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"No one doubts that the coming election will be the most important referendum on the size and nature of government in a generation. But another issue is nearly as important and has gotten far less attention: our crumbling commitment to the rule of law. The notion that we are governed by rules that are transparent and enacted through the legislative process-not by the whims of our leaders-is at the heart of that commitment. If legislators exceed their authority under the Constitution, or if otherwise legitimate laws are misused, courts must step in to prevent or remedy the potential harm. During the 2008 financial crisis, the government repeatedly violated these principles. When regulators bailed out Bear Stearns by engineering its sale to J.P. Morgan Chase, they flagrantly disregarded basic corporate law by "locking up" the transaction so that no other bidder could intervene. When the government bailed out AIG six months later, the Federal Reserve funded the bailout by invoking extraordinary loan powers for what was clearly an acquisition rather than a loan. (The government acquired nearly 80% of AIG's stock.) Two months later, the Treasury Department used money from the $700-billion Troubled Asset Relief Program fund to bail out the car companies. This was dubious. Under the statute, the funds were to be used for financial institutions. But the real violation came a few months later, when the government used a sham bankruptcy sale to transfer Chrysler to Fiat while almost certainly stiffing Chrysler's senior creditors. According to two leading legal scholars, Eric Posner and Adrian Vermeule, rule-of-law violations are inevitable during a crisis. The executive branch takes all necessary steps, even if that means violating the law, until the crisis has passed. The argument is powerful, and its advocates are correct that presidents and other executive-branch officials often push the envelope during a crisis. Yet pushing the envelope isn't the same thing as f

The banking crisis that began in August 2007 shocked markets and precipitated the Great Recession. To fully explain the banking crisis, one must account for its timing, severity, and global impact. One must also confront a startling historical contrast. If we define "banking crisis" to mean bank failures and system losses exceeding 1 percent of a country's gross domestic product (GDP), we find that in the period 1875-1913, a period of marked expansion in international trade and capital flows comparable to the last three decades, there were only four banking crises worldwide.1 By contrast, in the period 1978-2009, a period of much more extensive bank regulation, central bank intervention, government protection of depositors and other bank creditors, and government control of mortgage markets, about 140 banking crises occurred worldwide. Of these, 20 were more severe than any crisis from the earlier period of 1875-1913, in terms of total bank losses as a percent of GDP. Leading financial economists such as Charles Calomiris have argued that a necessary condition for a banking crisis is government policy that distorts the micro-incentives of banks. Likewise, University of Chicago scholar Richard Posner has argued the banks that got into trouble during the recent crisis were simply taking "risks that seemed appropriate in the environment in which they found themselves."2 In the period 1978-2009, about 140 banking crises occurred worldwide. But then why didn't a banking crisis erupt sooner-say, in the recession years of 1990-1991 or 2001-2002? What changed in recent years that led to business risk-taking capable of wrecking the U.S. housing market and the U.S. banking system and other banking systems throughout the world? Further, why were prudent credit practices reasonably maintained in credit card and commercial mortgage securitization in recent years, but wholly abandoned in residential mortgage securitization?

The underlying assumption of the Dodd-Frank Act (DFA) is that the 2008 financial crisis was caused by the disorderly bankruptcy of Lehman Brothers. This is evident in the statements of officials and the principal elements of the act, which would tighten the regulation of large financial institutions to prevent their failing, and establish an "orderly resolution" system outside of bankruptcy if they do. The financial crisis, however, was caused by the mortgage meltdown, a sudden and sharp decline in housing and mortgage values as a massive housing bubble collapsed in 2007. This scenario is known to scholars as a "common shock"-a sudden decline in the value of a widely held asset-which causes instability or insolvency among many financial institutions. In this light, the principal elements of Dodd-Frank turn out to be useless as a defense against a future crisis. Lehman's bankruptcy shows that in the absence of a common shock that weakens all or most financial institutions, the bankruptcy of one or a few firms would not cause a crisis; on the other hand, given a similarly severe common shock in the future, subjecting a few financial institutions to the act's orderly resolution process will not prevent a crisis. Apart from its likely ineffectiveness, moreover, the orderly resolution process in the act impairs the current insolvency system and will raise the cost of credit for all financial institutions. 

Daniel Henninger Says Blaming Capitalism for the Crisis Overlooks the Housing Bubble - WSJ.com: "Heads of state, perplexed finance ministers, inflated retinues and journalists from 20 nations arrived in London yesterday to address "the greatest financial crisis since the Depression." By 4 p.m. London time today they will hold a press conference and go home." "Beware of real-estate salesmen. The housing bubble that floated into view in 2007 is turning into the blob that ate the world. Real-estate mortgages and their derivative securities are a significant problem. That discrete problem, however, has been pumped up to an historic "crisis of capitalism." Capitalism didn't tank the U.S. economy. Overbuilt housing did. Overbuilt housing tanked the economies of the U.K. and Ireland and Spain. If little else, we've learned that artificially cheap housing sets loose limitless moral hazard." "In a normal environment, the problems revealed by the crisis in mortgage finance would produce fixes relevant to the problem, such as resetting the ratios of assets to capital for banks and hedge funds, or telling the gnomes of finance to rethink mark-to-market and the uptick rule. More energetic reformers might consider Gary Becker's suggestion that as financial institutions expand in size, their capital requirements tighten, so that compulsive eaters like Citigroup can fit inside their capital base." "Two signal events in history are shaping the politics of the current economic crisis: the Great Depression and the Reagan presidency (and in Europe, Thatcherism)." "The Depression put in motion an historic tension between public and private sectors over who sets a nation's course. After 50 years of public dominance, Reagan's presidency tipped the scales back toward private enterprise. The economic life of the ensuing 35 years became "the American model." Every waking hour of this economically liberal era, the losing side has wanted to tip the balance back toward public-sector

Excellent article on the importance of gun ownership in America.  The author is a defense attorney practicing law in Arizona.  He's also a war veteran and well versed libertarian.   Excerpts: "I am an American. As such, none of my rights depend on a showing of need. I am a free man who has the right to define and pursue my happiness in any peaceful way I see fit. The government does not grant me rights. I was born free. The legitimate role of government is to act as my agent to protect my rights; which exist independent of government. Americans do not beg the government for rights nor are they required to demonstrate a "need" for rights." "Government never has a more tempting opportunity to increase its size, power and scope, and to curtail the liberties of free people, than during or immediately after a crisis. Indeed, crisis is so tempting an opportunity for government that governments invent crisis whenever possible. This is why "emergency acts" and "wars" on anyone and anything are so popular for governments. Nothing entices people to stop thinking, act impulsively, and to relinquish liberties so easily as a "crisis" or a "tragedy" or an "emergency." We need to be smarter if liberty is to survive." "Although President Obama appears excited about the notion of banning guns, I have not heard him order a ban on the very guns used to protect him. Apparently, when it comes to his protection, President Obama prefers to be protected by people armed with guns. "

Excellent article other than the fact that the author erred in referring to the AR-15 as an "assault rifle." It is not. It is an "assault weapon," a semi-automatic rifle with only a cosmetic resemblance to the M-16 fully automatic "assault rifle." "Assault rifles" have been outlawed in the U.S. for decades. The U.S. had a complete ban on "assault weapon" rifles from 1994 to 2004. It did not affect gun violence rates at all, because semi-automatic rifles that lacked the cosmetic resemblance to "assault rifles" remained on the market. The distinction between the two terms is critical to understanding the current gun debate. Those who propose a ban on "assault weapons" are offering only a cosmetic sop to the anti-gun crowd, banning a sub-set of semi-automatic rifles whilst leaving equally capable semi-autos on the market. The correct question to ask is "why bother?" One might as well ban toy guns that bear a resemblance to assault weapons; other toy guns remain unaffected. For a more in depth discussion of "assault weapon" vs. "assault rifle" with references see http://en.wikipedia.org/wiki/Assault_weapon

Excellent summary of how deep the hole the Federal Reserve has dug for Americans.  Walks us from the 2008 crisis to the Levy Economics Institute $29.616 Trillion Bankster Bailout.  Incredibly well written commentary. excerpt: Bernanke argues we should look only at the lending at a peak instant of time. Think about it this way. A half dozen drunken sailors are at the bar, and the bartender refills their shot glasses with whiskey each time a drink is taken. At any instant, the bar-keep has committed only six ounces of booze. That is a useful measure of whiskey outstanding. But it is not useful for telling us how much the drunks drank. Bernanke would like us to believe that if the Fed newly lent a trillion bucks every day for 3 years to all our drunken bankers that we should total that as only a trillion greenbacks committed. Yes, that provides some useful information but it does not really measure the necessary intervention by the Fed into financial markets to save Wall Street. And that leads to the final way to measure the Fed's commitments to propping up our drunks on Wall Street: add up every single damned loan, guarantee and asset purchase the Fed made to benefit banks, banksters, real Housewives on Wall Street, fraudsters, and their cousins, aunts and uncles. This gives us the cumulative Fed commitments. The final important consideration is to separate "normal" Fed actions from the "extraordinary" or "emergency" interventions undertaken because of the crisis. That is easier than it sounds. After the crisis began, the Fed created a large alphabet soup of special facilities designed to deal with the crisis. We can thus take each facility and calculate the three measures of the Fed's commitments for each, then sum up for all the special facilities. And that is precisely what Nicola Matthews and James Felkerson have done. They are PhD students at the University of Missouri-Kansas City, working on a Ford Foundation grant under my direction, titl

Incredible video, a must see even though it's an hour long! If you want to understand how we got to into this financial-crisis, and our options for getting out, this is a must listen too speech. John Allison-the longest-tenured CEO of a top-25 financial services company "BB&T"-argues that this crisis is a legacy of the government's anti-capitalist policies. Mr. Allison uses his unique inside view of the financial services industry to show how massive government intervention into the U.S. economy-from the creation of the Federal Reserve in 1913 to a reckless crusade to encourage home-ownership-laid the groundwork for an unsustainable real estate boom. And he shows how the government's response to the inevitable bust-a frenzied series of bailouts, nationalizations, and "stimulus" efforts-is only making things worse. Finally, Mr. Allison explains the underlying philosophical reasons for the crisis, and discusses the immediate and long-term solutions. He shows that capitalism, far from being the cause of today's crisis, is its only cure. This is an incredible historical study and commentary provided by the Ayn Rand Institute

I've been reading John Mauldin's newsletter for some time now.  The guy is so grounded, and his writing style is fluid.  Mostly though i appreciate the depth of background information that surrounds the simplicity of his explanations.  Note his connections to George Friedman, Niall Ferguson David Rosenberg, Lacy Hunt and Gary Shilling.  Quite a murders row of economic thinking.  anyway, John's newsletter has become the bottom line of my economic thinking. excerpt:     "Our immersion in the details of crises that have arisen over the past eight centuries and in data on them has led us to conclude that the most commonly repeated and most expensive investment advice ever given in the boom just before a financial crisis stems from the perception that 'this time is different.' That advice, that the old rules of valuation no longer apply, is usually followed up with vigor. Financial professionals and, all too often, government leaders explain that we are doing things better than before, we are smarter, and we have learned from past mistakes. Each time, society convinces itself that the current boom, unlike the many booms that preceded catastrophic collapses in the past, is built on sound fundamentals, structural reforms, technological innovation, and good policy." - This Time is Different (Carmen M. Reinhart and Kenneth Rogoff) When does a potential crisis become an actual crisis, and how and why does it happen? Why did most everyone believe there were no problems in the US (or Japanese or European or British) economies in 2006? Yet now we are mired in a very difficult situation. "The subprime problem will be contained," said now controversially confirmed Fed Chairman Bernanke, just months before the implosion and significant Fed intervention. I have just returned from Europe, and the discussion often turned to the potential of a crisis in the Eurozone if Greece defaults. Plus, we take a look at the very positive US GDP numbers released this morning. Are we final

Not What They Had in Mind: A History of Policies that Produced the Financial Crisis of 2008. GMU economist and popular blogger Arnold Kling has released a new paper titled: "NOT WHAT THEY HAD IN MIND: A History of Policies that Produced the Financial Crisis of 2008." Kling is very much of the view that if you had to choose between blaming private sector greed and public policy, the fault lies in the latter: As this paper will illustrate, the seeds for much of the current crisis were sown in the policy "solutions" to previous financial and economic crises. Any attempt to dissect and understand the current crisis that does not account for the complex history, evolution, and integrated nature of financial regulations will not yield meaningful lessons for today's policy makers. Among the topics he addresses: housing policy, bank capital regulations, monetary policy, and bank capital regulations.   Incredible

""Firearms stand next in importance to the constitution itself. They are the American people's liberty teeth and keystone under independence … from the hour the Pilgrims landed to the present day, events, occurances and tendencies prove that to ensure peace security and happiness, the rifle and pistol are equally indispensable … the very atmosphere of firearms anywhere restrains evil interference - they deserve a place of honor with all that's good." George Washington I can't think of any reason I need to own my AR-15 assault[1] rifle. I don't pretend to need it for self defense. I also own several handguns. Any one of my handguns would be adequate to allow me an opportunity to defend myself, or another person, from virtually any act of aggression by another individual. Indeed, I could have easily halted any of the recent gun based rampages, by any of those deranged lunatics, with just one of my handguns. I wish I had been there. I have needlessly and peacefully owned my AR-15 for many years. I keep my AR-15 securely locked in a gun safe in the very same home where my young children live. My children are aware of my AR-15. Like many other things in life, I have taught my children about guns. Recently, some of my kids attended a private gun safety class given by a highly experienced gun expert. I enjoyed watching my kids learn about my AR-15. I admit being a bit nostalgic about my AR-15. I spent lots of time learning about every aspect of the AR-15 when I was in Marine Corps boot camp at Parris Island, South Carolina. I also carried an AR-15 when I served my country in Operation Desert Storm in Saudi Arabia. I had it with me when I lived in a dirt hole on the border of Kuwait. It is the weapon I know better than any other. I own lots of dangerous things I don't need. I don't need my highly modified 600+ hp Z06 Corvette, or my Harley Davidson motorcycle, or that crazy looking knife I sometimes jokingly say was imported directly from the Klingon Empire.[2] Al

Stunning stuff.  No need to bailout the European Banks because the Federal Reserve has already done that!!! The Levi Institute of Economics has published the details of the Federal Reserve's International Bankster bailout from late 2007 to 2009.  It's far more than the $16.2 Trillion the GAO audit uncovered in July of 2010.  It's far more than the $7.77 Trillion Bloomberg discovered in their Freedom of Information action against the Federal Reserve.  Researching the "recipients" of the USA Federal reserve Bankster largess, the Levi Institute documents a whopping $29 Trillion has been distributed to Bankster coffers at near zero percent interest.   Note that no debt, and no loans of any kind has been purchased, retired, restructured or otherwise dealt with.  The bad loans remain on the books, including crushing interest payments that continue to escalate and accrue.  Debtors continue to fall deeper into debt.  Foreclosure and default loom over public, private and sovereign debtors.  So where did the money go?  $29 Trill is more than enough to retire the entire USA national debt, with interest, and, every mortgage both public and private in the USA. abstract: There have been a number of estimates of the total amount of funding provided by the Federal Reserve to bail out the financial system. For example, Bloomberg recently claimed that the cumulative commitment by the Fed (this includes asset purchases plus lending) was $7.77 trillion. As part of the Ford Foundation project "A Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis," Nicola Matthews and James Felkerson have undertaken an examination of the data on the Fed's bailout of the financial system-the most comprehensive investigation of the raw data to date. This working paper is the first in a series that will report the results of this investigation. The extraordinary scope and magnitude of the recent financial crisis of 2007-09 required an

In my lifetime, I have encountered only a single trade agreement, the Agreement on Technical Barriers to Trade, that I would have supported had I been given the opportunity, and its mandates have been trashed in their implementation. Beware "trade agreements" in general. They are almost uniformly the tools of banksters seeking greater profits at the expense of non-banksters. 

This explains everything.  Sadly.  Obama is not trying to lead America forward to recovery, prosperity and strength. Quite the opposite, in fact. excerpt: The strategy of forcing political change through orchestrated crisis. The "Cloward-Piven Strategy" seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse. In a September 2009 article, James Simpson wrote an article entitled "Barack Obama and the Strategy of Manufactured Crisis". Part of a series, it connected then presidential candidate Barack Obama to individuals and organizations practicing a malevolent strategy for destroying our economy and our system of government.   The basis of this strategy is a plan called Cloward-Piven.  

The established New York credit agencies would play a strategic role in this post-1971 dollar system. During the 1970's the US Government's Securities & Exchange Commission, charged with oversight of bond and stock markets, issued a ruling giving the then-dominant New York credit rating agencies-Moody's and Standard & Poor's (and later Fitch Ratings)-a de facto guaranteed monopoly in an unregulated market, when they ruled that only "Nationally Recognized Statistical Rating Organizations" would be qualified to issue appropriate ratings, i.e. only Moody's and S&P. Corruption was made endemic to the US ratings game and Washington was party to the dirty deal. By the end of the 1970's, using the vast amount of OPEC "petro-dollars" from the two oil price shocks in 1973 and 1979, New York international banks, using London, began to loan to the rest of the world to finance imports of oil and other essentials. The New York credit rating agencies, previously primarily rating US corporate bonds, expanded into the new foreign debt markets as the largest and only established rating agencies in the new phase of dollarization and globalization of capital markets. They set up branches in Germany, France, Japan, Mexico, Argentina and other emerging markets much like the US Big Five accounting firms. During the 1980s the rating agencies played a key role in down-rating the debt of the Latin American debtor countries such as Mexico and Argentina. Their ratings determined if the debtor countries could borrow or not. Financial market insiders in London and New York openly spoke of the "political" rating agencies using their de facto monopoly to advance the agenda of Wall Street and the Dollar System behind it. Then in the 1990's, the New York rating agencies played a decisive role in spreading the "Asia Crisis" of 1997-98. With the precise timing of its downgrades they could worsen the panic because they had been suspiciously silent right up un

"Warren Buffett once referred to derivatives as "financial weapons of mass destruction", and it was inevitable that they would begin to wreak havoc on our financial system at some point.  While things may seem somewhat calm on Wall Street at the moment, the truth is that a great deal of trouble is bubbling just under the surface.  As you will see below, something happened in mid-September that required an unprecedented 405 billion dollar surge of Treasury collateral into the repo market.  I know - that sounds very complicated, so I will try to break it down more simply for you.  It appears that some very large institutions have started to get into a significant amount of trouble because of all the reckless betting that they have been doing.  This is something that I have warned would happen over and over again.  In fact, I have written about it so much that my regular readers are probably sick of hearing about it.  But this is what is going to cause the meltdown of our financial system. Many out there get upset when I compare derivatives trading to gambling, and perhaps it would be more accurate to describe most derivatives as a form of insurance.  The big financial institutions assure us that they have passed off most of the risk on these contracts to others and so there is no reason to worry according to them. Well, personally I don't buy their explanations, and a lot of others don't either.  On a very basic, primitive level, derivatives trading is gambling.  This is a point that Jeff Nielson made very eloquently in a piece that he recently published…"

The Dollar Crisis Quick Synopsis:     * Abandoning the gold standard in 1971 has resulted in large global trade imbalances and a massive buildup of foreign currency reserves     * These trade imbalances and buildup of foreign reserves have resulted in frequent booms and busts since 1971     * The Japanese bust of 1989, the Asian economic crisis of 1997, and the current US credit market collapse have resulted from the post-1971 paper money monetary system     * Abandoning the gold standard has gradually resulted in a very overvalued US dollar, and that the dollar is headed for disaster     *  "The dollar standard is inherently flawed and increasingly unstable. Its collapse will be the most important economic event of the 21st century."