[ExI] Article From March on SubPrime

Lee Corbin lcorbin at rawbw.com
Thu Sep 25 21:05:18 UTC 2008


Samantha writes

>>   <To see how the government contributed to the subprime mess, we
>>   must look at the feds, not the Fed. The feds helped create the
>>   problem in three main ways.>
> 
> Is it not the Fed that control interest rates and the money supply?  I  
> confess I forget which agency, quasi-governmental private group (like  
> the Fed), does what these days.  But interest rates and inflation of  
> the money supply are critical enablers of major bubbles.

Yes, that's my understanding.

> I confess I forget which agency, quasi-governmental private group
> (like the Fed), does what these days.

Well, there are more agencies, more governmental and
quasi-governmental entities every day, and their roles
and actions increase even for the established ones. You're
not alone.

> But interest rates and inflation of the money supply are
> critical enablers of major bubbles.

Good point. Nothing like easy money to throw at the
stock market. 

Meanwhile, an idiot like me saves his money, and is on
his way to the store (or to the auction) to buy something,
but someone who games the system has just gone to
the bank, and has some new hot money right off the
press (to speak metaphorically), money whose inflationary
effect has not yet spread. He outbids me at the auction,
and buys the articles at the store before I do, helping
push up the price. And the greatest injustice is that he
was able to borrow *my* money at the bank to do this;
with fractional reserve banking, it's not illegal to take
the money I deposit and use it to fuel spending in this
insidious way. Von Mieses long, long ago explained
how all this works.

> Not that it matters too much as government and the
> Fed are in cahoots running on ruining the US
> economically and selling all of us and our  
> children into the equivalent of indentured servitude.

Sure. Just the way that corporate executives will often
take their money and run when the ship looks like it's
about to go aground. Or the stock broker who has no
idea of how much his stock is worth, but is guessing
that someone else equally ignorant will buy it from
him tomorrow.

Unfortunately, we cannot do without stock brokers
and CEOs. They do create wealth through all their
activities, (and often pay the price of failure).

But the government wades in and creates havoc with
no punishment, or possibility of punishment, whatever.
No risk at all, for them.

Do we hold them to sound financial procedures the
way they hold (or are supposed to hold) accounting
firms responsible, i.e. audits?  No. The governments
that I know about steadfastly refuse to abide by the
same financial accountability rules they create for
private institutions.

Lee




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