The Real Benefits of Incompetent Big Central Gov't

[wkmac]

February 12, 2009

Katrina Libertarian

Posted by Lew Rockwell at February 12, 2009 08:04 PM

Writes George Westfield:

I have been an avid reader of your website and a libertarian for some time now. I am pretty much a daily reader, plus I come back to check the blog several times a day. It never fails to bring a smile to my face knowing that there are other sane people out there, and especially those who can put the truth into words so well and intelligently. You and the others who contribute to your site and the Mises Institute are my personal heroes, and I salute all of you.
I came into libertarianism in dramatic fashion - I was one of those directly impacted by Hurricane Katrina. In this case, it wasn't the storm that nearly destroyed my life, but the buffoonery and evil of a rapacious and supremely incompetent Federal government, which by a fluke of circumstance I was actually able to witness from the inside. I will not recount the horrors in detail other than to say that the Byzantine and chaotic nature of the Federal bureaucracy is far, far worse than I had ever considered it to be. Quite frankly, for the entire time (very short) that I inhabited that world, I had absolutely not one clue what it was all about.
It was impossible, looking back on that chaos, to not come out of that experience without converting to libertarianism. You have written so well and eloquently on Katrina and the attendant government failures that I feel no need to recount my own opinions on the matter other than that you captured them perfectly.
And now we enter another dark period such as has periodically occurred throughout history which may yet bring us to utter ruin and the return of a new dark age. I fear and tremble greatly for this nation's future. I simply cannot understand how people cannot grasp such a basic concept as the fact that government produces no money of its own, that it serves only to redistribute funds from one party, the looted, to another, the parasite. And yet the mindless morass, including the “educated class”, calls it a “stimulus” as if it were a magical financial injection from the tooth fairy. The mind truly boggles. It calls into question the moral integrity of every American that nothing is done to stop this. I truly hope that I am wrong and that Americans are better than that. But each passing day unfortunately serves to confirm otherwise.
Especially when faced with the near entirety of the so called “better classes” marching in lockstep with the latest moral midget to wear the purple in Parasite City, I sometimes wonder whether higher education actually serves to dumb down individuals. Having spent six years total in university (two at graduate school), I have yet come to consider my advanced degrees as more of a career credential than anything that actually symbolizes anything about my level of education, achievement, or intelligence. During my time at university, in my concentration we were only required to take six credit hours of economic courses (introductory micro- and macroeconomics). I think that Austrian economics (but what other sort of economics is there that makes any sense?) should be the backbone of a university education. Maybe then more people wouldn’t attempt to pursue idiotic careers that owe some or all of their existence to backing by State guns – such as health care “administrators” and land use planners, not to mention bureaucrats to enforce the Dear Leader’s pronouncements.
I just wanted to mention how much I enjoy your site and how much it gives me hope. Little about politics and even much of life made much sense to me until I discovered the libertarian philosophy and Austrian economics, and the writings of Mises, Rothbard, Hazlitt, and others. I feel that it is not just a question of “what one believes” when coming to free-market philosophy; it is actually an issue of moral importance of the highest sort. The pertinent question of the age today is: do you favor human liberty or not? How can that question be answered in the negative if one wants to retain some shred of moral integrity?
You have been a great force for good in my life, and certainly in the lives of countless others unknown to me. I wish you the best of luck in all your future endeavors.

http://www.lewrockwell.com/blog/lewrw/archives/025322.html

And then it continues:

http://www.lewrockwell.com/blog/lewrw/archives/025323.html

&

http://www.lewrockwell.com/blog/lewrw/archives/025324.html

&

http://www.lewrockwell.com/blog/lewrw/archives/025325.html
Mike refers to his retirement from US military service and I'm betting his creds on his several pro-guns pieces posted here just went way down with some on thee comments of his!

And now we shall corrupt your young!
https://web.archive.org/web/20090420072408/http://www.collegian.psu.edu/archive/2009/02/05/author_talks_economics_future.aspx/


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[wkmac]

February 20, 2009

Predatory Legislators


With millions of homeowners now struggling to repay money they clearly never should have borrowed, our leaders have been righteously wagging fingers at predatory lenders who allegedly enticed innocent borrowers, and the country, into a financial snake pit. While the mortgage industry clearly deserves a good share of the blame, unindicted co-conspirators abound. The ringleaders are still at-large and are, in fact, busy hatching a plan to dwarf the earlier mistakes.

Contrary to the message bouncing off the marble walls of the Capitol, most borrowers in the inflating housing bubble clearly understood the terms of their loans. Most knew that they could not afford their mortgage payments once their teaser rates expired, but enthusiastically jumped into the debt pool anyway believing that guaranteed real estate appreciation, or a quick and profitable sale, would keep them afloat.

Although both lenders and borrowers were acting in their own perceived self-interest, what can we say of our economic policymakers who are expected to protect the good of all? Their actions encouraged the whole sad circus. Were it not for the excessively low interest rates provided by the Fed, the lax lending standards and moral hazards supplied by Congress courtesy of Freddie, Fannie, and the FHA, and the many real estate subsidies built into the tax code, none of these predatory loans would have been possible.

Had lenders exercised better judgment and had borrowers avoided overly burdensome debt loads, both parties would clearly be in better financial positions today. Instead, as borrowers were demanding the credit to fuel their dreams of instant real estate riches, lenders were being ordered to accommodate them.

In past generations, homebuyers were required to save for down payments and postpone their purchases until they could actually afford conventional 30-year fixed mortgages. But in recent years, as home ownership became a matter of public policy, the government accused lenders of discrimination and urged lower standards and easier terms. With government guarantees in place, the mortgage industry was happy to both expand their revenues and promote a better society.

But by denying credit, even if it requires borrowers to forgo something they clearly want, lenders not only provide a valuable service to borrowers, but to society. Given the mess in which we now find ourselves, due to the bad loans made during the real estate bubble, this lesson should have been well learned. Unfortunately it hasn’t, as the same dynamic is now playing out on a much larger scale.

Faced with a prospect of downgrading its lifestyle, the U.S. government is instead borrowing trillions of dollars to artificially inflate our deflating bubble economy. The money is being used to both expand the size of government and finance additional consumer spending. Given our financial position, this is the exact opposite of what we should be doing.

Our global creditors are now making the same mistakes made by subprime mortgage lenders. They are loaning us money that we will never be able to repay. In the process, they are enabling the largest expansion in the size of our government since the New Deal and crippling an economy already suffering from excess consumption.

Although it may sound harsh, it would be far better for all involved if our foreign friends simply cut us off. Since their loans are merely fueling the growth of our government and artificially pumping up consumer spending, their savings will not only be lost but their sacrifice will severely exacerbate our problems as well.

Just as homebuyers did earlier in this decade, the U.S. government will borrow as much money as the world is foolish enough to lend, and it will use those funds to smother the life out of our economy. At this point government is growing like a cancer, feeding mainly off the funds it borrows from abroad. In the process, it is placing a horrific debt burden on its people, committing them to either a lifetime of crippling interest payments or run-away inflation.

There is nothing inherently wrong with foreign lending. If funding were directed toward private business to enable capital investments, the loans would not only benefit lenders, but they would benefit our nation as well. The funds would fortify our industrial base and provide the necessary foundation upon which to rebuild a viable economy.

If foreigners were to cut us off, there would be some immediate pain, but tough love is exactly what we need right now. Forcing Americans to live within their means, particularly the U.S. government, will be just as beneficial to the long-term health of our economy as similar restraint would have been had it been exercised by mortgage lenders. It’s too bad so few of us seem capable of making this connection, or learning anything from the mistakes of the past – even when the ink in the history books has barely dried.

Mr. Schiff is president of Euro Pacific Capital and author of "The Little Book of Bull Moves in Bear Markets" (Wiley, 2008).

http://www.europac.net/externalframeset.asp?from=home&id=15506