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Ron Paul - Strengthening or Weakening the Economy?

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January 23, 2009 – Comments (16)

The economic situation continues to deteriorate this week as past and future bailouts were discussed on Capitol Hill.  The debate was over the accountability of already disbursed TARP money, and on whether or not to release remaining funds.   Banks that had already been bailed out before are looking for more money to fill the black holes that are their balance sheets, warning that they are simply too big to fail.  However, whatever ‘devastating’ consequences these banks are dreaming up and pushing on Capitol Hill regarding their own collapse will be nothing compared to the collapse of our currency if we keep debasing it through these foolish bailouts.  It should be that they are too big to bailout.  The world will not come to an end without this or that bank.  The most troubling thing to me is this rhetoric that only government can save the economy, and must act.  This is so counter-productive.

We must ask ourselves what strengthens this country, and what weakens it.

Government is a monumental drag on this economy.  Government at all levels currently absorbs about 35-40 percent of GDP, which is still not enough for its voracious appetite. While productivity is already overtaxed, the government routinely spends more than it takes in and makes up for the shortfall by constantly borrowing or debasing our dollars through inflation.  It pains me to think of all the opportunities for productive economic growth we have given up simply because our government is super-sized instead of Constitution-sized.  There are just a few constitutionally sanctioned activities for government to engage in, but it is so overstretched with unconstitutional encroachments that what it is legitimately supposed to do, it does very badly.  And yet we are to believe the solution to our problems is to make government bigger.  On the contrary, government makes our problems bigger.  The central bank’s meddling with monetary policy led to overheated lending, and now massive defaults.  The government used manipulative tax policy to distort the housing market which has had many unintended consequences, and here we are.  Government is quick to enact and slow to correct bad policy.  Yet in spite of government’s failures, it flourishes and grows, thanks to the continual bailouts from the unwitting taxpayer. 

Big government has been tried and has failed miserably.  What we need now is small government, and freedom.  We need the freedom to pull ourselves up by our own bootstraps again, as we traditionally do in this country.  But try to start a business or charity today, and you will understand how little economic freedom we really have left.  Freedom, not government, made this the land of opportunity.  Freedom laid the foundation that catapulted us to becoming the strongest economic power in the world.  The American people are strong and capable.  We can pull ourselves out of this mess.  All we need is for the nanny-state to get out of the way and allow us to do it.  Freedom is our strength, government is our weakness.  Only by recognizing this and unleashing our strengths will we solve the problems we face today.

16 Comments – Post Your Own

#1) On January 23, 2009 at 10:47 AM, carcassgrinder (34.46) wrote:

kdakota....

Comlpetely agree with everything you said except one line....

"Freedom laid the foundation that catapulted us to becoming the strongest economic power in the world"

Freedom perhaps laid a foundation for us to be a super-power in global economics....but it was the leveraging and horrible monetary policies over the last 30 years that truly made us a mega-power in global economics.  

I believe that, had we stayed on a steady moderate growth as we did for the 150 years of this country.  We would have shared the role of major economic power...but not absolutely decimated everyone else as we have for the last 40.

Unfortunately....a little too much freedom is what allowed greed to dominate the financial markets and DC, and is what has led us to this point.

Good Post!!! 

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#2) On January 23, 2009 at 10:55 AM, DaretothREdux (49.28) wrote:

carcassgrinder,

There is no such thing as too much freedom...what you are talking about is an abuse of other people's freedom. I don't have the freedom to steal your money becaue my freedom stops where yours starts. That's what the government and the Fed need to learn above all else.

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#3) On January 23, 2009 at 10:55 AM, carcassgrinder (34.46) wrote:

above sentence should read...

"I believe that, had we stayed on a steady moderate growth as we did for the FIRST 150 years of this country....  we would have shared the role of major economic powers...but not absolutely decimated everyone else as we have for the last 40."

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#4) On January 23, 2009 at 11:03 AM, carcassgrinder (34.46) wrote:

Daretoth.....

Yes....Their is such a thing as too much freedom.

Adults are nothing but large children....this should be obvious.  Their is such a thing as too much freedom for children....right?  That is why we implement measures to try to make sure that they  don't make decisions that may hurt themselves...or others.

Why in the world would you think that adults are capable of playing(conducting business) with eachother fairly with no supervision?  That is a horrible misjudgement and flawed philosophy....and has been proven to be so by human nature throughout history.  

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#5) On January 23, 2009 at 11:11 AM, kdakota630 (29.81) wrote:

I'm not sure I agree that "adults are nothing but large children".

As for government freedoms, maybe you'll find this video interesting.  I sure did.

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#6) On January 23, 2009 at 11:30 AM, carcassgrinder (34.46) wrote:

Kdakota.....outstanding video.....thank you!

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#7) On January 23, 2009 at 11:38 AM, whereaminow (42.76) wrote:

carcassgrinder,

Many adults do act like children. Do you think that the government is filled with grown men, acting like grown men, austerely holding up the pillars of humanity?

If it's true that human nature throughout history (a very dubious assertion) proves that all adults act like children, why are so willing to put them in a position of power over you?

If I were a less optimistic person I'd fear that you are engaging in a dubious double logic: on the one hand disparaging all humans as incompetent and evil, and on the other hand offering up yourself as subservient to those very same people based upon an arbitrary selection process.

Hmmm.......

But, in the spirit of keeping things light-hearted around here, I do know a few adults that act like men.

THEY'RE CALLED UNITED STATES MARINES

And here's a news flash for the current oligarchy. Those young men are going to be pretty flippin pissed off when they finally return home in the year 2168 from the Global War on Terror, and they're going to be demanding some answers.

Regards,

David in Qatar

 

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#8) On January 23, 2009 at 11:55 AM, carcassgrinder (34.46) wrote:

David in Qatar....

At no point did I ever state or display the logic that.... 

"on the one hand disparaging all humans as incompetent and evil, and on the other hand offering up yourself as subservient to those very same people based upon an arbitrary selection process".....not sure where you got that.

Just like there are good children and bad children...there are good adults and bad adults.  We do not implement the supervision because we are afraid of the good adults...these measures are put in place to protect the good adults from the bad adults...just like with children.

And, in case you haven't noticed....the political system in the US does not allow us to choose the right person.....it gives us CHOICES to choose from.

And if you truly believe the statement you made below....then you are not worth having the discussion with...you are blind. 

 "But, in the spirit of keeping things light-hearted around here, I do know a few adults that act like men.

THEY'RE CALLED UNITED STATES MARINES"

 

HHAHAahahaaa...please man....there are plenty of great serviceMEN out there....there are also a ton of little boys carrying guns and displaying the same immaturities as little boys.  Get real!! 

 

 

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#9) On January 23, 2009 at 11:55 AM, MusoSpuso (< 20) wrote:

carcassgrinder,

In relation to your quote:

"I believe that, had we stayed on a steady moderate growth as we did for the 150 years of this country.  We would have shared the role of major economic power...but not absolutely decimated everyone else as we have for the last 40."

The problems we are facing now is a natural result of more than 90+ years of inflationary monetary policy (yes it goes back that far, to the inception of the federal reserve). Watch the video (and the entire series if you have time) for a true understanding of how/why we are where we are:

www.chrismartenson.com/crashcourse/chapter-10-inflation

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#10) On January 23, 2009 at 12:14 PM, whereaminow (42.76) wrote:

carcassgrinder,

Take it down a notch killer. The Marine Corps statement couldn't be more obviously a joke.

But your response and general surliness that leads you to lash at every statement is troubling. I hope you don't vote.

Regards,

David in Qatar

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#11) On January 23, 2009 at 12:28 PM, carcassgrinder (34.46) wrote:

David...you'll be relieved to know that I don't vote. 

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#12) On January 23, 2009 at 12:42 PM, Alex1963 (28.90) wrote:

Kdakota

you write "The government used manipulative tax policy to distort the housing market which has had many unintended consequences, and here we are."

That is a pretty broad statement so I'm not sure how you arrived at this conclusion

As a realtor for 35 years what I saw was a pretty healthly national RE market for decades.

(other than the commercial implosion leading to the RTC disposing of overmortgaged assets from the S&L crisis of which 2/3 were headquartered-guess where? Texas. Under which governor-that's right George W. Bush who's MBA apparantly meant nothing and who had lax reserve requirements for these institutions under TX law)  

What really tripped this recent collapse was the use of questionable mortgage products to encourage continued buying and refinacing after several boom years when lenders saw the nearly 1 trillion yearly business cut in half. They couldn't handle the decrease in revenue after they had tapped the sound borrowers and began offering neg amortization products and other ridiculously risky and questionable loans to the less qualified borrowers remaining. I blame realtors and these lenders far more than I blame a buyer who will tend to go along with the advice they are given by industry professionals who are supposed to have their clients best interest at heart. Well these same realtors and mortgage brokers didn't like their incomes dropping so they looked the other way. Maybe just alittle here and there  and at 1st but many made gobs of money and I can only imagine by saying "it's their own job to educte themselves. if they are stupid enough to buy a $400K house on $100 income..." Pathetic! I would welcome more oversight in this area because I see how greed and ignorance on the part of so called professionals can work-up close and in a field I am an expert in. I was warning clients away from these products from the outset and was perfectly willing to see an client walk away from a more expensive home or even no home (and a commision for me) if it kept them solvent to buy from me another day. Apparently even in an industry with a code of ethics and decent oversight the golden rule still needs to be enforced more strictly by someone. It turns out it seems to have to be the government.

These free market advocates do not understand the reality of human behavior in my view. People can rationalize any harmful behavior if they believe their own interests are threatened. This utopia of market forces counterbalancing the detructive force of greed is a fairy tale. In my case I have watched realtors and lenders wh have long track records of nearly criminal behavior continue to thrive by simply moving on to the next consumer. They don't care about or need repeat business. It is too difficult to sue and really get satisfaction. Most ethics and disciplinary boards within industries have to literally see a smoking gun even after repeated complaints to take any real punitive action. A consumer has to get lawyer or mount apublic campaign to get satisfaction and we can't allow them the "freedom" to blow the office of these crooks. so what is the realistic, civilized and best solution. The law. In all it's imperfections and sometime inefficiencies. 

Now if you are referring to this right wing misinformation that the governmbnets mandate for banks to not redline and to make loans to lower income people that is just hooey. No one says they have to loan more than these people can afford. The banks, loan officers (& realtors) are supposed to guide folks in that regard. It was the greed of these istitutions and their agents who fueled this mess. Those laws were in efeect for years with less of a foreclosure rate than the norm because of the strict guidleines involving consumer couseling (to combat predatory lenders) Most people I have worked with have to be sat down for at least 20-30 minutes before they even look at property just to discuss the various mortgage products available in order to get to a realistic price range of homes to look for. If an agent or loan officer is lazy and doesn't get into the details people are usually fine to trust that these folks have their best interests at heart, after all they have a mandated fiduciary, right? 

Maybe that is not your line of reasoning-I certainly hope not. The actual figures of default for lower income folks is no higher than the overall averages across all demographics unless you are getting the skewed numbers cherry picked by somene with an agenda.

I also would like to pint out that one of the reasons it can be difficult to get a charity or business going is the ineptitude, greed and dihonesty of those who came before. That is what's reponsible for the byzantine regulations in place. Not all but most. If evryone looking to start these enterprises did their research, had the best interests of the public somewhere in their minds and business model and then stuck to their ethics even when things went sideways you wouldn't see all these dificulties. It is the acts of those who came before that caused the public to cry for hel[p in correcting the problems, whether it be regulating or enforcing standards of practice, oversight with documentation requirements etc. I believe many people who decry oversight in these areas either have never been seriously screwed or bilked or are pissed because their enterprise failed or couldn't get off the ground. Easier to blame the costs and requirements of gov't than a poor business model or bad business decisions. Look at the statistics: how could small business employ better than 70% of the workforce if it were so restrictive to get one open or keep it running. Or that thousands of charities take in billions each year all under the "restrictions" of government regulation and taxation. I understand those who wish for the day you could simply hang a shingle on your house to start a business but those days are gone and for damn good reason. Because too large a segment of the population simply cnnot be trusted. I bet everyone reading this can think of at least a few examples of people or businesse that you would not have anything to do with. You want them running around with all that freedom that you can be trusted with? Can you be trusted with it if it came down to going bankrupt or fudging "just a little til things turn around"?

I do agree that the bailouts enacted and those on the table carry the real threat of deflation but I believe it is manageable with vigilence, and oversight. I understand even Warren Buffet is on board with the overall need for these stimulus packages if nor in agreement with every detail, (especially if he sees a direct threat to his own business). But he is a pretty shrewd guy and I don't think he's be advocating for something if he felt it could be an overall bad idea. That is a pretty compelling endorsement, in my view.

Good luck to us all

Alex

 

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#13) On January 23, 2009 at 12:49 PM, awallejr (82.72) wrote:

Rhetoric at best.  "Social freedom" is one thing, "economic freedom"  is another.  Regarding the latter, the last presidency allowed for plenty freedom and look where we are.  And while I don't think government alone can turn this mess around, I sure as hell lost any faith in the free market to self correct.  All that would mean is more suffering and more abuse.

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#14) On January 23, 2009 at 1:02 PM, awallejr (82.72) wrote:

Excellent response Alex.  You and I had seen the same things apparently (real estate attorney for 28 years).  After the late 80s crash, the market SLOWLY but steadily improved.  We actually had a very healthy market in the 90s.  It wasn't until changes to the leverage rate and allowing nonbanks (brokerage houses and mortgage brokers) to get into the business that the market expanded too quickly and with a "roaring twenties" atmosphere.

The total disregard for accuracy (incomes, valuations, etc) really was criminal.  But governmental agencies kept a blind eye.

Bubble finally burst and here we are.

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#15) On January 23, 2009 at 5:00 PM, Alex1963 (28.90) wrote:

awallejr

That's right I forgot about the deregualtion of banking. Another pressure on finding creative ways to lend-the new players wanted a piece of a shrinking pie. NAR (Realtor association) was very much against that for the very reasons we are seeing now. Although I don't like much of the myopic work of that trade PAC anymore than most of the others, even it it works to "benefit" my business. I mean not everything that could possibly negatively impact the real estate industry is bad for the country as a whole. My 1st loyalty is to society, not my career or my narrow economic interests. Each person hopefully tries to strike a true balance. That to me is what a true democracy is all about. Yes, pursue life, liberty and happiness but be prepared give up those things that are necessary to benefit to the greatest number and the least able. When the greatest possible number are well served by the government everyone benefits more. So if you don't do it for the Golden Rule or Christainity or whatever you may believe then do it for your own LONG TERM self interest and quit worrying about every short term bump/impediment or minor drag on your self interest. That so and so is getting a little help and you don't think you are. A true democracy requires advanced citizenship which requires self sacrifice for the greater good.

And to address another point in this blog string, we put people in power to enforce the collective good. So the less powerful have representation for the good of all. Minimize gov't to the level some of you seem to indicate and watch the rich and powerful really steam roller. Because unfortunately the days of Noblesse Oblige are long gone. I'll take my chances with the flawed elected officials than the survival of the fittest/most lethal/sneakiest in some Mad Max/ society.

On a lighter note- I used to joke with my clients that the next mortgage product would be targeted to the prison population and offered by the increasing numbers of private entities getting in (like Cheney)

"Why just stay in your cell when you can OWN it! Get a 30 year mortgage on your cell and pay it off during your life sentence. No cash? Heck, pay it off in cigarettes (we don't want to know how you get them or where) Best rates for federal white collar offenders"

I mean really who was left to loan to ? It would have been funny if it weren't so sad and typical. "Gotta keep growing, can't have a down cycle-ever, shareholders won't understand blah blah"  

Anyway, good point.

Thank you

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#16) On January 29, 2009 at 2:26 PM, OleDrippy (35.19) wrote:

To get back to the article:

1. Yes.. We should not devalue our currency

2. How is replacing 1 trillion paper losses with 1 trillion of paper inflationary? Isn't that net zero?

I have a feeling that the level of risk aversion that we will be experiencing for some time, coupled with a continued slowdown in money velocity, will exacerbate and continue this economic slowdown for quite some time. I'm afraid the hyperinflationary zeolots, though correct in principle, will be in their basements surrounded by bags of silver fuming for quite some time yet.

 JMHO

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