http://www.marketwatch.com/…

Central bankers and regulators are rethinking their faith in the ability of market forces alone to police the increasingly complex global financial system.

In a speech in Jackson Hole, Wyo., Federal Reserve Chairman Ben Bernanke said the Fed’s toughest challenge is not restoring growth, fighting inflation, or providing fragile banks with sufficient liquidity to get through the current financial crisis. Rather, it’s finding a way to prevent the next one.

The bailout of Bear Stearns in particular represents a failure of the supervisors to monitor the system. Bear wasn’t a particularly large institution, but its assets and liabilities were so thoroughly linked with the rest of the financial world that its failure would have been devastating, Bernanke said. Read the speech.
It’s not that Bear Stearns was too big to fail, it was too interconnected.

Bernanke suggested that the Fed and other bank supervisors need to use a holistic approach, rather than look at each institution in isolation. The explosion of securitization and derivatives in the past few decades has shifted risks in ways that aren’t immediately apparent. A risk that would be manageable for one bank would be unbearable if it applied to all, because systemic risks tend to create illiquid markets.

The regulators also have to clearly explain when and under what conditions financial institutions will be allowed to fail and when they will be bailed out, Bernanke said. To limit moral hazard, bailouts should be structured so that shareholders are wiped out, similar to the way failing banks are now treated by the Federal Deposit Insurance Corp.

Imposing systemwide supervision and regulation won’t be easy to design or cheap to implement. Unintended consequences are certain to appear. But the alternative of doing nothing would consign us to periodic costly boom and bust cycles that could leave us all poorer.

Just… wow. The organization that is the biggest nonfree component of the current economy and who is looking daily to increase its power doesn’t have faith in the market’s ability to handle things. What a shock. I love that last sentence too. “But the alternative of doing nothing would consign us to periodic costly boom and bust cycles that could leave us all poorer.” Is this guy serious? Has this guy ever opened an economics book or thought critically on the subject? Making us poorer? The Fed’s massive inflation has helped do that. So has the socialization of so many aspects of our lives. We have periodic costly boom and bust cycles BECAUSE they refuse to do nothing. The bust doesn’t make us poorer. It makes us wealthier in the end. The bust is the liquidation of bad investments. If you continue on with the malinvestment you’re continuing on with an inefficient system and not investing in the things with the highest priority. The boom shouldn’t be happening in the first place. Spurred on by cheap debt and other manipulations. Some debt so cheap, like today, that they in fact are paying people to take money. Price inflation being higher than interest rates. Even if you don’t believe Mises and Rothbard on that one show me where the Fed has stopped the cycle? Please. Once you’re finished show me how well government regulation and interference in healthcare, education, housing, the poor, drugs, etc. has done.

http://www.cato-at-liberty.org/…

Politicians who blame “speculators” in futures markets for the run up in oil prices — such as Sen. Byron Dorgan (D-N.D.) writing in this morning’s USAToday — should consider a lesson from the lowly onion.

Onions are one of the few commodities in the United States for which there are no futures markets, according to an item published Friday in Fortune magazine. (Futures markets allow the sale of commodities for set prices at future dates.) It seems that in the late 1950s domestic onion producers blamed those same speculators in futures markets for driving onion prices DOWN. They successfully lobbied Congress to ban all futures trading in onions, a ban that is still in place a half century later.

So has the absence of futures-market speculation kept onion prices low and stable? Quite the contrary. According to Fortune:

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

Sen. Dorgan and his allies will need to find someone else to blame for volitale and rising oil prices.

Isn’t this what serious economists, especially the Austrians, have been saying for perhaps 100+ years yet the politicians continue to use speculators as the scapegoat for many of the problems they instigated.

I’m sure most people have heard about this already but here is a collection of information about what’s going on.

• Ron Paul talks with Tom Abrahams on ABC 13
• Ron Paul’s Campaign for Liberty
• Campaign for Liberty’s YouTube channel

If you are in anyway a supporter of liberty and freedom, if you are a supporter of Ron Paul or anything he stands for, please signup to become a member of the Campaign for Liberty to be kept up to date on the second phase in the Ron Paul Revolution. We are looking to get 100K before September 2nd. You can read the mission statement, strategy and statement of principles at http://www.campaignforliberty.com/mission/.

There is also a blog [RSS feed] manned Trevor Lyman who helped rally people around the moneybomb concept and Michael Nystrom of Daily Paul.

I think this is a wonderful direction for Paul to take. He has no reason to continue his campaign now that all the votes are in. He can take his money and continue the momentum that his campaign has created which was what worried me the most.

OK, here is what I’m going to try to do. I’ll give what I feel is an objective and brief summary of what I read, set up the goal for next week and we’ll use the comment area for discussion. Please help me revise the summary in the comment area and join in the discussion.

Fourth Edition Forward:

Bettina B. Greaves appears to be an economics scholar affiliated with the Austrian school who edited this edition. I couldn’t find out much other info about her (him?). The forward does a nice job summing up the gist of the book and references things we won’t hit for weeks. It’s nice to know where it’s going.

Third Edition Forward:

Contains some updates and thank you’s by Mr. Mises. He talks about his usage of the terms psychology and liberal and mentions how nicely the book is bound. Too bad I’m reading it online.

Chapter 1 - Acting Man

• Action is defined as something someone does consciously and purposefully.
• It is easy to distinguish between conscious and unconscious action.
• Actions are measurable.
• We can’t get too mired down in worrying about what caused the actions or tacking value judgments onto those actions.
• People often act to decrease their uneasiness but human goals are very complex.
• There is a bunch of things other economists and scientists do that I’m not going to do.
• Without causality we couldn’t function in the world so it is fair to assume that most humans use the idea of causality to interact with other humans.

Next Installment: Both Forewords, Introduction, Chapter 1 and Chapter 2 for Sunday 6/14. Once you finish Chapter 1 feel free to add your input to this thread of comments.

http://www.lewrockwell.com/…

Tom Woods blogged about people starting book clubs, and yesterday Revolutionaries in Maryland had their first book club meeting. I was in attendance, and it was everything I hoped for and more.
Ron Paul’s message was discussed as an abstract philosophy and as it applies to certain issues. The meeting lasted about 3 hours and the last half-hour or so was spent discussing what we do next. It seemed that everyone was in agreement that this is a long-term movement that will go well past November, and also everyone felt strongly that education of our fellow citizens was extremely important; not coerced education - but a presentation of the ideas of the movement at every opportunity.
We’re going to meet monthly, choosing books from The Manifesto’s extensive reading list. Next up, I am pleased to say, is Rothbard’s “What has Government Done to Our Money?” published by the Mises Institute.

This is good to hear. Hopefully the idea spreads. The biggest thing to come out of the Ron Paul Revolution has been the social component. From the Meetup groups to moneybombs and driving crossing state lines to canvas and rally. The libertarian movement really didn’t have that before and most people need that sense of belonging in order to stay focused and not get discouraged. The stereotypical libertarian is the rugged individualist who’s likely introverted. The rugged part is generally way off but we do tend to be self motivated. This is a fairly small component of the population. That’s not to say that libertarianism only appeals to that minority. I think historically you can show this isn’t true. Thomas Paine’s Common Sense got the Colonists all worked up and it’s a very libertarian work for the time. Perhaps you could say that it was just the anti-King rants that got them going but it would seem to me it wouldn’t require Paine’s help in order to do that. There was something more about it. The idea that every man is a sovereign. The common man does believe in liberty they just need to be reminded of it. This revolution is made up of the common man and the social networks that are being created are both a sign of that and also means to sustain them. Or maybe the technology we have now makes herding cats easier.

Whatever the case it seems to me this movement has more staying power then similar ones before it. The participants are often younger and the belief in freedom rarely fades the way other political fads do. The Free State Project is showing us that even a very small percentage of the population being active on behalf of freedom can make a obvious differences in the political and apolitical spheres. Now we will bring that nationally through organizations like DownsizeDC, Free Talk Live, the RLC and maybe even the LP. And of course through the actions of dedicated individuals at their local levels.