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View Full Version : Has capitalism failed? -- Of course not. Keynseian Economics has.


Taco John
04-18-2008, 01:31 PM
Has Capitalism Failed?

by Ron Paul
Before the U.S. House of Representatives, July 9, 2002

It is now commonplace and politically correct to blame what is referred to as the excesses of capitalism for the economic problems we face, and especially for the Wall Street fraud that dominates the business news. Politicians are having a field day with demagoguing the issue while, of course, failing to address the fraud and deceit found in the budgetary shenanigans of the federal government – for which they are directly responsible. Instead, it gives the Keynesian crowd that run the show a chance to attack free markets and ignore the issue of sound money.

So once again we hear the chant: "Capitalism has failed; we need more government controls over the entire financial market." No one asks why the billions that have been spent and thousands of pages of regulations that have been written since the last major attack on capitalism in the 1930s didn't prevent the fraud and deception of Enron, WorldCom, and Global Crossings. That failure surely couldn't have come from a dearth of regulations.

What is distinctively absent is any mention that all financial bubbles are saturated with excesses in hype, speculation, debt, greed, fraud, gross errors in investment judgment, carelessness on the part of analysts and investors, huge paper profits, conviction that a new era economy has arrived and, above all else, pie-in-the-sky expectations.

When the bubble is inflating, there are no complaints. When it bursts, the blame game begins. This is especially true in the age of victimization, and is done on a grand scale. It quickly becomes a philosophic, partisan, class, generational, and even a racial issue. While avoiding the real cause, all the finger pointing makes it difficult to resolve the crisis and further undermines the principles upon which freedom and prosperity rest.

Nixon was right – once – when he declared "We're all Keynesians now." All of Washington is in sync in declaring that too much capitalism has brought us to where we are today. The only decision now before the central planners in Washington is whose special interests will continue to benefit from the coming pretense at reform. The various special interests will be lobbying heavily like the Wall Street investors, the corporations, the military-industrial complex, the banks, the workers, the unions, the farmers, the politicians, and everybody else.

But what is not discussed is the actual cause and perpetration of the excesses now unraveling at a frantic pace. This same response occurred in the 1930s in the United States as our policymakers responded to the very similar excesses that developed and collapsed in 1929. Because of the failure to understand the problem then, the depression was prolonged. These mistakes allowed our current problems to develop to a much greater degree. Consider the failure to come to grips with the cause of the 1980s bubble, as Japan's economy continues to linger at no-growth and recession level, with their stock market at approximately one-fourth of its peak 13 years ago. If we're not careful – and so far we've not been – we will make the same errors that will prevent the correction needed before economic growth can be resumed.

In the 1930s, it was quite popular to condemn the greed of capitalism, the gold standard, lack of regulation, and a lack government insurance on bank deposits for the disaster. Businessmen became the scapegoat. Changes were made as a result, and the welfare/warfare state was institutionalized. Easy credit became the holy grail of monetary policy, especially under Alan Greenspan, "the ultimate Maestro." Today, despite the presumed protection from these government programs built into the system, we find ourselves in a bigger mess than ever before. The bubble is bigger, the boom lasted longer, and the gold price has been deliberately undermined as an economic signal. Monetary inflation continues at a rate never seen before in a frantic effort to prop up stock prices and continue the housing bubble, while avoiding the consequences that inevitably come from easy credit. This is all done because we are unwilling to acknowledge that current policy is only setting the stage for a huge drop in the value of the dollar. Everyone fears it, but no one wants to deal with it.

Ignorance, as well as disapproval for the natural restraints placed on market excesses that capitalism and sound markets impose, cause our present leaders to reject capitalism and blame it for all the problems we face. If this fallacy is not corrected and capitalism is even further undermined, the prosperity that the free market generates will be destroyed.

Corruption and fraud in the accounting practices of many companies are coming to light. There are those who would have us believe this is an integral part of free-market capitalism. If we did have free-market capitalism, there would be no guarantees that some fraud wouldn't occur. When it did, it would then be dealt with by local law-enforcement authority and not by the politicians in Congress, who had their chance to "prevent" such problems but chose instead to politicize the issue, while using the opportunity to promote more Keynesian useless regulations.

Capitalism should not be condemned, since we haven't had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It's not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military-industrial complex, and a foreign policy controlled by corporate interests and overseas investments. Add to this centralized federal mismanagement of farming, education, medicine, insurance, banking and welfare. This is not capitalism!

To condemn free-market capitalism because of anything going on today makes no sense. There is no evidence that capitalism exists today. We are deeply involved in an interventionist-planned economy that allows major benefits to accrue to the politically connected of both political spectrums. One may condemn the fraud and the current system, but it must be called by its proper names – Keynesian inflationism, interventionism, and corporatism.

What is not discussed is that the current crop of bankruptcies reveals that the blatant distortions and lies emanating from years of speculative orgy were predictable.

First, Congress should be investigating the federal government's fraud and deception in accounting, especially in reporting future obligations such as Social Security, and how the monetary system destroys wealth. Those problems are bigger than anything in the corporate world and are the responsibility of Congress. Besides, it's the standard set by the government and the monetary system it operates that are major contributing causes to all that's wrong on Wall Street today. Where fraud does exist, it's a state rather than federal matter, and state authorities can enforce these laws without any help from Congress.

Second, we do know why financial bubbles occur, and we know from history that they are routinely associated with speculation, excessive debt, wild promises, greed, lying, and cheating. These problems were described by quite a few observers as the problems were developing throughout the 90s, but the warnings were ignored for one reason. Everybody was making a killing and no one cared, and those who were reminded of history were reassured by the Fed Chairman that "this time" a new economic era had arrived and not to worry. Productivity increases, it was said, could explain it all.

But now we know that's just not so. Speculative bubbles and all that we've been witnessing are a consequence of huge amounts of easy credit, created out of thin air by the Federal Reserve. We've had essentially no savings, which is one of the most significant driving forces in capitalism. The illusion created by low interest rates perpetuates the bubble and all the bad stuff that goes along with it. And that's not a fault of capitalism. We are dealing with a system of inflationism and interventionism that always produces a bubble economy that must end badly.

So far the assessment made by the administration, Congress, and the Fed bodes ill for our economic future. All they offer is more of the same, which can't possibly help. All it will do is drive us closer to national bankruptcy, a sharply lower dollar, and a lower standard of living for most Americans, as well as less freedom for everyone.

This is a bad scenario that need not happen. But preserving our system is impossible if the critics are allowed to blame capitalism and sound monetary policy is rejected. More spending, more debt, more easy credit, more distortion of interest rates, more regulations on everything, and more foreign meddling will soon force us into the very uncomfortable position of deciding the fate of our entire political system.

If we were to choose freedom and capitalism, we would restore our dollar to a commodity or a gold standard. Federal spending would be reduced, income taxes would be lowered, and no taxes would be levied upon savings, dividends, and capital gains. Regulations would be reduced, special-interest subsidies would be stopped, and no protectionist measures would be permitted. Our foreign policy would change, and we would bring our troops home.

We cannot depend on government to restore trust to the markets; only trustworthy people can do that. Actually, the lack of trust in Wall Street executives is healthy because it's deserved and prompts caution. The same lack of trust in politicians, the budgetary process, and the monetary system would serve as a healthy incentive for the reform in government we need.

Markets regulate better than governments can. Depending on government regulations to protect us significantly contributes to the bubble mentality.

These moves would produce the climate for releasing the creative energy necessary to simply serve consumers, which is what capitalism is all about. The system that inevitably breeds the corporate-government cronyism that created our current ongoing disaster would end.

Capitalism didn't give us this crisis of confidence now existing in the corporate world. The lack of free markets and sound money did. Congress does have a role to play, but it's not proactive. Congress' job is to get out of the way.

http://www.lewrockwell.com/paul/paul42.html

BucEyedPea
04-18-2008, 01:49 PM
You beat me to the punch. I'm so busy I wanted to put this up. Was going to later when I could. Excellent write-up!! Particularly when talk of nationalizing banks, bailing of investment banks and nationalizing airways is being discussed by some—because the market failed. LMAO!!

FD
04-18-2008, 02:43 PM
There were no bubbles or financial panics before Keynes. Fact.

Amnorix
04-18-2008, 02:58 PM
There were no bubbles or financial panics before Keynes. Fact.


That's sarcasm, I hope?

jettio
04-18-2008, 02:58 PM
If you have a regulated system with a monetary policy, you have to have appropriate regulation.

There is no doubt that deregulation of mortgage lending and deregulation that allowed for securitization of bundled bad loans enabled greed and stupidity to precipitate a crisis.

Paul is barking at the moon because his preferences will not be adopted especially when the theory of rational market actors policing themselves the he depends on was the same thing that the folks that argued for deregulation said.

If we were starting from scratch his plan might be a good idea, but we have a Keynesian system because of the Great Depression and the best approach is to have the right amount of regulation that allows for smart and honest people to grow the economy while preventing greedy and stupid people from cheating others.

Taco John
04-18-2008, 03:19 PM
Paul is barking at the moon because his preferences will not be adopted especially when the theory of rational market actors policing themselves the he depends on was the same thing that the folks that argued for deregulation said.

You can't have rational market actors in a system where credit is falsely easy to get your hands on, and there are no consequences for failure because the government will bail you out. You can regulate all you want, but all that intervention does is create the need for more regulation. Fine. Just put the blame where it goes: keynesian economics. Don't blame it on free market capitalism, because there is no evidence that even exists.


If we were starting from scratch his plan might be a good idea, but we have a Keynesian system because of the Great Depression and the best approach is to have the right amount of regulation that allows for smart and honest people to grow the economy while preventing greedy and stupid people from cheating others.


We had the Great Depression because of the Keynesian system.

FD
04-18-2008, 03:28 PM
We had the Great Depression because of the Keynesian system.

You might want to check the timeline there. Keynes published his General Theory in 1936. His main work prior to the Depression was "A Tract on Monetary Reform" which wikipedia describes as "a trenchant argument that countries should target stability of domestic prices and proposing flexible exchange rates."

Is that what caused the Depression? Did Keynes cause all the depressions that happened before he was born, too? Is it possible you're misusing the term Keynesian Economics?

oldandslow
04-18-2008, 03:31 PM
Not to mention the panic in 1890...and several before that.

Stewie
04-18-2008, 03:39 PM
No fiat system has succeeded over time. EVER!

Taco John
04-18-2008, 03:43 PM
You might want to check the timeline there. Keynes published his General Theory in 1936. His main work prior to the Depression was "A Tract on Monetary Reform" which wikipedia describes as "a trenchant argument that countries should target stability of domestic prices and proposing flexible exchange rates."

Is that what caused the Depression? Did Keynes cause all the depressions that happened before he was born, too? Is it possible you're misusing the term Keynesian Economics?

I was taking liberty there. Rather than blaming Keynes, I should have placed it where Ben Bernake places the blame for the Great Depression: The Federal Reserve.

FD
04-18-2008, 03:49 PM
I was taking liberty there. Rather than blaming Keynes, I should have placed it where Ben Bernake places the blame for the Great Depression: The Federal Reserve.

Do you know why Ben Bernanke, along with Milton Friedman and most other economists, blame the Fed for the Depression? Is it because the Fed wasn't concerned enough with sound money? This seems to be the intuition behind your claim. Is that a correct assumption?

Stewie
04-18-2008, 04:05 PM
In Bernanke's PhD thesis he blames the Fed for keeping money tight from 1930 and beyond (he still believes this). He ignored the loose money policy from 1925 to 1929 that was the real issue. More than one person has said he should have never received his PhD for that parochial view of the depression.

Amnorix
04-18-2008, 04:15 PM
No fiat system has succeeded over time. EVER!


eh? World's been succeedingly very nicely with it for 40 years now, no?

Amnorix
04-18-2008, 04:16 PM
In Bernanke's PhD thesis he blames the Fed for keeping money tight from 1930 and beyond (he still believes this). He ignored the loose money policy from 1925 to 1929 that was the real issue. More than one person has said he should have never received his PhD for that parochial view of the depression.


What a joke. He dind't get to be Fed chairman by being a marginal economist. Let's just say that "more than one person" would probably constitute a miniscule percentage of fringe economists. If it was anything more, he would not have risen to the heights he has...

FD
04-18-2008, 04:25 PM
In Bernanke's PhD thesis he blames the Fed for keeping money tight from 1930 and beyond (he still believes this). He ignored the loose money policy from 1925 to 1929 that was the real issue. More than one person has said he should have never received his PhD for that parochial view of the depression.

Practically all economists agree with his view. There is a reason he is considered one of the world's foremost experts on the Depression (along with many topics in monetary economics.) Only a few fringe extremists called the Austrian School don't agree with this view. The fact is there have been lots of financial crises both before and after the Fed but the monetary contraction following the crisis is a large part of why the Depression was the Depression. Perhaps by "more than one person" you mean yourself and TJ ( and maybe BEP?).

Stewie
04-18-2008, 04:25 PM
eh? World's been succeedingly very nicely with it for 40 years now, no?

Seen the dollar? Fiat systems are based on debt. It's easy, politically, to inflate problems away. That works until it doesn't. We are well on our way to .52 in the dollar unless the Fed gets some balls and raises rates SIGNIFICANTLY. That won't happen because it will kill our economy. So what does the Fed do? Lowers rates. Yep, that's the ticket. That's how we got in this mess in the first place.

Want a good investment? Printing presses, paper, and ink.

Stewie
04-18-2008, 04:28 PM
Practically all economists agree with his view. There is a reason he is considered one of the world's foremost experts on the Depression (along with many topics in monetary economics.) Only a few fringe extremists called the Austrian School don't agree with this view. The fact is there have been lots of financial crises both before and after the Fed but the monetary contraction following the crisis is a large part of why the Depression was the Depression. Perhaps by "more than one person" you mean yourself and TJ ( and maybe BEP?).

I can't argue with the kool-aid drinkers.

We're in a recession that will become really deep (according to the Fed) because this country's monetary policy is a joke. It has become a race to the bottom and no one realizes it. It's sad, really.

Chiefmanwillcatch
04-18-2008, 04:31 PM
The free market fails in lowering crude oil prices.

Instead it raises prices because of oil speculators by about 25%.

Stewie
04-18-2008, 04:32 PM
If you gave me a dime and I gave you $100 would you be happy? It happens every day at the Treasury.

Stewie
04-18-2008, 04:34 PM
The free market fails in lowering crude oil prices.

Instead it raises prices because of oil speculators by about 25%.

The world oil market dwarfs what any speculator(s) could do. The reason oil is at $115 is because the Fed (and the gov't) has decided to debase our currency into oblivion.

Stewie
04-18-2008, 04:40 PM
I have to go now, but I have a question for anyone interested.

Why is it necessary for the federal government to sell bonds to fund federal projects?

I'll be interested in responses, if there are any.

banyon
04-18-2008, 04:53 PM
I have to go now, but I have a question for anyone interested.

Why is it necessary for the federal government to sell bonds to fund federal projects?

I'll be interested in responses, if there are any.

Do "projects" include war?

Stewie
04-18-2008, 04:54 PM
Do "projects" include war?

No. That comes from the black hole project.

Chiefmanwillcatch
04-18-2008, 05:21 PM
eh? World's been succeedingly very nicely with it for 40 years now, no?

Is the dollar succeeding right now?

Allowing politicians to print paper is a recipe for you know what.

Most can't resist the urge for their 'wars and big projects'.

Chiefmanwillcatch
04-18-2008, 05:35 PM
The world oil market dwarfs what any speculator(s) could do. The reason oil is at $115 is because the Fed (and the gov't) has decided to debase our currency into oblivion.

Not true. A lot of US dollars is in oil futures.

CBS last night noted that 25% percent of the price is just speculation.

A form of hoarding lf you ask me.

Calcountry
04-18-2008, 06:02 PM
Seen the dollar? Fiat systems are based on debt. It's easy, politically, to inflate problems away. That works until it doesn't. We are well on our way to .52 in the dollar unless the Fed gets some balls and raises rates SIGNIFICANTLY. That won't happen because it will kill our economy. So what does the Fed do? Lowers rates. Yep, that's the ticket. That's how we got in this mess in the first place.

Want a good investment? Printing presses, paper, and ink.How long ago did I tell you fools to put some gold in your portfolios?

BucEyedPea
04-18-2008, 06:04 PM
Not to mention the panic in 1890...and several before that.

I was gonna post this to FD but I'll stop here. These words such as "panic", "depression", "recession" and a more recently coined term "soft landing" have all been terms for the same phenomena with a softening of the terms in the 20th century. Panic was used in the 19th century more then came "depression" and then "recession." Even a freer system has ebbs and flows because life isn't static...but per my studies they do eventually correct themselves. This process is not a bad thing but a good thing. We've been conditioned to think of a natural recession as bad. However, what we call the "business cycle" today is the artificial stimulus that leads to more frequent "booms and busts" with increasing inflation. This is harmful for savings. And they are taking longer to get out of. I'd rather the natural ebb and flow then a manipulated one that destroys savings and harms those on fixed incomes.
Besides savings is needed for capital investment.

BucEyedPea
04-18-2008, 06:09 PM
In Bernanke's PhD thesis he blames the Fed for keeping money tight from 1930 and beyond (he still believes this). He ignored the loose money policy from 1925 to 1929 that was the real issue. More than one person has said he should have never received his PhD for that parochial view of the depression.

And I might add the rising amount of central govt and its interference that preceded the GD. Ya' know, the "progressive" era. Well that, and distributions systems weren't as good but that's been handled.

And FDR kept us in the Depression far longer with his socialism.

BucEyedPea
04-18-2008, 06:16 PM
Practically all economists agree with his view.

So. Since when is collective thought agreement a substitute for critical thinking. Things move forward with ideas not herd instinct. It's due to the individual who rises above an avid craving for agreement who really gets things done. Every single step forward that was sound and workable was met with hostility and criticism.

There is a reason he is considered one of the world's foremost experts on the Depression (along with many topics in monetary economics.) Only a few fringe extremists called the Austrian School don't agree with this view. The fact is there have been lots of financial crises both before and after the Fed but the monetary contraction following the crisis is a large part of why the Depression was the Depression. Perhaps by "more than one person" you mean yourself and TJ ( and maybe BEP?).

Nice appeal to authority—a logical fallacy. Even when those authorities are babbling nosnense. Like when Bernanke says deficits don't matter. That right there intellectually dishonest and questionable ethics.

Don't forget the men whose thinking you follow today, were thought of as fringe at one time too. Same is true of men like Dr. Semmelweis who was called the same that you call us Miseans. It's just the opinion of an era...that will be a bygone one at some point in time like many others. You folks aren't as dominant as you once were, over the past twenty years. We are gaining ground.

Now please elaborate on "lots" of financial crisis before Keynesian Economics became in vogue for a socialist era. Please compare their severity to the recessions under Keynesian economics. Or do you prefer to regurgitate what you current professors are telling you. Fact is you can't argue the points so you and Amn resort to "fringe." ROTFLMBO!

BucEyedPea
04-18-2008, 06:20 PM
Not true. A lot of US dollars is in oil futures.

CBS last night noted that 25% percent of the price is just speculation.

A form of hoarding lf you ask me.

That hoarding, if true, is due to markets being uneasy about supplies because of war.
War always creates uncertainty in markets which also drive prices up.
It's not just ww demand although that is also a factor.

BucEyedPea
04-18-2008, 06:23 PM
Want a good investment? Printing presses, paper, and ink.

Well I make money off printing presses, paper and ink too.
We should change rock, paper scissors to ink, paper, presses these days.:D

banyon
04-18-2008, 08:41 PM
I was gonna post this to FD but I'll stop here. These words such as "panic", "depression", "recession" and a more recently coined term "soft landing" have all been terms for the same phenomena with a softening of the terms in the 20th century. Panic was used in the 19th century more then came "depression" and then "recession." Even a freer system has ebbs and flows because life isn't static...but per my studies they do eventually correct themselves. This process is not a bad thing but a good thing. We've been conditioned to think of a natural recession as bad. However, what we call the "business cycle" today is the artificial stimulus that leads to more frequent "booms and busts" with increasing inflation. This is harmful for savings. And they are taking longer to get out of. I'd rather the natural ebb and flow then a manipulated one that destroys savings and harms those on fixed incomes.
Besides savings is needed for capital investment.

Why would you think anyone would take your word for any of this?

NewChief
04-18-2008, 09:48 PM
Ideologues sure are cute.

Just like my Marxist professors in grad. school who blamed everything on capitalism, you all blame everything on socialism. It's grand to project for utopia, because nothing ever measures up to your standard, since your standard only exists within the confines of theory.

Adept Havelock
04-18-2008, 10:33 PM
Ideologues sure are cute.

Just like my Marxist professors in grad. school who blamed everything on capitalism, you all blame everything on socialism. It's grand to project for utopia, because nothing ever measures up to your standard, since your standard only exists within the confines of theory.

BEP will be along shortly to explain why the Libertarian "Utopia" isn't really a "Utopia". LMAO

BucEyedPea
04-19-2008, 06:44 AM
BEP will be along shortly to explain why the Libertarian "Utopia" isn't really a "Utopia". LMAO

Well, it's not. It doesn't claim to make life perfect for all. A person has to be more responsible for his actions or they suffer the consequences. Utopians promise the complete opposite. You don't understand libertarianism.

Remember, I'm not a libertarian. I do believe in free markets but that's not meant as an absolute. It only seems that way due to our present level of govt.Claiming this as an improvement is not a utopian argument.

Utopia is more about intentional communities that attemptto create an ideal society. There's hardly any community, in the sense we know it today, in a full libertarian paradigm.

I support the originalist center which is a balance between group (govt)/community and the individual with a few exceptions. I'm a paleo-con.
That balance should hold as the society grows and gets more complex. That hasn't happened. Govt has grown way beyond that with a large shift on the left.

Adept Havelock
04-19-2008, 10:22 AM
Well, it's not. It doesn't claim to make life perfect for all. A person has to be more responsible for his actions or they suffer the consequences. Utopians promise the complete opposite. You don't understand libertarianism.

Remember, I'm not a libertarian. I do believe in free markets but that's not meant as an absolute. It only seems that way due to our present level of govt.Claiming this as an improvement is not a utopian argument.

Utopia is more about intentional communities that attemptto create an ideal society. There's hardly any community, in the sense we know it today, in a full libertarian paradigm.

I support the originalist center which is a balance between group (govt)/community and the individual with a few exceptions. I'm a paleo-con.
That balance should hold as the society grows and gets more complex. That hasn't happened. Govt has grown way beyond that with a large shift on the left.

The other traditional definition of Utopia is simply "An Ideal Society".

As Newphin pointed out that means different things to different groups. Perfection for all is not a requirement.

Do you think the "Utopia" or "Ideal Society" of a bunch of "Christian Identity" racial separatists is even close to the "Utopia" or "Ideal Society" of the "Rainbow Family"?

Yes, I know you're using it almost strictly in the Platonic sense. Like many other relics of antiquity, It has developed a meaning beyond it's original one over the last couple thousand years.

Stewie
04-19-2008, 11:17 AM
Not true. A lot of US dollars is in oil futures.

CBS last night noted that 25% percent of the price is just speculation.

A form of hoarding lf you ask me.

Rarely to buyers of futures ever take delivery on the underlying asset so it can't be hoarding. They are just gambling (and a highly leveraged gamble at that) on the price at a specific date in the future. In my opinion, the speculation in crude is a play against the falling dollar.

JohnnyV13
04-21-2008, 05:35 PM
So. Since when is collective thought agreement a substitute for critical thinking. Things move forward with ideas not herd instinct. It's due to the individual who rises above an avid craving for agreement who really gets things done. Every single step forward that was sound and workable was met with hostility and criticism.



Nice appeal to authority—a logical fallacy. Even when those authorities are babbling nosnense. Like when Bernanke says deficits don't matter. That right there intellectually dishonest and questionable ethics.

Don't forget the men whose thinking you follow today, were thought of as fringe at one time too. Same is true of men like Dr. Semmelweis who was called the same that you call us Miseans. It's just the opinion of an era...that will be a bygone one at some point in time like many others. You folks aren't as dominant as you once were, over the past twenty years. We are gaining ground.

Now please elaborate on "lots" of financial crisis before Keynesian Economics became in vogue for a socialist era. Please compare their severity to the recessions under Keynesian economics. Or do you prefer to regurgitate what you current professors are telling you. Fact is you can't argue the points so you and Amn resort to "fringe." ROTFLMBO!

Since you don't accept GDP as a measure of economic "downturns", how, exactly are you measuring the depth of downturns and their length?

Chiefmanwillcatch
04-21-2008, 05:55 PM
If you have a regulated system with a monetary policy, you have to have appropriate regulation.

There is no doubt that deregulation of mortgage lending and deregulation that allowed for securitization of bundled bad loans enabled greed and stupidity to precipitate a crisis.

Paul is barking at the moon because his preferences will not be adopted especially when the theory of rational market actors policing themselves the he depends on was the same thing that the folks that argued for deregulation said.

If we were starting from scratch his plan might be a good idea, but we have a Keynesian system because of the Great Depression and the best approach is to have the right amount of regulation that allows for smart and honest people to grow the economy while preventing greedy and stupid people from cheating others.

Thats not how i understand it. The reason is because CONGRESS wanted affordable loans for risky loanees. Most of these people didn't have good credit. Most were black. They tried to do something counter to the free market and so this is what happens ;Loan defaults.

Congress helped create this mess.

banyon
04-21-2008, 06:22 PM
Thats not how i understand it. The reason is because CONGRESS wanted affordable loans for risky loanees. Most of these people didn't have good credit. Most were black. They tried to do something counter to the free market and so this is what happens ;Loan defaults.

Congress helped create this mess.

Heeeeere's CONGRESS:

Now, we've got a problem here in America that we have to address. Too many American families, too many minorities do not own a home. There is a home ownership gap in America. The difference between Anglo America and African American and Hispanic home ownership is too big. (Applause.) And we've got to focus the attention on this nation to address this.

And it starts with setting a goal. And so by the year 2010, we must increase minority home owners by at least 5.5 million. In order to close the homeownership gap, we've got to set a big goal for America, and focus our attention and resources on that goal. (Applause.)

And I picked a good man to help realize that goal, in Mel Martinez. I don't know if you know Mel's story, but -- (applause) -- it's an interesting story. Mel was born in Cuba. (Applause.) Yes. Mel brought his cousins with him. (Laughter.) All two of them, anyway. (Laughter and applause.)...

...And what we've got to do is to figure out how to make sure these stories are repeated over and over and over again in America. Three-quarters of white America owns their homes. Less than 50 percent of African Americans are part of the homeownership in America. And less than 50 percent of the Hispanics who live here in this country own their home. And that has got to change for the good of the country. It just does. (Applause.)

And so here are some of the ways to address the issue. First, the single greatest barrier to first time homeownership is a high downpayment. It is really hard for many, many, low income families to make the high downpayment. And so that's why I propose and urge Congress to fully fund the American Dream Downpayment Fund. This will use money, taxpayers' money to help a qualified, low income buyer make a downpayment. And that's important.

One of the barriers to homeownership is the inability to make a downpayment. And if one of the goals is to increase homeownership, it makes sense to help people pay that downpayment. We believe that the amount of money in our budget, fully approved by Congress, will help 40,000 families every year realize the dream of owning a home. (Applause.) Part of the success of Park Place is that the city of Atlanta already does this. And we want to make the plan more robust. We want to make it more full all across America...

...That's why I've challenged the industry leaders all across the country to get after it for this goal, to stay focused, to make sure that we achieve a more secure America, by achieving the goal of 5.5 million new minority home owners. I call it America's home ownership challenge.
And let me talk about some of the progress which we have made to date, as an example for others to follow. First of all, government sponsored corporations that help create our mortgage system -- I introduced two of the leaders here today -- they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion. (Applause.) I want to thank Leland and Franklin for that commitment. It's a commitment that conforms to their charters, as well, and also conforms to their hearts.

This means they will purchase more loans made by banks after Americans, Hispanics and other minorities, which will encourage homeownership. Freddie Mac will launch 25 initiatives to eliminate homeownership barriers. Under one of these, consumers with poor credit will be able to get a mortgage with an interest rate that automatically goes down after a period of consistent payments. (Applause.)

http://www.whitehouse.gov/news/releases/2002/06/20020617-2.html


America's homeownership challenge (http://www.whitehouse.gov/news/releases/2004/08/20040809-9.html)