HR1207 Passes committee against Barney Frank’s wishes

Posted on November 22nd, 2009 by bile
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In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank (D-Mass.), who had previously been a supporter.

The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed’s opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.

“The Watt amendment will fully obliterate everything 1207″ — Paul’s measure — “is intended to do,” said Paul during Thursday’s debate.

For anyone remaining confused, the debate was further clarified by the central bank itself: Federal Reserve Vice Chair Don Cohn and General Counsel Scott Alvarez spent much of the day calling committee members, urging them to oppose the Paul-Grayson amendment in favor of Watt’s, a member of Congress who asked for confidentiality told HuffPost.

Paul’s opponents also placed a letter from former Fed chairmen Alan Greenspan and Paul Volcker on the seats of every committee member. Such a move is in violation of House rules and Grayson was able to have the letters removed.

As the day wore on and support held for the Paul-Grayson side, the Fed still could hope that both would pass. Watt’s amendment, which included additional restriction, would then trump Paul’s.

To counter that possibility, the Paul-Grayson side moved to fully replace Watt’s amendment with theirs, leaving only one amendment to vote on. The motion carried and the amendment passed in a landslide.

The GOP broadly backed the amendment, though Frank chided them for finding their love of Fed transparency only after they lost power, noting that Paul has been introducing some version of the measure since 1983.

Frank said he was opposing the Paul amendment because it could be perceived as influencing monetary policy, which can have inflationary pressure. “Perception is very important in monetary policy,” said Frank.

Great to see out of committee without Watt’s neutering. Too bad Frank either entirely ignorant of the fact that the market already knows that the monetary policy is influenced by Congress and government, too blind to see the immense harm the FED does therefore justifying such an action, or is just another shrill for the banking cartel.

Ron Paul getting some of the attention and credit he deserves

Posted on May 15th, 2009 by bile
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[msnbc 22425001/vp/30762149]

Henry Kaufman: Federal Reserve led astray by libertarian dogma

Posted on April 28th, 2009 by bile
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The Federal Reserve has been hobbled by at least two major shortcomings that were primarily responsible for the current and several previous credit crises. Its failure to spot the importance of changing financial markets and its commitment to laisser faire economics were big mistakes and justify a fundamental overhaul of the Fed.

Bill Bonner puts it well over at

How about that? America’s largest car company is going to be state-owned… nationalized… presided over by the federal bureaucrats.

It’s just a part of the shift away from the free market and towards an un-free market. Free market capitalism has failed, say the pundits. Let’s give the feds a chance.

Even Henry Kaufman, writing in today’s Financial Times, says that the Fed’s “libertarian dogma” prevented it from controlling the banks properly.

But the Fed is hardly a libertarian organization. It’s a banking cartel. As a cartel, it looks out for its member banks – and doesn’t hesitate to use state power to do so. There is nothing libertarian about it… and no dogma associated with it – except as Greenspan’s eyewash – that is even vaguely libertarian.

The Fed colluded with member banks to fix interest rates. In so doing, it helped create the biggest bubble in credit the world had ever seen. It was a terrible thing for the average fellow – who was lured deep into debt by rising house prices and cheap credit. But it was a great thing for the members of the Federal Reserve cartel. Profits in the financial sector – notably, the big Wall Street investment banks – soared.

But bankers are vulnerable to too much of a good thing – just like everyone else. Soon, they made the classic Wall Street mistake – they came to believe their own hype. Not only did they gin up trillions of dollars’ worth of preposterous financial instruments… they actually bought these debt bombs from each other.

This posed a grave danger to the nation’s economy… and to the banking system. Henry Kaufman claims the regulators dropped the ball because they put too much faith in the free market. But the regulators were little more than front men for the banks themselves. After Alan Greenspan came Henry Paulson as head of the Fed. He was probably still replying to messages at his old address when the crisis began. And the head of the New York Fed – now, US Treasury Secretary Tim Geithner – was elected to his post by the very institutions he was supposed to be overseeing.

Neither of them was about to stop the party; they and their friends were having too much fun.

I agree it was inconsistency which helped lead to this. You can’t supercharge an industry and remove the governors (regulations) and not expect shit to hit the fan eventually.

Let’s be consistent. Remove the supercharger. Remove the governors. Stop tweaking with a system you can’t possibly control and leave it be. Get rid of the Federal Reserve and it’s monoply on interest rates and money and credit creation. Remove it’s monopoly on legal tender. Treat fractional reserve banking as the fraud it is (in its current form anyway). Allow the bubble created “too big to fail” failures to fail and go into bankruptcy. Oh and stop handing out our grandchildren’s future tax dollars on failed institutions.

Speaking of which… yesterday Obama said that the government should spend as much on R&D as on the military. On Slashdot someone asked why when we are already in debt would we be spending money on something that would help us but costs would be placed on our children. A response was that it would more likely help them because the advancements would come out later.

My question is… what moral authority does this guy have spending future generations money (which will be forcefully taken from them) regardless of who it will directly effect? Is that not taxation without representation? They have had no say in the matter. Why not let the bureaucrat tyrants of their own time decide how best to steal from them?

Two NJ high school students arrested for attempting to stimulate the economy

Posted on April 20th, 2009 by bile
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Two New Jersey high school students are accused of counterfeiting and selling the fake bills to classmates.

Police said they are still trying to determine how much money the 16-year-old sophomore and 17-year-old junior at Colts Neck High School printed.

Detective Sgt. Joseph Whitehead said the boys sold the fake $10s and $20s in exchange for real cash in smaller denominations.

Officials said some of the money was used in the school cafeteria. Workers discovered the funny money and alerted school administrators, who called police.

The boys are charged with forgery and were released to their parents.

Their names have not been released because they are juveniles.

You know where I was going to go with this… I’ll let one of the commenters on the article do it for me:

Ben Bernanke and Alan Greenspan aren’t juveniles. This is just another case of the government covering up for the Federal Reserve.

Giving out $10s and $20s in exchange for smaller denominations = giving out hundred of billions of dollars in exchange for worthless mortgage and debt securities of lower denominations.

It’s hard to manage something you can’t define

Posted on March 17th, 2009 by bile
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Ron Paul questioning Greenspan about M3 and the increase in the money supply in 2000.

On Ladders and Models by Citizien X

Posted on January 16th, 2009 by bile
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“President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter.” – Washington Dispatch, 21 October 1930

President-elect Barack Obama claims that his economic stimulus package will create or save three to four million American jobs. Wow! Why not five million or ten million? How, in fact, did Obama’s advisors arrive at three to four million? Well, they used sophisticated economic models. But there is a problem with those models. The 14-page analysis of Obama’s $775 billion plan, which was posted on the Internet, concedes that the estimates are “subject to significant margins of error, both because of the assumptions that went into their economic models and because no one knows the final outlines of the package that will emerge from Congress” [emphasis added].

There’s an old joke about economists. An economist, a lawyer, and an engineer fall into a pit. Not having a way out, each one sets about solving their problem. Unfortunately, they don’t have any materials to build a ladder. Thus, the lawyer’s rhetorical skills and legal knowledge are useless. The engineer can design a ladder but has nothing with which to build it. The economist, however, fails to see a problem. He just assumes that they have a ladder!!!

Obama’s advisors are assuming that Keynesian economics will be the ladder that allows the U.S. to climb out of the hole into which the Keynesians pushed us in the first place.If, however, their plan doesn’t work, it won’t be the fault of the planners. It will be your fault. You see, according to mainstream economists, individuals cannot be trusted to act rationally. For example, Professor Peter Gottschalk of Boston College says that “our models are built on the assumption that on average people behave rationally and they do the right thing, but this time people did very much the wrong thing.”

Perhaps if the good professor had studied Austrian economics he would realize that his entire statement rests on a fallacy. People do act rationally. They act in ways in which they believe will yield the greatest utility—i.e., satisfaction of their most important needs and desires. Whether their decisions prove to be good or bad is another story. No one has perfect knowledge and, thus, ex ante we can only speculate on the end result of the decisions that we make. It is not until after the decision is made, ex post, that we can determine if our action was sound. Even then, whether the decision was sound or not depends on the subject valuation of the individual; not on some objective measure applied by another individual.

Since we all have different value scales, what may be a good decision for one person will seem stupid to another. For example, Warren Buffet is advising that folks buy American stocks. Good decision for Mr. Buffet. He can afford to lose a few billion dollars waiting for a stock market recovery. However, the average person who could not afford to lose a few thousand has already seen his savings decimated. He’ll choose to keep his money where it is perceived to be safe, in cash or perhaps government securities. Although this may prove detrimental in the long term, is it really irrational? Of course not; the individual is doing what he thinks is in his own best interests.

Alan Greenspan summed up the elitist economist attitude when he coined the phrase “irrational exuberance.” According to Greenspan, it is irrational exuberance on the part of investors and consumers leads to bubbles and then to busts. Sorry, Maestro, you’ve got it backwards. “Irrational exuberance” is simply people trying to take advantage of your irresponsible policies. It’s not irrational exuberance that causes the business cycle; it’s the central bank’s inflationary monetary policy. For instance, is it irrational for folks not to save when interest rates are set near zero so that there is no reward for saving? Is it irrational to think of your home as an ATM when home prices are skyrocketing due to fiscal and monetary policy?

But, hey, don’t blame Greenspan. His policies would have worked if only everyone had acted in ways he thought prudent—if they’d only been rational.

Mainstream economists assume that people are robots and that they will act in predictable ways. In reality, people act in ways which they believe will best satisfy their needs and desires. Since we all have different needs, desires, abilities, and resources, it is impossible to accurately predict how individuals will act.

Economic models are based on aggregates. But the aggregate is composed of diverse individuals acting in their own self-interest. In order to address this contradiction, economists make assumptions—they assume there is a ladder where there is in fact none. Thus, while economic models work well in the laboratory, they are virtually useless in the real world.

However, there are some assumptions which we can make about Obama’s stimulus plan:

Ramped up government spending will crowd out private investment. Resources and capital will be transferred from the productive sectors of the economy to less or non productive sectors. Government job “creation” will mean that fewer jobs are created in the private sector. FDR used the New Deal for political patronage; there is no reason to believe Obama’s administration will be any different. More government economic control will mean less individual liberty in all areas.

Finally, and most importantly, the free market—the one ladder which would allow us to escape this morass—will be crippled by more regulation, intervention, subsidies, and taxation. A real economic stimulus package would unfetter the market, bringing about real growth and real prosperity. Unfortunately, unleashing the market would mean that politicians would have to relinquish their power and control, and elitist economists would have to admit that their models are a fraud.

Don’t count on that happening any time soon. Indeed, because the market is not under their control, policy makers and their statist advisors regard the free market as out of control and thus as the enemy. Instead of allowing the free market to work, the Power Elite will do everything they possibly can to demonize and eventually kill it.

By the way, Colonel Arthur Woods established his Emergency Committee for Employment at the behest of President Hoover in October of 1930. By 1931, the unemployment rate had doubled, mostly thanks to Hoover’s incessant intervention.

Let’s hope President-elect Obama has better luck with his incessant interventions.