[ExI] Economy: "The Big Takeover"

[Lee Corbin]

Stathis points out

> spike wrote:
> 
>> Thanks Samantha.  This is scary: I am seeing things in perfect agreement
>> with your posts.  Everywhere I look, I see new evidences of wild power grabs
>> in government, in creation of crises and taking advantage of same to grab
>> more centralized control of everything.  I see massive expansion of
>> government power, just the exact opposite of the right way to deal with an
>> economic crisis as demonstrated by Reagan: cut taxes, cut spending, reduce
>> regulation of business and personal lives.
> 
> Reagan cut taxes but the US budget deficit has been more or less
> continuously increasing ever since.

True. So many times that I can't count them, I heard
the Democratically controlled congress pronounce one
of Reagan's budgets "dead on arrival". There was no
way that they were going to cut spending. All their
power depends on it.

Unfortunately, the Republicans are no better. *They*
had complete control of congress early in the Bill
Clinton years and then again under Bush's first term.
So what happened? Well, "There was no way that they
were going to cut spending. All their power depends
on it".

> In fact, some commentators see the current financial
 > crisis as the end of a humongous bull (or bubble)
> market that started with Reagan's policies of deregulation
 > and fiscal expansion, with the blips in the early 90's
 > and 2000's in retrospect being only minor corrections.

Exactly how disastrous is the huge and super-exponentially
growing U.S. debt remains to be seen.... As if we didn't
already have enough economic problems.

But the deregulation created wealth. Well, except when it
was precluded from doing so by other existing regulation.
The totally ridiculous guarantee up to $100,000 for *any*
depositor's money in certain counts was an infinitely
tempting lure to saving and loans to take extreme advantage,
and the regulation that *had* been holding them in check
was, yes, unwisely removed.

But there shouldn't be nearly so much regulation at all,
and the government should not be in the business of
bailing out anybody---individual depositor or financial
institution.

The deep key to the whole fiasco is the pyramiding
allowed banks by the government. The Austrian economists
isolate this as the underlying cause of the eternal
economic crisis. Even our "good times" are so merely
because we're in an inflationary bubble (inflation
defined properly as how much money the government is
creating, not ephemeral price indexes).

With pyramiding, if I'm a bank and you *deposit* money
with me that you are free to withdraw at any time, and
I lend 90% of it out to (probably) successful enterprises,
then the conditions of a panic are all set. Von Mieses
emphasized almost a century ago that by law every bank
should have two lines: one for depositing money (where
it would be sacrosanct no matter how much was there),
and another for investing, where a specified due date
was emblazoned on your receipt.

Then banks could lend out as much of the latter as they
dared, and if they miscalculated and could not repay
those notes on time (because they had lent money out
too riskily), down the drain they went (including
possible jail time depending on the severity of the
misappropriations, or possible corruption).

In this latter case, only your insurance company could
possibly repay you, and your insurance company may not
cover certain banks that had a bad reputation.

At the base of our entire eventually doomed *scheme*
lies the pyramiding of bank deposits, where many people
walk around thinking they own the same dollar.

Lee