Wall Street, Banks, and American Foreign Policy

A new introduction by Anthony Gregory.

Gregory writes:

The idea that corporate interests, banking elites, and politicians conspire to set US policy is at once obvious and beyond the pale. Everyone knows that the military-industrial complex is fat and corrupt, that presidents bestow money and privilege on their donors and favored businesses, that a revolving door connects Wall Street and the White House, and that economic motivations lurk behind America's wars. But to make too fine a point of this is typically dismissed as unserious conspiracy theorizing, unworthy of mainstream consideration.

We have seen this paradox at work in the aftermath of the 2008 financial collapse. The left-liberals blame Wall Street and Big Finance for betraying the masses out of predatory greed and for being rewarded for their irresponsibility by Washington's bailouts. At the same time, the Left appears reluctant to oppose these bailouts outright, seeing the spending as a necessary evil to return the global economy to stability, however inequitably. What's more, left-liberals fail to call out President Obama and Democratic leaders for their undeniable hand in all this. They blame Goldman Sachs but see their president, who got more campaign money from the firm than from almost any other source, as a helpless victim of circumstance, rather than an energetic conspirator in corporate malfeasance on top of being the enthusiastic heir and expansionist of George W. Bush's aggressive foreign policy.

The tea-party Right is also hesitant to examine the corporate state too closely. These conservatives detect an elitism in Obama's governance but are loath to earnestly challenge the economic status quo, for it would lead to uncomfortable questions about the warfare state, defense contractors, US wars, the whole history of the Republican Party, and all the typical right-wing assumptions about the inherent fairness of America's supposedly "free-enterprise" system. By refusing to admit that economic fundamentals were unsound through the entirety of the Bush years — by failing to acknowledge the imperial reality of US wars and their debilitating effect on the average household budget — the Right is forgoing its chance to delve beyond the surface in its criticism of Obama's reign.

read the entire essay

The Framework

The Framework: Explained from Mises Media on Vimeo.

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The Mises Institute worked very hard to make these books right - in terms of binding and printing. And now we see the payoff: uniform sizes in this incredible size.

This is the collection to own, gift, and read for a lifetime.

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Rothbard on Depressions and their Cures

Thus, what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, "laissez-faire" policy. Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.

The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget.

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The Problem is Central Banking

PRESIDENT BARACK OBAMA HEADS the list of Americans who believe that the continuing financial crisis should be blamed on excessive risk-taking by bankers who had an unbridled desire to make money in mortgages. These would-be reformers want stronger government regulation of the bankers to make sure that nothing like this ever happens again...

A deeper examination, however, reveals that this is neither a housing crisis nor a Wall Street banking crisis. This is a monetary crisis, rooted in the lending of money created out of thin air. This is what leads to economic booms and busts.

The current crisis goes back to the Asian Contagion of 1997 and the meltdown of the Long Term Capital Management hedge fund in 1998. In response to each of these situations, the Federal Reserve cut interest rates and rapidly expanded the money supply...

Healthy economic growth is supported by savings, rather than newly created money. People and businesses save and invest the money they don't need to consume right away. They make loans and investments that create computer equipment, copper mines, retail stores, and new homes...

How many more crises must we endure until we realize the common denominator is the creation of money and credit by the Fed? Wall Street bankers and speculators, who try to game the system and make profits during each boom, are mere bit players in these crises. By fostering the booms and triggering the busts, the real villain is the institution of central banking itself. Thus, instead of providing stability to the economy, central banking has created great instability. Until this is understood, we will make little progress in preventing future crises or easing the current one.

Lurching from crisis to crisis in boom-bust fashion is unacceptable and unnecessary. The Federal Reserve must stop juicing the economy with massive amounts of newly created money and move to a monetary system free of government-caused booms and busts.

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Essay: Faith of Entrepreneurs

There was no German miracle after World War II, he used to say; the glorious recovery was a result of economic logic working itself out through market forces. Once we understand the relationship between property rights, market prices, the time structure of production, and the division of labor, the mystery evaporates and we observe the science of human action making great things happen...

"What distinguishes the successful entrepreneur and promoter from other people," writes Mises, "is precisely the fact that he does not let himself be guided by what was and is, but arranges his affairs on the ground of his opinion about the future. He sees the past and the present as other people do; but he judges the future in a different way."

It is for this reason that entrepreneurial habit of mind cannot be implanted through training or education. It is something possessed and cultivated by an individual. There are no entrepreneurial committees, much less entrepreneurial planning boards.

The inability of governments to engage in the entrepreneurial act of faith is one of many reasons why socialism cannot work. Even if a bureaucrat can look at history and claim that his agency could have made a car, dry wall, or a microchip, that same person is at a loss to figure out how innovations in the future can take place. His only guide is technology: he can speculate about what might work better than what is presently available. But that is not the economic issue: the real issue concerns what is the best means given all the alternative uses of resources to satisfy the most urgent wants of consumers in light of an infinity of possible wants.

This is impossible for governments to do.

read the entire essay

My thoughts: When you look at history and current events, it is difficult to understand why people still think the government can be more innovation and productive than the market economy.

New Book: Readings in Applied Microeconomics

A central concern of economics is how society allocates its resources. Modern economies rely on two institutions to allocate: markets and governments. But how much of the allocating should be performed by markets and how much by governments? This collection of readings will help students appreciate the power of the market. It supplements theoretical explanations of how markets work with concrete examples, addresses questions about whether markets actually work well and offers evidence that supposed “market failures” are not as serious as claimed...

The selections should be comprehended by undergraduate students who have had an introductory course in economics. This reader can also be used as a supplement for courses in intermediate microeconomics, industrial organization, business and government, law and economics, and public policy.

click here for the preface and table of contents

Economic Fascism and the Bailout Economy

The whole structure of the national American political system has rested on the solvency of the largest American banks. These banks have all been called into question. They are now gutted. Do I see this as the end of freedom? No, I see it is the end of the fascist state. The monstrosity came close to going belly-up last October. It is on its last, tottering legs. It has lost the respect of the public...

The second event that I regard as almost comparable in importance to the collapse of the Soviet Union was the collapse of the American banking system that took place in September and October of 2008...

Anyone who does not understand the magnitude of what is taking place is an economic ignoramus...

Here is their intellectual problem: they do not believe in the free market. They cannot conceive of a social institution based on voluntarism that can break the backs of government planners and central bankers. They will believe anything but this. They think of themselves as defenders of the free market, but they do not grasp the power of the free market to enforce consumers' decisions...

It has been the Austrian School economists who have warned, decade after decade, that the increase in the federal debt would eventually threaten the solvency of the government and the stability of the dollar. Now that this is visibly coming true, we still do not hear from professional economists cries of warning regarding trillion-dollar annual federal deficits. They say nothing — except when they say it is a good idea, because it is necessary, because we have got to save the banks, because we have got to regulate the economy, and, most of all, because the unhampered free-market system really does not work.

This is what we are getting from people who have generally been known as free-market economists. They are lining up as cheerleaders as the banks go to the federal trough. The federal deficit soars into astronomical regions, and the monetary base soars just as fast, yet the academic economists are silent. This is not the silence of the lambs; this is a silence of unindicted co-conspirators...These people are apologists for the state...

The fascist state has always been an attempt to control private industry by means of inflation, taxation, and regulation. Fascism has always been a system of keeping the big boys alive and happy at the expense of the taxpayers. Of course, the faces change. The system was always one gigantic system of cartels, regulation, and fiat money...

The modern economic system is one gigantic interlocking system of promised bailouts, beginning with Social Security...

Always in the past, there has been a recovery after a recession. Always in the past, the bailouts have worked to cover up the underlying malinvested capital. Always in the past, the Federal Reserve has inflated, and the economy revived.

This economy will revive, but it will revive on a new basis. It is no longer possible for someone who understands Austrian School economics to look at this economy as anything remotely resembling a free-market economy.

read the entire essay

My thoughts: One of North's best essays. Unfortunately it could be a generation or two before we truly recover.

Capitalism is the Solution

Not only is the capitalist system not responsible for the present economic crisis, but any attempt to severely hamstring or regulate the market economy out of existence would only succeed in undermining the greatest engine of economic progress and prosperity known to mankind...

The recession has its origin in years of monetary mismanagement by the Federal Reserve System and misguided policies emanating from Washington, D.C. For the five years between 2003 and 2008, the Federal Reserve flooded the financial markets with a huge amount of money, increasing it by 50 percent or more by some measures. The St. Louis Federal Reserve Bank has tracked the impact of this monetary expansion on interest rates...

The easy money and government-guaranteed house of cards all started to come tumbling down last year, and with a huge crash during the last six months. Now, the same people in Washington who produced the mess we are in say that they need more regulatory authority to repair the very financial and housing markets their earlier actions so severely undermined.

And the same Federal Reserve System that produced the monetary excesses that generated the artificial bubbles that have now burst is busy flooding the financial markets with even more newly created money. Over the last five months they have increased the Monetary Base (cash in the system and bank reserves for loans) by 95 percent and M-1 (cash and checking deposits in banks) by almost 40 percent at an annualized rate. The concern, therefore, should not be deflation, but the likelihood of very serious price inflation over the next few years.

Trillion-dollar Federal bailouts and “stimulus” packages will only prolong the agony and delay any real economic recovery. Any government-created jobs will be at the expense of private sector employment opportunities, and will disappear as soon as the government projects come to an end.

The capitalist system is a great engine of human prosperity. It creates the profit incentives for industry and innovation that over the last half century has literally raised hundreds of millions of people out of poverty around the world. The competitive process of supply and demand brings the productive activities of tens of thousands of businesses into balance with the demands of all of us as consumers, both here in America and around the globe.

There is no economic system in all of history has had the same ability to do so much material and cultural good as the open, competitive free market. But the capitalist system cannot do its job if government interferes with its operation. Burdensome government taxes, heavy-handed government regulation, misguided government spending, and mismanagement of the monetary system only succeed in gumming up the works like so much sand in the machine.

The best pro-active policy the Federal government can undertake right now is to accept that its own past policies have caused the economic crisis we are in, and leave the market alone to rebalance itself and reestablish the basis for sustainable growth and employment in the years ahead.

read the entire essay

My thoughts: Brilliant. Only government thinks repeating the mistakes of the past represents solutions.

Hayek v Keynes

"In the long run, we are all dead," John Maynard Keynes once quipped. An influential British economist, Keynes used the line to dodge the problematic long-term implications of his policy proposals. His analysis of the Great Depression redefined economics in the 1930s and asserted that increased government spending during a downturn could revive the economy.

President Barack Obama and congressional Democrats (very few of whom likely have read Keynes's 1936 book "The General Theory of Employment, Interest and Money") have dug up the dead economist's convenient justification for deficit spending in defense of their bloated stimulus legislation. But none ask the most important question: Was Keynes right?...

A father of public choice economics, Nobel laureate James Buchanan, argues that the great flaw in Keynesianism is that it ignores the obvious, self-interested incentives of government actors implementing fiscal policy and creates intellectual cover for what would otherwise be viewed as self-serving and irresponsible behavior by politicians. It is also very difficult to turn off the spigot in better economic times, and Keynes blithely ignored the long-term effects of financing an expanded deficit.

It's clear why Keynes's popularity endures in Congress. Intellectual cover for a spending spree will always be appreciated there. But it's harder to see any justification for the perverse form of fiscal child abuse that heaps massive debts on future generations...

In reality, no one spends someone else's money better than they spend their own. The charade of the current stimulus package, chockablock with earmarks to favored pet constituencies and virtually devoid of national policy considerations, is the logical consequence of Keynesianism in action. It is about politics and power, not sound economics, and I believe that the American people will reject it.

read the WSJ essay

My thoughts: Hayek will continue to win the intellectual battle and lose the political battle until the American people once again value freedom more than the security.

Pols Never Learn

A classic essay from Hans Sennholz

Keynesian Budgets Threaten the Economy

Federal legislators and administrators apparently cannot free themselves from the spell of Keynesianism. It has such a compelling attraction because it elevates to good economics the thing they like to do most—spend other people’s money. Keynesianism permits administrators to yield to any and all spending pressures by Congress, and encourages them to take the lead in new spending initiatives. It confers respectability on political profligacy.

Unfortunately, government spending does not sustain, stimulate, or invigorate an economy. On the contrary, it diverts economic resources to many unproductive uses and thereby aggravates a recession. Boosts in spending allocate more resources to the ever-growing bureaucracy and the favorite recipients of Federal largess. This is why the Federal budgets may actually deepen and prolong the present recession...

Government spending always is presented as a benefit without cost, a grand addition to the general welfare, a social achievement of the highest order...

The Keynesian call for a sharp rise in Federal spending as an antidote for recession is neither thoughtful nor helpful; it completely misinterprets the causes and consequences of recession and, therefore, prescribes the wrong medicine. A recession is a time of readjustment and recovery when businessmen correct the mistakes made in the past and put their houses back in order. It is an integral part of a business cycle that begins with a boom, leads to a bust, and ends with recovery. If, for any reason, government prevents the readjustment or even promotes more maladjustment, it makes matters worse. In the end, the recession may turn into a deep depression, just like the Great Depression during the 1930s...

Under the sway of Keynesian thought, many politicians and officials are determined to hasten recovery through deficit spending and money creation, which they call “contra-cyclical.” Actually, their policies are “contra-recovery”; they aggravate and prolong the recession by consuming capital en masse, crowding out business, and depressing business activity. The currency and credit expansion falsely lowers interest rates, which again misleads businessmen in their investment decisions. In short, government deficit spending and money manipulation are the most potent recovery suppressors.

The present recession may prove this point. When Federal deficits are made to swell to Unprecedented levels while the recession deepens and lingers on, the Keynesian model obviously fails to demonstrate economic reality. It misinterprets the causes of recession and, therefore, prescribes a wrong medicine, in fact, a very harmful medicine.

read the entire essay

Socialism is Evil

Walter Williams on Socialism

It employs evil means, coercion or taking the property of one person, to accomplish good ends, helping one's fellow man. Helping one's fellow man in need, by reaching into one's own pockets, is a laudable and praiseworthy goal. Doing the same through coercion and reaching into another's pockets has no redeeming features and is worthy of condemnation...

I don't believe any moral case can be made for the forcible use of one person to serve the purposes of another. But that conclusion is not nearly as important as the fact that so many of my fellow Americans give wide support to using people. I would like to think it is because they haven't considered that more than $2 trillion of the over $3 trillion federal budget represents Americans using one another. Of course, they might consider it compensatory justice. For example, one American might think, "Farmers get Congress to use me to serve the needs of some farmers. I'm going to get Congress to use someone else to serve my needs by subsidizing my child's college education."

The bottom line is that we've become a nation of thieves, a value rejected by our founders. James Madison, the father of our Constitution, was horrified when Congress appropriated $15,000 to help French refugees. He said, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." Tragically, today's Americans would run Madison out of town on a rail.

read the essay

Free Market, Capitalism, and the Bailout

Bush said that his economic advisors, led by Treasury Secretary Henry Paulson, will provide further details on how this "rescue plan" will take shape:

They will make clear that each of these new programs contains safeguards to protect the taxpayers. They will make clear that the government's role will be limited and temporary. And they will make clear that these measures are not intended to take over the free market, but to preserve it.

Up is Down. Right is Left. Freedom is Slavery. We come not to bury the "free market," but to save it... just the way FDR saved capitalism!

But, to paraphrase another Savior of the Free Market, who enacted wage and price controls to save "capitalism" from itself... "Let us make one thing perfectly clear": There is no free market. And the "capitalism" they are "saving" has nothing to do with "free markets." Call it "state capitalism," or "corporatism," or "neofascism." Call it whatever the hell you want... but don't call it a "free market."

As I argued recently, the state and the banks are virtual extensions of one another, two aspects of the same structure, a "state-banking nexus," if you will. The effective
nationalization of financial institutions in this country is just a continuation of a long history of government intervention.

source

The current state and the current banking sector require one another; neither can exist without the other. They are so reciprocally intertwined that each is an extension of the other.

Remember this point the next time somebody tells you that "free market madmen" caused the current financial crisis that is threatening to undermine the economy. There is no free market. There is no "laissez-faire capitalism." The government has been deeply involved in setting the parameters for market relations for eons; in fact, genuine "laissez-faire capitalism" has never existed. Yes, trade may have been less regulated in the nineteenth century, but not even the so-called "Gilded Age" featured "unfettered" markets.

One of the reasons I have come to dislike using the term "capitalism" is that it has never, historically, manifested fully its so-called "unknown ideals." Real, actual,
historically specific "capitalism" has always entailed the intervention of the state. And that intervention has always had a class character; that is, the actions of the state have always, and must always, benefit some groups differentially at the expense of others...

It is therefore no surprise that the loudest advocates for the effective nationalization of the finance industry are to be found on Wall Street; at this point, failing financiers welcome any government actions that will socialize their risks. But such actions that socialize "losses while keeping the profits in private hands" are a hallmark of fascist and neofascist economies. They are just another manifestation of "Horwitz's First Law of Political Economy": "no one hates capitalism more than capitalists."

In the end, the proposed Paulson Plan is nothing more than a "heist," as Robert P. Murphy argues, "a grand scheme in which the public will end up owing hundreds of billions of dollars to holders of new debt claims issued by the US Treasury." Such a plan will only compound the problem.

read the entire post

My thoughts: Two outstanding posts for Chris Sciabarra. He clearly makes the case that capitalism does not mean free markets.

Sheldon Richman: Capitalism or Freedom

Capitalism or Freedom
October 17, 2008
Sheldon Richman

"These measures are not intended to take over the free market, but to preserve it," George W. Bush said in Orwellian tones Tuesday as he announced the partial nationalization of nine major American banks.

He was partly right, though not in the way he meant his words. There is no free financial market to take over. But that means there is no free market to preserve either. The moves he announced, which include government part-ownership of smaller banks too, were just more, albeit big, steps along the corporatist route the country has been following for generations...

There's an unfortunate phenomenon in politics. If a candidate says he favors markets but does little to actually free any markets once he becomes, say, president, lots of people will assume he's done so anyway. Evidence that he didn't won't matter. He will become known for his "laissez-faire, hate-the-government" policies -- even if such policies are nonexistent. Rhetoric gets all the attention.

But there's an asymmetry here. As noted, the most important deregulation of the last 30 years occurred, or at least was set in motion, by Jimmy Carter (trucking, airlines, banking, oil prices, telecommunications, and more) and Bill Clinton (banking). But no one accuses them of devotion to laissez faire. Yet Republicans who initiate little or nothing in this regard -- or worse, sponsor intervention such as protectionism -- are portrayed as Adam Smith reincarnate.

Do you sense that a political agenda overwhelms objectivity?...

The current political economy is a product of the past, and the past was not laissez faire...

The recent nationalization of the mortgage market and of major banks represent leaps in the degree of intervention. Still, they can be seen as a logical continuation of what has gone before. The crises produced by intervention summon forth further, more intense intervention. This is the way historical capitalism has worked.

Fortunately, we have an alternative: freedom and the free market.

read the entire essay

My thoughts: Perhaps it is time to totally abandon the word capitalism (the mixed economy verison) that is rapidly becoming corporatism. Supporters of freedom and free economy should embrace the terms free markets and laissez-faire.

Try Free Enterprise

The bailout passed!

Too bad...

Economist Robert Higgs of the Independent Institute looked at the credit numbers kept by the Federal Reserve. He writes: "Although certain financial institutions are undeniably in deep trouble -- difficulties of their own making ... -- credit markets in general have not ceased to operate. Moreover, lenders are extending credit in historically great amounts".

Maybe this is why CNN business reporter Ali Velshi broke ranks when reporting on "dried up" credit and said, "When I say 'dried up,' I don't mean there's no money. But you'd better have good collateral and good credit."

What's wrong with that?

I suspect that the bailout will do more harm than good, like "aiding" an alcoholic by giving him booze. It perpetuates the moral hazard produced by government guarantees that created the problems in the first place (http://tinyurl.com/5yc4fk)...

So any recession will last longer. And the moral hazard the bailout perpetuates will lead to new bubbles ... and then demands for another bailout.

Free enterprise sounds nice. We should try it sometime.

read the entire essay

My thoughts: A good layman explanation for doing nothing.

Demystifying the Mortgage Meltdown

Demystifying the Mortgage Meltdown: What It Means for Main Street, Wall Street and the U.S. Financial SystemGlenn Yago and James R. Barth

Watch the video here. (72 minutes)

Powerpoint slides (84 slides)

Back in March 2008, Treasury Secretary Henry Paulson told CNN, "I have great, great confidence in our capital markets and our financial institutions."

Just six months later, it was a different story. "The financial security of all Americans . . . depends on our ability to restore our financial institution to a sound footing," the secretary noted in a press release...

The story of the mortgage meltdown began when the Federal Reserve, in response to the recession of 2001, began slashing interest rates to historically low levels. The result was an era of easy credit that made homeownership more accessible. Soon new mortgage products were introduced, promising instant access to the American Dream.

Many subprime borrowers joined the party via adjustable-rate mortgages (ARMs), enjoying artificially low teaser rates and banking on the hope of refinancing down the road. The market encouraged this kind of wishful thinking...

read more here

The Pretense of Regulatory Knowledge

Advocates of the free market are sometimes parodied for their seemingly all-purpose answer to any problem: Let the market handle it. What may sound like a simplistic answer, however, is actually the most complex prescription imaginable. In the modern world, the workings of any particular market are so complicated, they are beyond the grasp of mere mortals. Moment by moment, day by day, so many subtly interrelated decisions are made by so many people worldwide that no individual or group could possibly understand the big picture in any detailed way. So there is nothing simplistic about proposing the market as a solution to an economic problem. It’s short way of saying: let the multitude of knowledgeable people seeking profit, risking their own money, and responding to incentives find a solution based on persuasion not force. Translated that way, it sounds like a promising approach.

Ironically, those who don’t appreciate markets are in fact the ones who offer a simplistic, even empty alleged solution to economic problems: government regulation. That phrase is uttered like an incantation, the magical answer to all doubts about how, in the absence of fully free markets, problems would be solved. The irony is that while “let the market handle it” can be unpacked and made specific, “regulation” cannot. It can only be interpreted this way: Appoint a czar or a committee to somehow watch over things, and all will be well...

But chanting “regulation” and “oversight” is not a solution to anything. It raises more questions than it answers. Even if we assume the regulatory body would be populated by honest, disinterested people (a wild assumption, we should realize by now), how would they know what to do? As noted, markets are complex beyond imagination. One may have a great deal of knowledge about one’s own sliver of a given market, but that would count for nothing were one called on to regulate the whole thing. Sure, the committee could collect data. But to what avail? Data are history. By the time it is collected, it is old...

In opposing government regulation, no free-market advocate believes the public should be left to the mercy of reckless speculators, short-sellers, and the like, whose activities have the potential to harm bystanders. The public does indeed need protection. What the free-market advocate understands, however, is that regulation is not protection but merely a shoddy, deceptive substitute for the only real protection available: market discipline.

read the entire essay

Economic Depressions: Their Cause and Cure

It is the preceding inflation that makes the depression phase necessary. The depression is the process by which the market economy adjusts, throws off the excesses and distortions of the previous inflationary boom, and reestablishes a sound economic condition.

The depression is the unpleasant but necessary reaction to the distortions and excesses of the previous boom. the business cycle is brought about, not by any mysterious failings of the free market economy, but quite the opposite: By systematic intervention by government in the market process. Government intervention brings about bank expansion and inflation, and, when the inflation comes to an end, the subsequent depression-adjustment comes into play.

What the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, "laissez-faire" policy. Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.

read the full article

Dan Mitchell on the Bailout

Bailout Would Impose Needless Economic Damage

The proposed bailout of the financial system is a misguided scheme that will hurt the U.S. economy in the short run and long run. The economy currently is stumbling as a consequence of a government-created housing bubble, but a bailout of companies, executives, and shareholders that made unwise decisions would, at best, extend the economy's adjustment process. More likely, the bailout would impose considerable additional economic damage because political factors would at least partially supplant market forces in determining the allocation of resources...

Providing government with enormous - and opaque - new powers is likely to exacerbate economic uncertainty and increase system-wide risk...

Why the Bailout is Bad for America
*The bailout is bad for the economy. The unfortunate truth is that bad government policy has resulted in excess investment in the housing sector, and the inevitable reallocation of labor and capital is going to cause some economic dislocation. The good news, though, is that this process - if not hindered - will create a stronger and more vibrant economy.

*The bailout repeats the mistakes Japan made in the 1990s.

*The bailout will increase corruption in Washington.

*The bailout rewards executives and companies that made poor choices.

*The bailout will encourage imprudent risk in the future.

Government Caused the Turmoil in Financial Markets
One of the ironies of the bailout debate is that supporters think that more government intervention is the solution to problems caused by bad government policy. The main mistake was probably the Federal Reserve's easy-money policy. By creating too much liquidity and by driving interest rates to artificially low levels, the Fed set in motion the conditions for a housing bubble...

Moreover, short-term stock market performance is a bad indicator of good government policy...

One of the reasons why short-term stock market performance can be misleading is that investors sometimes care more about what other investors think than they do about the underlying fundamentals...

When government tries to redistribute wealth from rich people to poor people, it causes economic damage by discouraging productive activity by the most successful and by discouraging productive activity from those who are lured into government dependency. The proposed bailout is even more pernicious. It would redistribute wealth from poor people to rich people, and simultaneously encourage reckless behavior by recipients and impose an immoral burden on those that behaved responsibly.

read the entire essay

Recession Reader

What’s important is not necessarily the specific political opposition to this bailout, but rather educating people about the dangers of nationalization, central banking, and government regulation. Only when people recognize the dangers of the government’s "socialism for the rich" will we be able to get back on the road to prosperity. Unfortunately, a correction is necessary. There is no such thing as a free house. The more the government intervenes, the longer and more painful it will be. But this crisis gives the country a chance to rethink its previous assumptions about the economy and the government’s role in it. Hopefully, this reader will be a first step for many into an exciting, growing branch of economic thought.

The Bailout
Stop the Bailout, Lew Rockwell, September 11, 2008.
The Government is Not Promoting Stability, Bob Murphy, September 22, 2008.
Day of Reckoning, Pat Buchanan, September 27, 2008.
Economic Depressions: Their Cause and Cure, Murray Rothbard.
Notes on the Fannie Mae/Freddie Mac Bailout, Bob Higgs, July 17, 2008.
Get Out of the Way, Anthony Gregory, July 18, 2008.
The Mises Institute’s Bailout Reader

The Bubble
The Impending End of the Housing Bubble, Bill Bonner, September 19, 2006.
Is the Housing Bubble Popping?, Mark Thornton, August 8, 2005.
Pop Goes the Bubble, Gary North, August 23, 2003.
The Land-Price Bubble, Doug French, June 10, 2003.

The Banks
Anatomy of the Bank Run, Murray Rothbard.
More Bank Failures, Doug French, August 25, 2008.
Run for Your Money, Max Raskin, September 28, 2007.

The Fed
War and Inflation, Lew Rockwell, June 9, 2008.
The Fed’s Failure, Michael Rozeff, September 17, 2008.
Why Not Abolish the Fed, Jacob Hornberger, February 5, 2008.
A Run on the State, Bill Huff, September 27, 2008.

Short Selling
Don’t Sell Short Selling Short, Gary Galles, April 7, 2007.
Ron Paul and Austrian Economics
The Austrian School and the Meltdown, Ron Paul, September 26, 2008.
The Creation of the Second Great Depression, Ron Paul, September 25, 2008.
Ron Paul Against the Bailout, Ron Paul, September 25, 2008.

We Told You So
Fannie and Freddie, Ron Paul, September 10, 2003.
‘Bull’ Market?, Mark Thornton, February 9, 2004.
We Told You So, Mark Thornton, March 24, 2007.
Falling Oil Prices: Told You So, Dom Armentano, September 10, 2008.

Podcasts
Ron Paul on the Panic of ’08, September 18, 2008.
Lew Rockwell on the Michael Reagan Show, September 26, 2008.
Robert Higgs on War and the Economy, September 25, 2008.
Steve Berger on Financial Markets, July 31, 2008.
Robert Higgs on the "Crisis," September 24, 2008.
Joe Salerno on the Broke Banks, July 23, 2008.

Books
America's Great Depression, by Murray Rothbard
The Causes of the Economic Crisis, by Ludwig von Mises
The Politically Incorrect Guide to Capitalism, by Robert Murphy
Economics in One Lesson, by Henry Hazlitt
Prices and Production, by F.A. Hayek
The Mystery of Banking, by Murray Rothbard
The Case Against the Fed, by Murray Rothbard
How Capitalism Saved America, by Thomas DiLorenzo

source

The Bailout Reader

The Bailout Reader

Fannie Mae and Freddie Mac
Freddie Mac: A Mercantilist Enterprise, by Paul Cleveland, March 14, 2005
Fannie Mae: Another New Deal Monstrosity, by Karen De Coster, July 2, 2007
How Fannie and Freddie Made Me a Grumpy Economist, by Christopher Westley, July 21, 2008 Who Made the Fannie and Freddie Threat? By Frank Shostak, March 5, 2004
Are Fannie and Freddie Too Big to Fail? By Frank Shostak, September 17, 2008
Fannie Mae Distorts Markets, by Robert Blumen, June 17, 2002

The Housing Bubble
The Real Cost of a Full Bailout, by Don Rich, August 22, 2008
The Subprime Mortgage "Crisis" Will Fix Itself, by Steve Berger, May 30, 2007
Did the Fed Cause the Housing Bubble? By Robert Murphy, April 14, 2008
The Mortgage Market Mess, by Christopher Westley, May 17, 2007
Housing Bubble: Myth or Reality? By Frank Shostak, March 4, 2003

Inflationary Finance
What's Behind the Financial Market Crisis? by Antony Mueller, September 18, 2008
Our Financial House of Cards, by George Reisman, March 25, 2008
Will Central Bankers Become Central Planners? by Robert Blumen, July 31, 2008
Inflation is a Policy that Cannot Last, by Thorsten Polleit, March 14, 2008
The Widening Safety Net, by Christopher Mayer, March 19, 2004
The Fed's New Tricks Are Creating Disaster, Frank Shostak, March 18, 2008
The Fed's War on the Middle Class, by Mark Thornton, June 4, 2008.
Austrian Economics and Financial Markets conference at The Venetian Hotel Resort Casino, Las Vegas, 02-18-2005

Community Reinvestment Act
The CRA Scam and its Defenders, by Thomas DiLorenzo, April 30, 2008
Regulatory Sneak Attack, by Thomas DiLorenzo, September 16, 1999

Short Selling
Short-Sale Restrictions Are an Exercise in Naked Power, by Robert Murphy, August 11, 2008
The Social Function of Futures Markets, by Robert Murphy, November 29, 2006
Don't Sell Short Selling Short, by Gary Galles, April 6, 2007

The Austrian Theory of the Business Cycle
The Idiocy of Wall Street, by Don Rich, September 24, 2008
The Fed is Culpable, by Hans F. Sennholz, November 11, 2002
Skyscrapers and Business Cycles, by Mark Thornton, August 23, 2008
Economic Outlook 2008: Darkening Clouds, Dominick Armentano, January 2, 2008
Business Cycle Primer, Llewellyn H. Rockwell, Jr. February 8, 2001
Economics Depressions: Their Cause and Cure, by Murray Rothbard

Who Predicted This?
The Financial Apocalyptics are Back, Robert Blumen, July 25, 2007
Sowing the Seeds of the Next Crisis, Thorsten Polleit, April 25, 2006
Credit Crisis: Precursor of Great Inflation, by Thorsten Polleit, February 7, 2008
Mr. Bailout, by Anton Mueller, September 30, 2004
America's Unsustainable Boom, by Stefan Karlsson, November 8, 2004
Who Predicted the Bubble? Who Predicted the Crash? By Mark Thornton, July 14, 2003

What To Do
Don't Bail Them Out, by Llewellyn H. Rockwell, Jr., September 10, 2008
How to Avoid Another Depression, by Mark Thornton, September 10, 2008
Taking Money Back, By Murray N. Rothbard, June 14, 2008
Beware the Alchemists, by Ludwig von Mises, February 3, 2006
Reflation in American History, by H.A. Scott Trask, October 31, 2003
Money and Freedom, by Joseph Salerno, February 2, 2002
The Case for a Genuine Gold Dollar, by Murray Rothbard

Books to Distribute
The Theory of Money and Credit, by Ludwig von Mises
America's Great Depression, by Murray Rothbard
The Mystery of Banking, by Murray Rothbard
Prices and Production, by F.A. Hayek
Causes of the Economic Crisis, by Ludwig von Mises
Austrian Theory of the Trade Cycle and Other Essays, Ludwig von Mises et al.
Understanding the Dollar Crisis, by Percy Greaves
The Case Against the Fed, by Murray Rothbard
Money, Bank Credit, and Economic Cycles, by Jesus Huerta de Soto
History of American Currency, by William Graham Sumner
Banking and the Business Cycle, by C.A. Phillips
Fiat Money Inflation in France, by Andrew Dickson White

from the Mises Institute