Archive for juli 2009

Postcards from London

juli 16, 2009

Surveillance camera

Surveillance camera in the West End, there are literally thousands of them around now.

Ron Paul

Sticker on a street sign at Piccadilly.

In this post I bring what I consider to be key information on the finance crises. The post is made up of various recent interviews.

Ron Paul talking in the U.S. House 12/10/2008:

There has been a lot of talk and a lot of publicity and a lot of arguments going back and forth about the bailout for the car companies and it is of cause very important. But in the scheme of things, you know, what does 15 billion dollars mean anymore, especially as it has been authorized? The big thing is this, the big bailout, the 8 trillion dollars, the unlimited amount. And what we have been doing for the past 6 months. We are on the road to nationalization. In many ways, we are in the mist of nationalization without a whimper. There is no real talk about it. We essentially nationalize insurance companies, the mortgage companies, the banks and medical care is moving in that direction and now the car companies are going to be run by a Car-Czar from this congress. I mean it is such an embarrassment. It is such an insult to us who believe in freedom, who believe in sound money and limited Government. It is such an insult to the whole idea of what made America great. And this is what is has come to: bailout after bailout after bailout and nobody even calls it what it really is: it is nationalization of our companies.

The Federal Reserve has literally created a trillion dollars here in the last several months, at least an obligation. That’s outside the realm of the Congress. We don’t even audit the Federal Reserve. They created this money and when the Fed Chairman comes before a committee and we ask ‘where did you dispose of this two trillion dollars that you’ve created recently’, he says ‘well it’s not your business’. That’s not necessary, not in the law, he doesn’t even have to tell us. This is how out of control this is. Sure there is a lot of debt in the economy and once a Government or corporations get in excess of the amount of debt, it is never paid for. So yeah we can transfer around. We are dealing only with finding victims. We cannot get rid of the debt whether it is our national debt or whether it is corporate debt. We need to look at the cause of these bubbles and it has to do with monetary policy and the Federal Reserve System.” (The video from the House is here , let’s hope it stays there.)

Highlights from an interview with American investor Peter Schiff  ‘Why the meltdown should have surprised no one’, recorded at the annual Austrian Scholars Conference, Ludwig von Mises Institute, 13 March 2009:

We had too many people buying houses and credit was too cheap. Everybody can agree that we need to go back to a prudent form of lending. But nobody wants to go back to prudent pricing. Everybody wants to go back to sound lending principles but leave the bubble prices intact. That’s impossible. Nobody can afford to pay these high home prices without these gimmicks. The best thing that can happen to the real estate market is that prices come down. It used to be, that the mission of Freddie Fannie, before they went broke, was to try to make home ownership affordable. Now their mission is to keep home prices high, to keep homes unaffordable, to make sure that we have to mortgage ourselves to the hilts to buy a house. The Government solution is high prices but low mortgage payments subsidized by the Government. The free market solution is low prices. Because if real estate prices go down you don’t need to borrow that much money to buy a house. So it doesn’t matter that your mortgage payment is a little higher. But the Government still looks at the problem, that home prices are falling. That’s the solution. The problem is that they went up. Now that the bubble has burst first in in the stock market and now in the real estate market, and now they are having this massive recession which has just getting started, we have barely gotten the taste of it. But unfortunately all the blame is on the free market. All the blame is on capitalism, it’s because there wasn’t enough regulation, there was too much greed. President Bush, in one of his speeches, said that Wall street got drunk. And he was right, they were drunk. So was mainstream, the whole country was drunk. But what he doesn’t point out is, where did they get the alcohol. Why were they drunk? Obviously Greenspan purred the alcohol, the Fed [Federal Reserve Bank] got everybody drunk and the Government helped out with their moral hazards and the tax codes and all the incentives and disincentives they put in, all the various ways that they interfered with the free market and removed the necessary balances that would have existed , that would have kept this from happening… What the Government did repeatedly, was to try to remove the fear. They tried to make speculating as risk less as possible. First they provided us with almost costless money with which to speculate. Then they created the idea that whenever there is a problem don’t worry the Government is going to rescue you. The Government is not gonna let the stock market go down, the Government is not gonna let you debts go bad so go ahead and keep placing them. That was the idea, that was the mentality. It was nothing that the free market did. The only entities that need more regulations was the ones the Government created. If Freddie and Fannie didn’t have a Government guaranty they wouldn’t have needed any regulation because the market would have regulated them. People would have looked at their balance sheets and said, hey you don’t have any capital, you can’t guaranty these mortgages, who are you kidding? And they never could have expanded the way they did. It was only because the Government stood behind them that people didn’t care. People said, ah the Government will never let Freddie and Fannie go bankrupt. And they were right, they didn’t.” (The video is here).

American trend forecaster Gerald Celente interviewed on Fox News 07/05/09:

“… it has been long in the making but now it is being accelerated with these programs of stimulus packages, bailouts, buyouts, Government take-over. By the way people are calling, is it Nationalism, is it Socialism? The merger of State and Corporate powers according to Mussolini, who knew a thing or two about it, is called Fascism!

You cannot print phantom money out of thin air based on nothing and producing practically nothing without destroying the economy.

First of all, the Government has to stay out of private enterprise and stop taking equity positions in it. This whole monster of ‘Too Big To Fail’ is a lot of baloney… What is the ‘too big to fail’ is the monopolies who are killing mainstream.” (The video is here).

And Gerald Celente again from a longer recent interview:

Interviewer: Do you feel people are not hopeful, that Obama won’t bring change?

Gerald Celente : “People are hopeful, they are desperate and they are fearful. And they will hang on to anything. Let’s look at the facts, a man of change? Who did he bring into Washington? You know that they say by their deeds you shall know them. Let’s look at his Treasury Secretary, Timothy Geithner, former Robert Rubin retract from the Clinton Administration, the former President of the New York Federal Reserve Bank. Change? How about Larry Summers, the former Clinton Secretary of the Treasury? I have been around a long time. I never remember a newly elected President bringing in basically the National Security team from the last administration who happened to be from another party.

Interviewer: “So you don’t think Obama is different in any way?

Gerald Celente : “By their deeds you shall know them.” (The video is here).

American investor Peter Schiff again:

When President Obama is talking about how everything is different than George Bush, how his administration is change, ‘we are doing it differently’. He hasn’t changed anything. He is doing exactly what Bush did. He inherited the same situation, only worse, and he is doing the same thing, only worse. His fiscal policy is worse that Bush’s and it is funny, as he is getting ready to sign budget or proposing a budget with nearly two trillion dollars deficit in one year he is criticizing Bush for deficit spending. What Bernanke is doing now dwarfs what Greenspan did in irresponsibility. It’s a tough race to see who is gonna go down in history as the worst Fed chairman ever. Greenspan is probably still in the lead but Bernanke is hot on his tail. The only reason that Greenspan is still wining is because he was there longer. But as far as for how many years he is been at the job its gonna go to Bernanke. So the combination of Obama Bernanke is way worse than Bush Greenspan. But it is the same philosophy. Nothing has changed. This might as well has been the third Bush term. He is doing the same exact stuff. The rhetoric is a little bit different but the policies are all the same, the ideas are all the same. That economic growth is a function of people spending money and that we need more Government to stimulate the economy, that we should bailout the people who fail and punish the people who succeed, and that we should have no interest rates, that the Fed should be cranking out money.

What we need, not only do we need to allow the companies to fail and allow Americans to stop spending. The credit crunch is a good thing. The fact that credit is being denied to American consumers is a good thing. Because credit is scarce, it is not unlimited, it is a function of savings. And if we want to have a real economy, if we want to have production, then saving needs to go to producers…

We need the Government to stop spending money and depleting our savings. We need consumers to stop spending the money and rebuild their savings. We need a recession, we need one badly… This is the price we pay for years of indulgence and reckless spending, now comes the sacrifice… The only thing the Government can do about is to acknowledge to the American public that the Government is a burden on the economy. In good times maybe we can tolerate that burden, but in bad times, there is no way. And that the only way we can rebuild the economy is with a smaller Government, not with a bigger Government. We need sound money. Unfortunately we need high interest rates. We are getting the opposite. Instead of getting higher interest rate and smaller Government we are getting lower interest rates and bigger Government. We are getting inflation and we are getting deficit spending and we are getting stimulus and we are not gonna have any different results this time around. If you liked what Bush Greenspan did to the economy then you will love what this pair does [Obama Bernanke]. But is not gonna be any better, its gotta be a bigger disaster...

The free market was getting the blame for a problem that was created by the Government. And what is happening now, is that the Government is using this economic crises, that they caused, to get even bigger. To grow their power, toe expand, to come to our rescue. To save us from the evil forces of Capitalism with Government with Socialism. When you listen to Barack Obama, I listened to his most recent speech and a lot of what he said was true. He talked about the fact that we need a genuine economy; we can’t have a false prosperity, we can’t have a prosperity based on debt and spending, we need to have a sound foundation. All of that was true. But then of cause everything else he said is wrong. He wants the US economy to have a sound foundation. But he wants to be the one that builds it. He thinks that the Government can erect a sound foundation. That central Government planning can replace the market. That resources can be allocated efficiently by politicians who wanna get votes as opposed to entrepreneurs who are looking for profits. He wants to replace the invisible hand with the hand of the state and he thinks he can do it better. We had a phone economy, that is true. We had a phony economy because of the Government. Because the Government undermined our productive capacity, undermined our ability to save, undermined our ability to manufactor and nurtured and cultivated the consumer bubble, the service sector economy, that we had that is now collapsed. And it is not Government that is gonna restore it. We need free market forces…

They say that we can’t let General Motors go bankrupt because some autoworkers will be unemployed. Well, we don’t want work just so that we can have a job. We want work because we can produce something, we want the value. If some how, if we could all have little machines so that we could push a little buttons and whatever we wanted it would magically appear. Nobody would have to work and the Government of cause would try to outlaw these gadgets because they would create a lot of unemployment. But who would care, we wouldn’t need employment, we would have everything we want. So we work because we want stuff not because we want to work. So just to preserve jobs doesn’t make any sense if they are not productive, if they are not efficient“.