Skip navigation

Tag Archives: housing bubble

The media pundits are shocked! The politicians are slack-jawed. What can we do? Our financial system is in tatters! We’re in a housing crisis, a recession, or a depression, depending on which term you prefer. Credit has dried up for all but the squeaky cleanest of borrowers! How could this be possible? After all, here in the good ol’ U.S. of A. we have this wonderful institution called the Federal Reserve that’s supposed to keep the financial system safe from all of those power mad, greedy capitalists who supposedly ruin the good times for everyone. Well, the whole mess can be summed up with two words: credit expansion.

From USAGold.com we see this statement concerning the central banks actions in the aftermath of the September 11 attacks : “The Fed moved aggressively to supply credit and lower interest rates in an effort to resurrect the markets and keep the economy out of recession.”

And from NPR: “Federal Reserve officials kept interest rates artificially low after the Sept. 11, 2001, terrorist attacks and that helped create the housing bubble.”

Even CNBC’s ranting establishment money man, Jim Cramer had harsh words for the Fed when he railed that, “The Federal Reserve created the stock bubble with low margin rates and it created the housing bubble with low mortgage rates, yet I never hear about anyone talking about investigating the Fed,”

And from Robert P. Murphy and Lee Hoskins on Forbes.com: “A good portion of the housing mess itself is the result of Fed policy: In response to the 2000-2001 recession, chairman Alan Greenspan brought the federal funds rate down to a shocking 1% by June 2003, then held it there for a full year.”

Those are just a few comments. However, they illustrate the dangers that are involved when the Fed slashes interest rates below the normal market level in an effort to expand credit and lead people to believe that prosperity can be created out of thin air. The Austrian economists, however, recognized the dangers of reckless credit expansion many years ago. Here a few comments from Ludwig von Mises on this subject. They are all taken from his book Human Action , which was published in 1949.

“The essence of a credit-expansion boom is not overinvestment, but investment in wrong lines, i.e., malinvestment.”

“What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse.”

“If the credit expansion is not stopped in time, the boom turns into the crack-up boom; the flight into real values begins, and the whole monetary system founders.”

“The final outcome of the credit expansion is general impoverishment.”

“Credit expansion is the governments’ foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.”

These quotations, and many others on various topics and issues are compiled in The Quotable Mises, edited by Mark Thornton.

Advertisements

Wow! It’s been over four months since my last blog post! My, how time flies when I’m thoroughly disgusted with politics! And that just about sums it up for me. I’m disgusted.

It was just over one year ago when I attended a rally for erstwhile Republican presidential candidate Ron Paul here in Pittsburgh. As the year passed I watched the “news” and the “debates,” and came to this conclusion: everything about the American political system as it is now construed is a farce.

Why do I say it’s a farce? Well, let’s just start with the blatant violation of the Constitution by nearly all politicians. Now, maybe I’m missing something here but, it is supposed to be the law of the land, is it not? It is supposed to protect us, the people, against the depredations of government, right? Well, unfortunately, most politicians simply regard it as “just a piece of paper.” And while there are numerous abuses of that document that could be noted, I’ll just mention  the one I consider to be the most egregious. It’s pretty simple, really. According to the Constitution  the power to declare war is given to Congress. However, since the Korean War, yes for longer than half a century,  the president, regardless of his party affiliation, regardless of any popular outcry against going to war from the American people, has been given the authority to bomb anyone, anywhere, at any time, WITHOUT a congressional declaration of war. Congress has shirked its Constitutional responsibility, and the president is now EXPECTED to be the final arbiter in all matters of war. And what do we hear from the mainstream media about this illegal  congressional transfer and presidential usurpation of power?

Zilch.

Call it the liberal media or the conservative media. The truth is that it is the Statist media.

Even more farcical is the fact that our central bank, the Federal Reserve, receives virtually no blame for the calamitous financial situation that exists in America today. Never mind the fact that the dollar has lost 96% of its value since the Fed was created in 1913. Never mind the fact that there exists virtually no oversight of the Fed. Never mind the fact that the housing bubble never would have been “inflated” had it not been for the Fed’s artificial lowering of interest rates to ridiculous levels. Never mind the fact that the United States would not have entered into so many preposterous wars over the last several decades had it not been for the Fed’s relentless dollar creation. Don’t pay attention to any of these facts. Just listen to the blabbering airheads on CNN and Fox News, and their State Department correspondents, Defense Department correspondents, and White House correspondents. Then sleep well knowing that you are receiving the “inside scoop” from all of these wonderful “journalists” who allow us to share in their privileged access to the inner workings of the American body politic. As if they’d even be granted their “privileged access” if they actually reported the truth.

And so here we are on the eve of another presidential election. On the left we have Barack “guns and butter” Obama. On the right we have John “bombs and…well, more bombs” McCain. You call this a choice?! I’d rather see the presidency completely vacated than have either of these two frauds occupying it.

Barack Obama is not about “change.” Sorry to disappoint people but, if he really intended to change anything about the American political system he would have never made it this far in the campaign. If he truly intended to “change” Washington, the media would have paid very little attention to him. Just think about that for a second. When has the mainstream media ever glorified a candidate who truly represented a dramatic change from mainstream American politics? The bottom line is that Obama is just another politician who is willing to say anything to get elected.

As for John McCain, well, I just get the feeling that the man is desperate to be president before he shuffles off this mortal coil. Forget all of this “maverick” nonsense. The man is clueless. Oh, and he never met a war he didn’t like, so I guess that’s a plus when you’re running for President of the American Empire.

As for me, well, I think I’m going to get one of those bumper stickers that reads: “Don’t blame me. I didn’t vote!”