NOTABLOG MONTHLY ARCHIVES: 2002 - 2020

OCTOBER 30, 2008

This evening, I spoke to Molly Sechrest, who informed me that her beloved husband, Larry, passed away this morning, October 30, 2008. A brief obituary appears at the site of the Mises Institute.

I had known Larry for over 15 years. He and I developed a deep respect and admiration for one another, and we loved one another as brothers. Larry was, quite simply, family. He was one of my closest personal friends and confidantes, an intellectual of the first rank, a superb thinker and writer, with a keen sense of humor. We shared so much over the years, including war stories of our various health battles. He'd had his ups and downs over the last several months in particular. But this shattering loss has come as a great shock to all of us who loved and honored him.

I hope to have more to say about Larry in the coming days and weeks... but for now, I just wanted to note his passing here at Notablog.

I will miss you, my dear, dear friend.

My love, always,
Chris

Comments

I spoke to him once at a seminar and he was very friendly and non-elitist unlike some other instructors. He also clarified quite a bit on the Austrian position when he said "Menger is your man".

Posted by: Timur Rozenfeld | October 31, 2008 09:59 AM

You have my utmost of condolences. I've been pressing you hard on getting together. When you're through grieving, I'd love to hear from you.

Posted by: "Nick Manley" - The Curious "Deviant" | November 1, 2008 09:02 PM

So sorry to read about Larry Sechrest's passing Chris. I didn't know him personally but I've come across various writings of his over the years and it's fair to say that (albeit to a limit extent) he's had his influence on me. You have lost a friend, and for that you have my deepest condolences.

MH

Posted by: Matthew Humphreys | November 2, 2008 02:48 PM

OCTOBER 18, 2008

Song of the Day: Li'l Darlin', composed by the late, great Neal Hefti (who passed away on October 11, 2008), was a huge hit for the Count Basie Band. Hefti arranged this luscious tune and others on what has become known as the "Atomic Basie" album. Take a look at a Basie-Hefti YouTube moment, and at this all-too-brief clip of the great jazz guitarist Joe Pass.

Comments

i'm gonna sample some of Count Basie abd see if I can come up with a hip hop song.

Posted by: new hip hop songs | December 11, 2008 01:05 PM

Clever and interesting toughts. Hope to read more from you.

Regards,
Matt P.

Posted by: Mr Pills | February 7, 2009 10:29 AM

OCTOBER 14, 2008

This morning, President George W. Bush announced further "unprecedented and aggressive steps" that will help to "shore up" financial institutions and the U.S. economy during this time of crisis. He's delighted that globally, governments are moving to "strengthen" market institutions by providing more "liquidity," that is, by "purchasing equity" in major banks worldwide. The Federal Government will now purchase equity shares in this country's banks as part of its "$700 billion financial rescue plan." Oh, the banks will be able to buy back these shares with money from "private" investors when they get back on stronger financial footing. And, in addition to stepped up efforts by the FDIC, the Federal Reserve Bank will become a "buyer of last resort for commercial paper."

Inflate, inflate, inflate! And let's coordinate this on a global scale, if our national efforts are too puny!

Finally, Bush said that his economic advisors, led by Treasury Secretary Henry Paulson, will provide further details on how this "rescue plan" will take shape:

They will make clear that each of these new programs contains safeguards to protect the taxpayers. They will make clear that the government's role will be limited and temporary. And they will make clear that these measures are not intended to take over the free market, but to preserve it.

Up is Down. Right is Left. Freedom is Slavery. We come not to bury the "free market," but to save it... just the way FDR saved capitalism!

But, to paraphrase another Savior of the Free Market, who enacted wage and price controls to save "capitalism" from itself... "Let us make one thing perfectly clear": There is no free market. And the "capitalism" they are "saving" has nothing to do with "free markets." Call it "state capitalism," or "corporatism," or "neofascism." Call it whatever the hell you want... but don't call it a "free market."

As I argued recently, the state and the banks are virtual extensions of one another, two aspects of the same structure, a "state-banking nexus," if you will. The effective nationalization of financial institutions in this country is just a continuation of a long history of government intervention.

Cross-posted at L&P.

Comments

I must admit to being most amused reading Dr. Greenspan's recent comments concerning the financial crisis. These guys don't miss a beat. For the past several decades, all these guys, including Greenspan (who readers may know was a long time disciple and close friend of Ayn Rand), have been avidly peddling free market ideology. And not just in their own countries, but the whole world over. Indeed, they have advocated the use of all means up to including the force of arms to coerce recalcitrant governments into adopting the policies favored by the free marketeers.

Then, the economy slows down, a few bubbles pop, and suddenly, when these capitalists start suffering some real losses, they start loudly demanding that governments take taxpayer money to bail them out. Indeed, in both the US and UK, we have their respective governments go as far as to nationalize banks in order to prop up the financial sector. All these fanatical free marketeers have, in the wink of an eye, become "born-again socialists."

I have got to hand it, these guys may not be very consistent, but they sure are arrogant. It's time, I think, for the rest to put these guys out of business. Atlas shrugged, indeed!

Posted by: Jim Farmelant | October 25, 2008 03:23 PM

OCTOBER 01, 2008

Oy, what a mess.

The "mess" of which I speak is, of course, U.S. Political Economy. And make no mistake about it: We are talking about political economy.

One of the things that I have long admired about Austrian-school theorists, such as Ludwig von Mises, F. A. Hayek, and Murray Rothbard, is their understanding of political economy, a concept that conveys, by its very coupling, the inextricable tie between the political and the economic.

When Austrian-school theorists have examined the dynamics of market exchange, they have stressed the importance not only of the larger political context within which such exchanges take place, but also the ways in which politics influences and molds the shape and character of those exchanges. Indeed, with regard to financial institutions in particular, they have placed the state at the center of their economic theories on money and credit.

Throughout the modern history of the system that most people call "capitalism," banking institutions have had such a profoundly intimate relationship to the state that one can only refer to it as a "state-banking nexus." As I point out in my book, Total Freedom: Toward a Dialectical Libertarianism:

A nexus is, by definition, a dialectical unity of mutual implication. Aristotle (On Generation and Corruption 2.11.338a11-15) stresses that "the nexus must be reciprocal ... the necessary occurrence of this involves the necessary occurrence of something prior; and conversely ... given the prior, it is also necessary for the posterior to come-to-be." For Aristotle, this constitutes a symbiotic "circular movement." As such, the benefits that are absorbed by the state-banking nexus are mutually reinforcing. Each institution becomes both a precondition and effect of the other.

The current state and the current banking sector require one another; neither can exist without the other. They are so reciprocally intertwined that each is an extension of the other.

Remember this point the next time somebody tells you that "free market madmen" caused the current financial crisis that is threatening to undermine the economy. There is no free market. There is no "laissez-faire capitalism." The government has been deeply involved in setting the parameters for market relations for eons; in fact, genuine "laissez-faire capitalism" has never existed. Yes, trade may have been less regulated in the nineteenth century, but not even the so-called "Gilded Age" featured "unfettered" markets.

One of the reasons I have come to dislike using the term "capitalism" is that it has never, historically, manifested fully its so-called "unknown ideals." Real, actual, historically specific "capitalism" has always entailed the intervention of the state. And that intervention has always had a class character; that is, the actions of the state have always, and must always, benefit some groups differentially at the expense of others.

Mises understood this when he constructed his theory of money and credit. For Mises, there is no such thing as a "neutral" government action, just as surely as there is no such thing as "neutral" money. As he pointed out in his Theory of Money and Credit (pdf at that link), "[c]hanges in the quantity of money and in the demand for money . . . never occur for all individuals at the same time and to the same degree and they therefore never affect their judgments of value to the same extent and at the same time." Mises traced how, with the erosion of a gold standard, an inflation of the money supply would diffuse slowly throughout the economy, benefiting those, such as banks and certain capital-intensive industries, who were among its early recipients.

One of the reasons a gold standard was abandoned is that a gold standard is incompatible with a structural policy of inflation and with a system heavily dependent on government interventionism.

The profiteers of systematic inflation are not difficult to pinpoint. Taking their lead from Mises, Hayek, and Rothbard and such New Left revisionist historians as Gabriel Kolko and James Weinstein, Walter Grinder and John Hagel III point out in their classic article, "Toward a Theory of State Capitalism: Ultimate Decision-Making and Class Structure" (pdf at that link):

Historically, state intervention in the banking system has been one of the earliest forms of intervention in the market system. In the U.S., this intervention initially involved sporadic measures, both at the federal and state level, which generated inflationary distortion in the monetary supply and cyclical disruptions of economic activity. The disruptions which accompanied the business cycle were a major factor in the transformation of the dominant ideology in the U.S. from a general adherence to laissez-faire doctrines to an ideology of political capitalism which viewed the state as a necessary instrument for the rationalization and stabilization of an inherently unstable economic order. This transformation in ideology paved the way for the full-scale cartellization of the banking sector through the Federal Reserve System. The pressure for systematic state intervention in the banking sector originated both among the banks themselves and from certain industries which, because of capital intensive production processes and long lead-times, sought the stability necessary for the long-term planning of their investment strategies. The historical evidence confirms that the Federal Reserve legislation and other forms of state intervention in the banking sector during the first decades of the twentieth century received active support from influential banking and industrial interests. ...

Most importantly, however, cartellization of banking activity permits banks to inflate their asset base systematically. The creation of assets made possible by these measures to a great extent frees the banking institutions from the constraints imposed by the passive form of ultimate decision-making exercised by their depositors. It thereby considerably strengthens the ultimate decision-making authority held by banks vis a vis their depositors. The inflationary trends resulting from the creation of assets tend to increase the ratio of external financing to internal financing in large corporations and, as a consequence, the ultimate decision-making power of banking institutions increase over the activities of industrial corporations. Since the capital market naturally emerges as a strategic locus of ultimate decision-making in market economies, it is reasonable to assume that, by virtue of their intimate ties with the state apparatus, banking institutions will acquire an additional function within the state capitalist system, serving as an intermediary between the leading economic interests and the state.

So one of the major consequences of inflation (especially in a monetary system stripped of a gold standard) is a shift of wealth and income toward banks and their beneficiaries. But this financial interventionism also sets off a process that Hayek would have dubbed a "road to serfdom," for inflation introduces a host of distortions into the delicate structure of investment and production, setting off boom-and-bust, and "a process of retrogression from a relatively free market to a system characterized by an increasingly fascistic set of economic relationships," as Grinder and Hagel put it.

Just as the institution of central banking generates a "process of retrogression" at home, engendering additional domestic interventions that try to "correct" for the very distortions, conflicts, and contradictions it creates, so too does it make possible a structure of foreign interventions. In fact, it can be said that the very institution of central banking was born, as Rothbard argues in The Mystery of Banking (pdf at that link), "as a crooked deal between a near bankrupt government and a corrupt clique of financial promoters" in an effort to sustain British colonialism. The reality is not much different today, but it is a bit more complex in terms of the insidious means by which government funds wars, and thereby undermines a productive economy. (Of course, the funding itself benefits certain interests too, but we'll leave our sermon on the "military-industrial complex" for another day.)

So where does this leave us today?

Much has already been said about the most recent financial crisis, viewed from a radical libertarian and Austrian perspective, which helps to clarify its interventionist roots (see, for example, the links in "The Bailout Reader"). The seeds for this particular crisis were planted some years ago but the interventionist policies now being proposed and implemented have been around even longer. They are tried and true methods of further concentrating the power of "ultimate decision-making" in the state-banking nexus. (Indeed, as Robert Higgs notes, even the Federal "authority" to take over AIG is rooted in a Depression-era law. See also this post by David Theroux and the links therein, as well as commentary by Ron Paul and Sheldon Richman.)

On the current crisis, Steven Horwitz has written a superb open letter to those on the left, from which I'd like to quote at length. It explains the origins of the housing bubble in the creation of Fannie Mae and Freddie Mac, and places that crisis in a wider political-economic context shaped by governmental and Federal Reserve policies. By all means, read Horwitz's whole essay, and follow the links therein as well, which are missing in the passage cited here:

For starters, Fannie Mae and Freddie Mac are "government sponsored enterprises." Though technically privately owned, they have particular privileges granted by the government, they are overseen by Congress, and, most importantly, they have operated with a clear promise that if they failed, they would be bailed out. ... In 1995, Fannie and Freddie were given permission to enter the subprime market and regulators began to crack down on banks who were not lending enough to distressed areas. ... In addition, Congress explicitly directed Fannie and Freddie to expand their lending to borrowers with marginal credit as a way of expanding homeownership. What all of these [policies] did together was to create an enormous profit and political incentives for banks and Fannie and Freddie to lend more to riskier low-income borrowers. However well-intentioned the attempts were to extend homeownership to more Americans, forcing banks to do so and artificially lowering the costs of doing so are a huge part of the problem we now find ourselves in.

At the same time, home prices were rising making those who had taken on large mortgages with small down payments feel as though they could handle them and inspiring a whole variety of new mortagage instruments. What's interesting is that the rise in prices affected most strongly cities with stricter land-use regulations, which also explains the fact that not every city was affected to the same degree by the rising home values. ...

While all of this was happpening, the Federal Reserve, nominally private but granted enormous monopoly privileges by government, was pumping in the credit and driving interest rates lower and lower. [Ah... one way to keep those funds flowing for the Iraq war... --CS] This influx of credit further fueled the borrowing binge. With plenty of funds available, thanks to your friendly monopoly central bank (hardly the free market at work), banks could afford to continue to lend riskier and riskier.

The final chapter of the story is that in 2004 and 2005, following the accounting scandals at Freddie, both Freddie and Fannie paid penance to Congress by agreeing to expand their lending to low-income customers. Both agreed to acquire greater amounts of subprime and Alt-A loans, sending the green light to banks to originate them. From 2004 to 2006, the percentage of loans in those riskier categories grew from 8% to 20% of all US mortgage originations. ... The banks were taking on riskier borrowers, but knew they had a guaranteed buyer for those loans in Fannie and Freddie, back[ed], of course, by us taxpayers. Yes, banks were "greedy" for new customers and riskier loans, but they were responding to incentives created by well-intentioned but misguided government interventions. It is these interventions that are ultimately responsible for the risky loans gone bad that are at the center of the current crisis, not the "free market."

The current mess is ... clearly shot through and through with government meddling with free markets, from the Fed-provided fuel to the CRA and land-use regulations to Fannie and Freddie creating an artificial market for risky mortgages in order to meet Congress's demands for more home-ownership opportunities for low-income families. Thanks to that intervention, many of those families have not only lost their homes, but also the savings they could have held onto for a few more years and perhaps used to acquire a less risky mortgage on a cheaper house. All of these interventions into the market created the incentive and the means for banks to profit by originating loans that never would have taken place in a genuinely free market.

It is worth noting that these regulations, policies, and interventions were often gladly supported by the private interests involved. Fannie and Freddie made billions while home prices rose, and their CEOs got paid lavishly. The same was true of the various banks and other mortgage market intermediaries who helped spread and price the risk that was in play, including those who developed all kinds of fancy new financial instruments all designed to deal with the heightened risk of default the intervention brought with it. This was a wonderful game they were playing and the financial markets were happy to have Fannie and Freddie as voracious buyers of their risky loans, knowing that US taxpayer dollars were always there if needed. The history of business regulation in the US is the history of firms using regulation for their own purposes, regardless of the public interest patina over the top of them. This is precisely what happened in the housing market. And it's also why calls for more regulation and more intervention are so misguided: they have failed before and will fail again because those with the profits on the line are the ones who have the resources and access to power to ensure that the game is rigged in their favor.

This is precisely correct; indeed, there are those of a certain political bent, who might seek to place blame for the current financial crisis on the recipients of subprime mortgages, particularly those in minority communities. But if elements of the current housing bubble can be traced to Clinton administration attempts to appeal to traditional Democratic voting blocs, it's not as if the banks were dragged kicking and screaming into lending those mortgages. This is, in a nutshell, the whole problem, the whole history, of government intervention, as Horwitz argues. Even if a case can be made that the road to this particular "housing bubble" hell was paved with the "good intentions" of those who wanted to nourish an "ownership society," their actions necessarily generated deleterious "unintended consequences." When governments have the power to set off such a feeding frenzy, government power becomes the only power worth having, as Hayek observed so long ago. If our Presidential candidates wish to end the influence of Washington lobbyists, they should consider ending the power of Washington to dispense privilege. Because that privilege will always be dispensed in ways that benefit "ultimate decision-makers."

It is not simply that intervention breeds corruption; it's that corruption is inherent in the process itself.

It is therefore no surprise that the loudest advocates for the effective nationalization of the finance industry are to be found on Wall Street; at this point, failing financiers welcome any government actions that will socialize their risks. But such actions that socialize "losses while keeping the profits in private hands" are a hallmark of fascist and neofascist economies. They are just another manifestation of "Horwitz's First Law of Political Economy": "no one hates capitalism more than capitalists."

In the end, the proposed Paulson Plan is nothing more than a "heist," as Robert P. Murphy argues, "a grand scheme in which the public will end up owing hundreds of billions of dollars to holders of new debt claims issued by the US Treasury." Such a plan will only compound the problem. As Frank Shostak explains, government policies that try to prevent

a fall in the stock market cannot prevent a fall in the real economy. In fact, the real economy has already been damaged by the previous loose monetary stance. All that the fall in the stock market does is inform us about the true state of economic conditions. The fall in the price of stocks just puts things in a proper perspective. The fall in the stock price is just an acknowledgment of reality.

By not allowing market participants to work through the distortions therein created, government might very well plunge "the economy into the mother of all recessions."

Of course, there is a lot more that needs to be done to correct this economy structurally, but have no fear: Such structural change will not come to this economy without fundamental intellectual and cultural change. That, my friends, is not on the menu. The chefs who prepare the current menu of "choices" belong to a loosely defined political-economic class, centered around that "state-banking nexus" I mentioned earlier. The "choices" they offer might modify the regulations here or there, free up some institutions, while regulating others more heavily. They can only hope that their limited choices will guide them out of the current crisis, while still enabling them to retain their hold on "ultimate decision-making." And they have been, in the past, remarkably effective at steering a course between "extremes," which is why the system has never toppled. (With regard to the "stability" of the current system, I strongly recommend a book by Sanford Ikeda on the Dynamics of the Mixed Economy: Toward a Theory of Interventionism, though it might make you feel that we're doomed and that nothing will ever change fundamentally.)

If all of this sounds diabolically conspiratorial, well, it is, in a sense, even if the "ultimate decision-makers" are not getting together in a single room trying to hatch the next great conspiracy. In fact, the reality is uglier: The culture of conspiracy is such that these plans are being hatched, ad hoc, by those within that state-banking nexus, presented to the public as the next great "rescue plan" for the "common good." Yet nobody inside or outside that nexus has the knowledge to coordinate any centrally-guided plan to "correct" the economy. But try to "correct" it, they will. Lord help us.

That's why, I maintain, it does not matter one iota who gets elected President. The emphases might vary slightly under Obama or McCain, but the fundamentals of U.S. political economy, and, I should add, U.S. foreign policy, will not change. Indeed, even for those of us who view the current Bush administration as the worst in our history, well, certainly the worst in our lifetime.... it is clear that nothing proposed by Obama or McCain is going to change the structural defects of this system.

It is the government's monetary, fiscal, and global policies that have created insurmountable debt and record budget deficits, speculative booms and bubble bursts. In such a "crisis of global statism," nationalizations and bailouts are not the only goodies in this "rescue package," being wrapped up as an unwanted gift for taxpayers. And because there is an organic link between domestic and foreign policy, be prepared for even more tragic fiscal and monetary irresponsibility at home, and an ever-expanding institutionalized war abroad.

Indeed, the "ultimate decision-makers" of U.S. political economy have a host of new battlefields on which to wage war, both literally and figuratively, in their efforts to stabilize the ship of state. None of the choices being offered will challenge their hegemony or topple them from their positions of power.

But a war beckons; it is primarily an intellectual and cultural one, and it must begin by questioning the fundamental basis of the current system---in any effort to overturn it.

Mentioned at L&P and Mises.org.

Comments

Chris, a fantastic post! You have nailed it in all its disgusting aspects. Thanks!

Posted by: Sheldon Richman | October 2, 2008 06:25 AM

As Rothbard said of Mises, "Mises arrived at a general law that, whenever the government intervened in the economy to solve a problem, it invariably ended not only in NOT solving the original problem, but also CREATING one or two others, each of which then seemed to cry out for further government interventionism, or a "mixed economy," to be unstable. Each intervention only creates new problems, which then face the government with a choice: either repeal the original intervention, or go on to new ones." Look for either Obama or McCain to follow the latter course and for the banking cartel to be avid enablers.

Posted by: William Rader | October 2, 2008 06:26 AM

This is by far the smartest thing I've read so far concerning the bailout bill. Thank you.

Posted by: Brandon Blaylock | October 2, 2008 06:28 AM

Chris,

Once again, you impress me with your scholarly learning. You also leave me in the position of having to decipher your jargon. It's a good thing I am used to this language now ( :

Posted by: Nick Manley | October 2, 2008 10:50 PM

Wonderful essay, Chris.

But the gold standard that you mention is itself, arguably, an example of the general rule that no government action can ever be neutral.

I agree with William Greene and Benjamin Tucker that government should not be in the business of declaring *anything* to be legal tender. In a free market, genuine free market banks would be able to issue currency against any form of property that their members or customers were willing to accept.

Posted by: Kevin Carson | October 3, 2008 02:06 AM

Hey, folks, thanks very much for your kind comments.

A couple of points in response:

Nick... except for a single mention of "dialectical" (not including the subtitle of my book), the post was remarkably free of my jargon. :) It did include, however, some comments entrenched in economics... a dismal science if ever there were one! :)

And Kevin, you are right, indeed. I suppose I suffer from the prejudice that a free market banking system would quite likely back a gold standard. But this need not be the case, and we ought not to reify gold as some kind of ahistorical or eternal standard.

I have become more and more convinced by the case for "free banking," argued by such theorists as my friend, economist Larry Sechrest. His book on free banking has just been re-issued, and I highly recommend it: Free Banking: Theory, History, and a Laissez-Faire Model.

You can find the book at the Mises Institute, both as a PDF and for sale.

Posted by: Chris Matthew Sciabarra | October 7, 2008 07:23 PM

Free banking would hopefully put an end to the "too big to fail" syndrome.

I am lucky, because my money is in Bank of America. I tend to think it will come out more with wealth than before.

Just another example of how business statism creates extreme concentrations of wealth.

Posted by: Nick Manley | October 7, 2008 09:17 PM

There is a strain of political economy in a country, but from what I can tell it never goes much further than studies about the effect of divided govt on budget deficits. I certainly haven't ever tried to do research here.
--------------
siva

Posted by: siva | October 10, 2008 11:55 PM

Hi to everyone on this blog,

Chris, a great friend of mine and a fan of my experimental film, Space Times Square (2007), asked me to post a comment here regarding the financial crises. A year prior, it seems my film called it, albeit artistically and philosophically.

The National Debt Clock has run out of digits because of skyrocketing debt in America. Is this only a pop culture oddity located on the fringe of Times Square? Or, does this not suggest something more than a mere crisis, but perhaps a kind of insanity, a cultural madness in America?

In my film Space Times Square, there was a scene of the National Debt Clock ticking away, at $7.7 trillion, accompanied by this line: "Astronomical debt ... credit line for ideological bankruptcy."

The line was inspired by my astonishment over the level of debt, ticking toward the electronic stratosphere, as if seeking an escape velocity beyond the bounds of Earth and human reason. I knew some kind of crash was sure to happen, as things do when they ignore or flout the laws of gravity. Of course, the Debt now exceeds $10 trillion and the clock needs more digits.

So, did my film call it on the bankruptcies, well before they happened?

Yes, in an artistic and philosophical way. The scenes of the Debt Clock and the Lehman building clearly called the "intellectual crash," not only via the logical absurdity of the Clock, but also in terms of media and cultural theory. Many other scenes in the film clearly reference the approaching intellectual bankruptcy of our culture, which makes possible the current economic crises. Near the end of the film, the Lehman building is aglow with an explosion of light, clearly meant by me to suggest catastrophe!

Ironically, or strangely, my film also includes a woman's eyes winking at the screen, long before Sarah Palin made it so fashionable. Only, the winking woman in my film is accompanied by a far different ideological message than Palin and her tribe of fundamentalists and anti-intellectual Joe Six-Packs.

Of course, the film also suggests ways to counter the prevailing cultural trajectories. Like the National Debt Clock on the fringe of Times Square, my film and its ideas are on the fringe of cultural theory. But, should they be? After all, look at what "mainstream" opinion has gotten us?

At the website for my film there is an essay that explains my take on the financial crisis, the terror war, cultural conditions, and many other issues in the film. (My essay draws from my recent book publications, Signs, Zero Conditions, and others). The essay can also be downloaded as a PDF at the website for the film:

http://www.spacetimessquare.net/

You can also view the film there, in case you have yet to see it.

Thanks if you have read this far. I hope you take time to consider what the film and essay are saying. If you would like to send me your thoughts, I would love to read them.

Best,
Barry

Posted by: Barry Vacker | October 19, 2008 10:46 AM

Thanks, Chris.

I've tried to connect the same dots on my blog and in my communications with others and I've only grown more weary over time. I'm so glad to see that you still have the energy and commitment to keep up the fight. As always, your writing is full of support from many other sources.

All the government has to do is scare people into thinking there is an imminent disaster and people willingly hand over more money and freedom to the government, forgetting that it was the government's control of the situation that created the problem in the first place.

It's like a battered spouse that keeps going back for more beatings and steadfastly defending the batterer. The citizens of this country just can't seem to get enough of being taken to the cleaners.

Posted by: Chip Gibbons | October 25, 2008 07:04 PM

An insightful essay. I would only disagree in that the easing of credit to 'sub prime' borrowers was in no way motivated by anything other than the need to keep the larger bubble growing.

Posted by: PenGun | February 4, 2009 04:04 PM

"...it's not as if the banks were dragged kicking and screaming into lending those mortgages."

Excuse me, but that is emphatically not the case. The Feds threatened to prosecute those banks and bankers who did not make loans on the governments terms - i.e. to borrowers who were of a protected class.

Posted by: RKV | February 4, 2009 05:02 PM

Well, somebody has to take a bath here. There is no other way out. My vote is for the investors and executives in the banks, rather than every single American taxpayer for the next 50 years.

Posted by: Letalis Maximus, Esq. | February 4, 2009 09:17 PM

Wow - this is really good post. I have never been here before, but I am coming back.

Posted by: greg | February 4, 2009 10:07 PM

A response to RKV and a further comment.

A relative retired about 10 years ago as a VP of a regional bank. I ran into her son a couple months ago and chatted. He said her comment was that when they were faced with having to make low-income loans they *knew* they were going to lose money on, the only way to compensate was to also make riskier loans at the higher end where they had at least a chance of making up the losses at the low end.

Additionally, once the rules of the game were furthrer changed in the last few years, even otherwise sane banks were in a 'keeping up with the Joneses' dilemma' -- look like losers by comparison if they didn't partake.

Posted by: newscaper | February 4, 2009 11:53 PM

You need to look at Catherine Fitts and her review of how the narco economy intersects with the banking economy.

Posted by: M. Simon | February 5, 2009 05:11 AM

'The One' has declared a $500k cap for 'the greedy'. Will he also cap 'The Fannie' and 'The Freddie'...and any other Federales who "receive Federal funds"? Should Franklin Raines be made to return $17,500,000?

Posted by: Broadsword | February 5, 2009 07:09 AM

This is an excellent post that describes problems. What I continue to wonder is why all the masters of the universe, heavily represented here, cannot come up with some potential solutions to lay in front of the voters. I continue to believe that we lack a 21st century PERSPECTIVE. We need to look down on government, not up. If we have empowered out government to force us to report our income via IRS Form 1099's then all the disbursements FROM government to individuals or corporate entities should also be reported. Can you imagine how the stock of a company might fair if it's balance sheet showed it couldn't compete without the property tax grants from local government? After all of this housing bubble, can you really say that welfare shouldn't cop a 1099 when you can now use it for a loan app?

Posted by: SenatorMark4 | February 5, 2009 07:27 AM

To Letalis Maximus, Esq:

You said:
"Well, somebody has to take a bath here. There is no other way out. My vote is for the investors and executives in the banks, rather than every single American taxpayer for the next 50 years."

Aren't "investors" and "taxpayers" the same thing in most cases of publicly traded stocks? I'm sure there are major investors who knew what was going on, but isn't a large percentage of stock owned by small shareholders? Often, those small shareholders don't even know they own a particular stock, much less take part in [mis]management of the company.

On principle, I agree that those knowingly and willfully responsible should be punished severely. And I agree that the US taxpayer shouldn't be on the hook for this (like we have a choice). On the other hand, we did elect the greedy scum who appointed the idiots who mis-regulated the system into the ground. It could be said that our laissez-faire attitude toward self-government has bitten us.

Posted by: az_conservative | February 6, 2009 03:45 AM

What sort of fundamental change are you referring to, that Obama will not deliver on?

Marcia

Posted by: Marcia Epstein | April 20, 2009 04:32 PM

Great post - not to mention the TARP money that was literally shoved down the throats of solvent banks. Those banks were forced to pay above 60% APR on those funds, whether they needed them or not. As in the book 1984, the goal of the regime is to have the "ultimate decision makers" not know the reality of their decisions, and how they are just as best cutting off their own head as they are that of everyone else when they support this outdated structure of political economic intervening fascist government.

Another problem is that big words and numbers scare people and do not allow them to think beyond their nose. These "ultimate decision makers" are people like you and me who can be just as easily toppled and need to be treated as so.

Posted by: Clayton | May 8, 2009 07:22 PM