Socialism and the End of the American Dream

The opening words of H.R. 3200, Mr. Obama s solution to the manufactured health care quot;crisis quot; in the United States reads: quot;A Bill to provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes. quot; I haven t yet heard comment by the president or by the leaders of C

Hey guys I just joined The Free Enterprise Nation and I think ya'll would like to too. It's a group of no specific party that wants representation for members of the private sector. Do you realize how much more the members of the public sector (gov workers and pub school teachers) are making in wages and benefits? It's definitely not fair and this site is here to help.

Let stupid firms fail. We need to get back to that. Yes, the fact that the "stupid firms" this time around included most of Wall Street shows that special rules of financial bankruptcy should apply so the whole system doesn't collapse.  But the firms need to be allowed to fail. What should the special rules of financial bankruptcy be? managements should be tossed compensation contracts and other liabilities should be torn up,  bonus pools should be zeroed until the firms return to annual profitability equity and preferred holders should be wiped out, and junior bondholders should get a major haircut through the immediate, forced conversion of debt to equity. All of this should happen not over years in the courts, but overnight--in the manner in which the FDIC seizes failing banks.  In such proceedings, all of Wall Street's idiocy enablers will lose their shirts: The folks who work the at the firms, the folks who lend money to the firms, the folks who invest in the firms and trust the firms' managements to be something other than morons. Losing your shirt generally has a sobering effect on decision-making.  As long as managers, lenders, and shareholders know they will lose their shirts, the next generation of Wall Street enablers will likely be far more careful and demanding than their predecessors, at least for a little while (and don't hallucinate that the Fed's new policy is anything other than temporary). 

A slide set featuring the corruption bio of the top 16 most corrupt members of congress.  Incredible.  Seems like the longer these clowns serve, the more corrupt and innovative they become.  Kudos to the  This top tier listing must have been very competitive.  Missing are criminals like Chris Dodd, Kathleen Sebelius, and Barney Frank.  Frank and Dodd are almost single handedly responsible for the Fannie Mae - Freddie Mac mortgage crisis that tripped the entire global economy.

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

A system where bank lobbyists have been spending in record numbers to make sure it stays that way. A system that corrupts the most basic principles of competition and fair play, principles upon which this country was built. It is a system that so far has forced the taxpayer to provide the banks with the use of $14 trillion from the Federal Reserve, much of the $7 trillion outstanding at the US Treasury and $2.3 trillion at the FDIC. A system partially built by the very people who currently advise our President, run our Treasury Department and are charged with its reform. And most stunningly -- it is a system that no one in our government has yet made any effort to fundamentally change.

Economic comparison that describes the prosperity differences between a Republican led congress and a Democratic controlled congress. Excerpt: If you want to give Bill Clinton credit for economic results during his terms, you have to link those results to his policies.  If you want to give him credit for those policies, you must admit that they were virtually all in line with Republican rhetoric and antithetical to modern liberalism. But here's what you can't do and remain intellectually honest:  praise Clinton and damn Bush, and then encourage Obama to do the exact opposite of what Clinton did and to add multiple trillions of dollars to Bush's spending and deficit levels. Conservatives like me have always encouraged tax rate cuts, spending cuts, free trade and eliminating government programs like welfare and the byzantine farm program.  Reagan did what he could (with a Democrat-controlled House the entire time), and the economy grew 3.5% annually over his eight years.  Clinton did these things as well (with Republicans controlling both houses of Congress his last six years), and the economy grew 3.8% annually over his eight years. This is not hard: cut taxes, cut spending, cut programs.  Oh, and elect Republicans to the Senate.  At least that's what the facts say.

The financial crisis has propelled the Federal Reserve into an excruciating political dilemma. The Fed is at the zenith of its influence, using its extraordinary powers to rescue the economy. Yet the extreme irregularity of its behavior is producing a legitimacy crisis for the central bank. The remote technocrats at the Fed who decide money and credit policy for the nation are deliberately opaque and little understood by most Americans. For the first time in generations, they are now threatened with popular rebellion. Share this article RELATED ALSO BY Obama's False Reform ECONOMIC POLICY WILLIAM GREIDER: Congress should step up its investigations of the roots of the financial crisis and slow down the rush to weak solutions--especially the empowerment of the Federal Reserve. Bucking the Banks ECONOMIC POLICY CHRISTOPHER HAYES: How can we expect the experts to reform the financial system when it's experts who got us into this mess to begin with? » More During the past year, the Fed has flooded the streets with money--distributing trillions of dollars to banks, financial markets and commercial interests--in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers. Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really--not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities.

Half of all subprime mortgage backed securities wound up on the balance sheets of banks. This fact surprises many people who think that the problem with securitization is that it let banks off-load risky loans onto investors. If that was the strategy, however, banks wouldn't have wound up with such huge holdings of subprime securities. So why did banks snap up so many mortgage backed securities? Even banks that were originating mortgage loans preferred to securitize them, and then hold the securities. Why would they do that rather than just hold the loans? The answer is that bank regulations encouraged them to own securities rather than loans. Under the international Basel capital requirements, a well-capitalized bank was required to hold $4 for every $100 in individual mortgages-a 4% reserve requirement. But if it held the securitized the AAA and AA tranches, the bank only had to hold $1.60 in capital. That's a huge incentive to trade in a loan for a mortgage backed security. But the capital regulations did more than just create incentives to own mortgage backed securities. They allowed banks to dramatically increase their balance sheets. The lower reserve requirement allowed banks to buy even more securities than it could make loans. A bank with $4 billion in reserve could hold $100 billion in loans. But that same $4 billion could instead be used to invest in $250 billion worth of mortgage backed securities.

Here's the "housing is recovering" story graphically depicted: Anecdotally, breathless stories of the return of multiple bids are filtering into a Mainstream Media anxious to report "proof" of a "recovery in housing." Incredible graphical depiction of the historical relationship between real estate prices/home values and interest rates.

Excerpt: After 2000, the national push toward home ownership intensified in three dimensions, leading to a doubling of housing prices in just five years' time. First, the Federal Reserve Board's interest-rate policy drove down the cost of borrowing money to unprecedented lows. Second, a common conviction arose that home ownership should be available even to those who, under prevailing conditions, could not afford it. Finally, private agencies charged with determining the risk and value of securities were exceptionally generous in their assessment of the financial products known as "derivatives" whose collateral resided in the value of thousands of mortgages bundled together. The rating agencies understated the risks from these bundled mortgages by assuming that home prices were simply going to rise forever. When the housing bubble burst in 2006, the damage to the financial system pushed the global economy into the worst contraction since the Great Depression. In the midst of the pain and suffering that have accompanied financial collapse and economic contraction-over $15 trillion in wealth has been lost by American households alone while, to date, more than 6 million job losses have boosted the unemployment rate to 9.4 percent-much of the blame has been placed on unregulated financial markets whose behavior is said to have revealed a terrible flaw in the foundation of capitalism itself. This was a market failure, we are told, and the promise of capitalism has always been that the self-correcting mechanisms built into the system would preclude the possibility of a systemic market failure. But the housing bubble only burst after government subsidies pushed house prices up so fast that marginal buyers could no longer afford to chase prices even higher. A bubble created by rigged financial markets and a government-sponsored obsession with home ownership is not a result of market failure, but rather, a result of bad public policy. The belief that home ownership,

Nassim Taleb and his hedge-fund partner Mark Spitznagel weigh in in the FT with an analysis of the world's problem (too much debt) and a reasonable solution (convert some of the debt to equity).  Taleb explains how banks can end the mortgage crisis, lowering monthly mortgage payments by converting mortgage debt to equity: Excerpt: The only solution is to transform debt into equity across all sectors, in an organised and systematic way. Instead of sending hate mail to near-insolvent homeowners, banks should reach out to borrowers and offer lower interest payments in exchange for equity. Instead of debt becoming "binary" - in default or not - it could take smoothly-varying prices and banks would not need to wait for foreclosures to take action. Banks would turn from "hopers", hiding risks from themselves, into agents more engaged in economic activity. Excellent excellent excellent!

A declaration of War on the status quo ..... Excellent point-by-point summary of what has to be done to restore American liberty and prosperity, and the important role Sarah Palin can play. This article presents a conservative manifesto describing wha thas to be done to save America. The points are absolutely excellent. Excerpt: Mrs. Palin, you are now free of the Republican Party. The Party needs you more than you need it. To say that the Republican Party, on its own, has a charismatic void is a vast understatement. You are now free to wage all out war on the status quo. More importantly you are free to fashion a Reagan-esque Conservative alliance on your terms. At the risk of being presumptuous, I would suggest the following lines of attack for your war against the Democrats and the Obama/ Pelosi / Frank/ Dodd Economy. Free market capitalism must be emphasized as our only true hope for recovery -- not the crony capitalism of the Democrats..... Points include Energy Policy, Term Limit Congress, Repeal of government over-regulation, Taxes, the Judiciary, Border Protection, Abortion, Foreign Policy, and Dick "the Churchillian" Cheney

Short intro to the Michael Lewis article in Vanity Fair about the AIG implosion: http://www.vanityfair.com/politics/features/2009/08/aig200908?currentPage=1 excerpt: While nearly every other Wall Street firm had AIG's Financial Products group in Wilton, Connecticut on speed dial, Citigroup reportedly avoided doing business with them. Instead of off-loading risk onto the insurance giant by taking out credit default swap contracts, Citigroup prefered to keep one-hundred percent of the risk themselves, an AIG trader tells Michael Lewis in Vanity Fair. Lewis has a long article in this month's Vanity Fair that describes how AIG FP blew up. It's finally online and makes for an entertaining read. In case you are pressed for time, here's the short version: they sold lots of credit default swaps on subprime mortgage backed paper while no one internally had a clue what was going on.

An absolute must read By GEORGE NEWMAN. Simply precious! Every American should read this before buying into the load of bull crap pouring out of the socialists mouth. Excerpt: The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:

The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s. this article features a complete break down of where the money went!!!! New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation's gross domestic product was $14.2 trillion in 2008.

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."

"15.4 million homeowners now owe more on their houses than their houses are worth, up from 13.6 million four months ago. The number will probably top 20 million when all is said and done. To mark this sad stat, we've updated our post from last fall on the power of leverage." Excellent math in this article. Very simple and straightforward explanation. Do the math and weep.

What caused this recession? We still don't have a simple explanation. Such is the uncertainty sapping the country's confidence that in a recent Rasmussen Reports poll only 53% of Americans said they prefer capitalism to socialism; 27% were unsure and 20% preferred socialism. Before seeking political asylum in free-market Hong Kong, consider reading a new book that critiques what went wrong with capitalism, written in order to save it. Judge Richard Posner's "A Failure of Capitalism: The Crisis of '08 and the Descent into Depression" is noteworthy. As a longtime University of Chicago professor and father of the free-market-based law-and-economics movement, Judge Posner makes an unlikely critic of capitalism. But as author of some 40 books and as the most frequently cited federal appeals court jurist, he is also one of our most original and clearheaded thinkers. Who's to blame and who's responsible for the recession? Judge Posner, who calls it a depression, distinguishes between the roles played by government and the private sector. "Although financiers bear the primary responsibility for the depression," he writes, "I do not think they can be blamed for it -- implying moral censure -- any more than one can blame a lion for eating a zebra. Capitalism is Darwinian." A pragmatic explanation for behavior that looks irrational in retrospect shows that it was logical, based on incentives at the time. Blame lies elsewhere: "The responsibility for building the fences that prevent an economic collapse as a result of risky lending devolves on the government."

A bias piece by MediaMatters.