George Washington’s Blog
Friday, Sept 19, 2008
Here’s a great email (slightly edited) from CS to Mike Shedlock:
“I am almost shaking as I write this for what is happening to the capital markets, this country, and the free world. The impact of the past two weeks’ action in the financial markets, if not reversed by cooler heads, will have irreparably changed the world in a way that only terrorist attacks and acts of war have in the past.
Nationalizing Fannie Mae and Freddie Mac, providing an emergency quasi-legal bridge loan to AIG, temporarily banning short-selling on all stocks in the US, and instituting an RTC-type entity to handle the toxic waste of the financial system is economic violence on a grand scale.
The long-term cost of these actions to dollar holders will likely be in excess of $1 trillion. The basic premise of a free economy is one governed by laws and not men, where property rights are respected, where individuals are free to make contracts with each other, and where honesty and transparency exist in the marketplace. It’s questionable whether any of these currently exist in the economy of the United States.
(Article continues below)
[L] et me provide a partial list of entities responsible for the financial mess we find ourselves in:
- Fractional-reserve banking, which is inherently unstable and entirely a confidence game
- Congress for passing the Federal Reserve Act and creating the Federal Reserve, the third central bank in the history of the US
- Woodrow Wilson for using the Fed to finance World War 1
- Benjamin Strong, the President of the Federal Reserve Bank of New York from 1914-1928, for inflating the money supply in the ’20s to help out Great Britain which led to the Great Depression
- Herbert Hoover for his economic intervention from 1929-1932. He was not laissez-faire by any means.
- John Maynard Keynes for laying the foundation of a miseducated public
- FDR for banning private ownership of gold, enacting the New Deal, creating Social Security and Fannie Mae, and exacerbating the Great Depression
- The FDIC for lulling the American public into a false sense of security regarding their bank deposits and training the public to unquestionably trust the financial system
- LBJ for the guns and butter of the ’60s
- Nixon for severing all ties between the US dollar and gold
- Reagan’s intellectual duplicity, using free market, small government rhetoric while turning the US into a chronic debtor nation
- Alan Greenspan, one of the most duplicitous, arrogant, and incompetent individuals in the history of the United States. If I had to pin this crisis on any one man, it would be he.
- George W. Bush for cutting taxes while raising spending and his full embrace of Cheney’s doctrine of “deficits don’t matter”
- Ben Bernanke for following the Greenspan doctrine to its inevitable conclusion
- The heads of Fannie Mae and Freddie Mac for using artificially low borrowing costs to create systemically-dangerous housing institutions
- Christopher Dodd and Barney Frank for beating the socialist drum
- Christopher Cox for thinking a ban on short-selling will solve anything
- Hank Paulson for folding the hand he was dealt
- The ratings agencies for rubber stamping garbage assets as AAA
- The heads of the major banks and brokerages on Wall Street for turning a blind eye as their institutions were taking on massive leverage that threatens to take down the financial system
- The hedge funds that levered up structured finance to dangerous levels
- Generations of lawmakers for kicking the looming financial crisis can down the road
- Home buyers who lied about their income and creditworthiness
- Predatory lenders who put people into mortgages they could never afford
Its worth reading the rest of Mish’s article.
This article was posted: Friday, September 19, 2008 at 9:47 am