a long-term effect on the oil industry that is seldom discussed by those who see parallels with the Microsoft case. Only six years after losing the antitrust case, Standard Oil dramatically changed its attitude toward Washington, moving from hostility or avoidance to a very warm embrace. Company chief A.C. Bedford served as chairman of the War Services Committee, an agency created to mobilize the nation’s supplies of gasoline and diesel fuel for military use during World War I. After the war, federal control never retreated, transforming what economist Dominick Armentano has called “a virtual textbook example of a free and competitive market” into “what had previously been unobtainable: a governmentally sanctioned cartel in oil.” The legacies of this transformation include higher prices for consumers and the “energy crisis” of the 1970s. Deregulation in the 1980s finally restored some measure of competition to the industry.

The Standard Oil case teaches some important lessons about competition, innovation, and antitrust law. We see the difficulty antitrust has dealing with highly innovative companies. We witness the vagueness of antitrust law, which allows prosecution on the basis of alleged intent rather than specific actions. And we see how the Standard Oil case ultimately failed to benefit consumers or investors. Instead, it laid the groundwork for collusion between industry and government, bringing about many of the very ills the “progressive” proponents of antitrust said they were fighting. (Read more from Reason.com)

– Washington Is Killing Silicon Valley. From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators. They treat it as if it is a natural phenomenon that can be manipulated and exploited, rather than the fragile creation of several generations of hard work, risk-taking and inventiveness. In the name of “fairness,” preventing future Enrons, and increased oversight, Congress, the SEC and the Financial Accounting Standards Board (FASB) have piled burdens onto the economy that put entrepreneurship at risk.

The new laws and regulations have neither prevented frauds nor instituted fairness. But they have managed to kill the creation of new public companies in the U.S., cripple the venture capital business, and damage entrepreneurship. According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986.

Faced with crushing reporting costs if they go public, new companies are instead selling themselves to big, existing corporations. (Read more from wsj.com)

– Anti-trust, Anti-truth. In his masterpiece, Antitrust and Monopoly: Anatomy of a Policy Failure, Dominick Armentano carefully examined fifty-five of the most famous antitrust cases in U.S. history and concluded that in every single case, the accused firms were dropping prices, expanding production, innovating, and generally benefiting consumers. It was their less-efficient competitors who were “harmed,” as they should have been.

For example, the American Tobacco Company was found guilty of “monopolization” in 1911, even though the price of cigarettes (per thousand) had declined from $2.77 in 1895 to $2.20 in 1907, despite a 40 percent increase in raw material costs. (Read more from the Ludwig Von Mises Institute)

– Letter from an angry business owner. To All My Valued Employees, There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn’t pose a threat to your job. What does threaten your job however, is the changing political landscape in this country. (Read more from fivemilliondots.com)

Sen. Bernie Sanders (I-VT) Says No More Bailout Money for Bush

BURLINGTON, December 23 – Senator Bernie Sanders (I-VT) said today that Congress should reject Treasury Secretary Henry M. Paulson’s request to release the second half of a $700 billion Wall Street bailout fund that has been shrouded in secrecy.

In a statement issued by the Treasury Department on Friday, Paulson asserted that “it is clear…that Congress will need to release the remainder…to support financial market stability.” President Bush has not yet formally asked Congress for authority to tap the second half of the fund.

“It is inconceivable that we would provide another $350 billion to the banks — supposedly to ease credit — when they are refusing to tell us how they’re spending the money they’ve already received,” said Sanders. The senator said that many of the concerns that he voiced when he voted against the bailout on October 1 have turned out to be true.

“Given the incompetence of the Bush administration, there is no way I would give them another dime to throw at a program that he has been so miserably botched,” Sanders said. (Read more from buzzflash.com)

Support this man.

The Unspeakable has been Spoken: Devaluation

The fact that a Forbes columnist used the D-word is very significant. Usually the media supports the government’s desire to maintain confidence in the dollar. Government needs this confidence to preserve the dollar’s value as it prints trillions from thin air to support wars, domestic spying and the salaries of 22 million federal employees. Why are rumors of devaluation dangerous? Think about it. What would you do if you knew dollars were about to lose half their purchasing power?

In my mind, the fact of devaluation’s discussion is news in itself.

“What began as government social tinkering–with implied threats to banks and mortgage companies to extend home loans to even the most marginal of borrowers–led to a greed-blinded mortgage banking business and the meltdown we are experiencing today. Now we are asked by the same congressional leadership to go along with taxpayer-funded bailouts of the very banksters who, while making millions, created the mess.

Despite the trillions of dollars already expended recapitalizing banks, there is very little, if any, progress to show. Will a few trillion more do the trick? That seems to be the consensus among Congress and the banks. ‘They are simply too big to let fail,’ or are they really just too big to save? We can go back to “Plan A” and buy the toxic assets. If so, at what price? What if a few trillion does not remove enough toxic waste from the system or doesn’t get credit flowing again and the economy bustling?”

“A quick dollar devaluation would work wonders for submerged borrowers. Don’t kid yourself: It could happen.”

“It can be done on a country-by-country basis, but a coordinated devaluation would work best. A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments. Both the homeowner and the bank are immediately better-off.

It would even benefit those who purchased their homes responsibly, as the value of their homes would rise by the same 43%. The current course of throwing trillions of dollars at the culprits is without any benefit to those who acted responsibly. Admittedly, this is not a solution without the price of inflation.” (Read more from forbes.com)

Social Security is also a Ponzi Scheme

“Charles Ponzi, an Italian immigrant, started the first such scheme in Boston in 1916. He convinced some people to allow him to invest their money, but he never made any real investments. He just took the money from later investors and gave it to the earlier investors, paying them a handsome profit on what they originally paid in. He then used the early investors as advertisements to get more investors, using their money to pay a profit to previous investors, and so on.

To keep paying a profit to previous investors, Ponzi had to continue to find more and more new investors. Eventually, he couldn’t expand the number of new investors fast enough and the system collapsed. Because he never made any real investments, he had no funds to pay back the newer investors. They lost all the money they “invested” with Ponzi.

Just like Ponzi’s plan, Social Security does not make any real investments — it just takes money from later “investors,” or taxpayers, to pay benefits to earlier, now retired, taxpayers. Like Ponzi, Social Security will not be able to recruit new “investors” fast enough to continue paying promised benefits to previous investors. Because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi’s scheme.” (Read more from The Motley Fool)

Ron Paul on Social Security during the Republican debates:

Where’d the bailout money go? Shhhh, it’s a secret

“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,'” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”

The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest?

None of the banks provided specific answers. (Read more from news.yahoo.com)

Where does money come from?

UPDATE: This popular video is incorrect in several respects. Bankers do not end up owning everything. They certainly profit from the transactions, but they sell their debts. $1,111.11 simply does not create $100k of new money in the banking system. The proposals at the end are sorely misguided. For accurate criticism of the monetary system, go to mises.org.

I’ve watched this educational cartoon approximately five times since discovering it a few months ago. It presents the simple, tragic absurdity of our monetary system.

For example, most people believe that if individuals, companies, governments all saved and got out of debt, society would be prosperous, when the opposite is true. If everyone began saving and paying off their debts, there would be no money. Money is debt. Without debt, there is no money.

Watch at least the first three parts for an explanation of this. As an aid, I summarize each part and transcribe the many great quotes presented in the videos.

Part 1

-Early banking.
-The shift of currency from gold to paper.
-The shift of goldsmiths from artisans to bankers.
-The evolution of lending gold, to lending depositors gold, to lending non-existant gold.
-Runs on the bank.
-Government legalizes lending fictional money.
-The advent of the fractional reserve system.
-Central banks supporting local banks.

“Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.”
– Woodrow Wilson

“Each and every time a bank makes a loan, new bank credit is created – new deposits – brand new money.”
– Graham F. Towers Governor, Bank of Canada 1934-54

“The process by which banks create money is so simple that the mind is repelled.”
– John Kenneth Galbraith, Economist

“Permit me to issue and control the money of a nation, and I care not who makes its laws.”
– Mayer Anselm Rothschild, Banker

I’m certain this diverges with the Austrian Economic point of view. I’ve heard this video series called socialist because it proposes government control of the monetary supply. I think the first two and half parts are an effective expose on the banking system. The ending is suspect.

See the rest:

part2
part3
part4
part5

When the United States CONFISCATED GOLD FROM PRIVATE CITIZENS

“Executive Order 6102 was signed on April 5, 1933 by U.S. President Franklin D. Roosevelt to prohibit the “hoarding” of privately held gold coins and bullion in the United States, in an attempt to address the causes and effects of the Great Depression. This Order was given under the auspices of the Trading with the Enemy Act of 1917. The government required holders of significant quantities of gold to sell their gold at the prevailing price of $20.67 per ounce. Shortly after this forced sale, the price of gold from the treasury for international transactions was raised to $35 an ounce. The U.S. government thereby made nearly 15 dollars profit per ounce, and devalued the dollar by 69.3%. . . .

The limitation on private gold ownership in the U.S. was repealed by an act of Congress codified in Public Law 93-373 [1][2] which went into effect December 31, 1974. P.L. 93-373 does not repeal the Gold Clause Resolution of 1933 which makes unlawful any contracts which specify payment in a fixed amount of money or a fixed amount of gold. That is, contracts are unenforceable which use gold monetarily rather than as a commodity of trade.” (from NationMaster.com)

—

“Following the privately held Federal Reserve Bank causing the Great Depression, in 1933, astonishingly FDR literally stole gold from citizens, ordering them to hand their gold to the privately held Federal Reserve Bank in exchange for pieces of paper . In issuing this Executive Order, FDR exceeded jurisdiction and committed high treason by assuming law making power exclusively limited to the legislature and he committee treason by violating the core tenants of legal tender mandated by the U.S. Constitution. During this era the Banksters, whom FDR worked for, took control of the U.S.A., literally implementing Socialism (Social Security), assuming control of media (FCC), control of private corporations and their stock/notes (SEC) and he implemented unconstitutional socialistic taxation through a private mob called the IRS.” (from libertyforlife.com)

See Also:
–Executive Order 6102, full text
–Wikipedia: Executive Order 6102
–Marc Faber advises Americans to hold gold outside the U.S.

Thomas Friedman Blaming “The Stupids” for the Financial Disaster

“In a new column by this best selling hero of all serious media, we finally have a easy to read explanation of the financial crisis—namely the nerds on Wall Street were just plain dumb, or to use an overused term, “stupid.”

. . . .

“. . . overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye. But it wasn’t only the bankers. This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.”

Tom then lays out who was complicit in all this—with nary a mention of the media that spent years hyping the “financial innovation on Wall Street.” His answer: all of us. Everyone, he concludes, was involved so you can’t really blame anyone, much less prosecute the fraudsters and, to use an FDRis, “banksters” who bamboozled the gullible and laughed all the way to the bank or their high priced condo—which ever came first.

“This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics., ” he divines.”

“So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.”

America: confess your guilt. Because as long we all did it, as long as unsophisticated borrowers and subprime victims are treated in Friedman speak as equally to blame with shrewd lenders pedaling products they knew were unaffordable, then no one can ever be held responsible. To him, the bankers and brokers were not driven by avarice and self-interest but by ignorance and idiocy. How patronizing!

. . . .

Who are the Stupids here — the people who are losing everything or the media wise men who turn their eyes and pens away from examining the crimes of Wall Street who write in well polished generalities that seem critical at first reading, but then reveal themselves as totally superficial?

Can it be that people who live in big houses, can’t see or FEEL the pain of the people shackled by debt in smaller abodes down the street, the folks who are just waiting for the sheriff to toss them out?

Tom Friedman lives in one of those very big houses — you can see it on the Internet at sustainelane.com — but he also purports to be guided by a moral compass even as he blames us all for the sins of a few, concluding:

“That’s how we got here — a near total breakdown of responsibility at every link in our financial chain, and now we either bail out the people who brought us here or risk a total systemic crash. These are the wages of our sins.”

One sin Tom doesn’t comment on is the failure of our media to do a better job of assessing how that irresponsibility was permitted, even encouraged, and who should be held accountable.” (Read more from globalresearch.ca)