http://www.washingtonpost.com/…

The biggest political story of 2008 is getting little coverage. It involves the collapse of assumptions that have dominated our economic debate for three decades.

Since the Reagan years, free-market cliches have passed for sophisticated economic analysis. But in the current crisis, these ideas are falling, one by one, as even conservatives recognize that capitalism is ailing.

You know the talking points: Regulation is the problem and deregulation is the solution. The distribution of income and wealth doesn’t matter. Providing incentives for the investors of capital to “grow the pie” is the only policy that counts. Free trade produces well-distributed economic growth, and any dissent from this orthodoxy is “protectionism.”

The old script is in rewrite. “We are in a worldwide crisis now because of excessive deregulation,” Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said in an interview.

He noted that in 1999 when Congress replaced the New Deal-era Glass-Steagall Act with a set of looser banking rules, “we let investment banks get into a much wider range of activities without regulation.” This helped create the subprime mortgage mess and the cascading calamity in banking.

While Frank is a liberal, the same cannot be said of Ben Bernanke, the chairman of the Federal Reserve. Yet in a speech on Tuesday, Bernanke sounded like a born-again New Dealer in calling for “a more robust framework for the prudential supervision of investment banks and other large securities dealers.”

Bernanke said the Fed needed more authority to get inside “the structure and workings of financial markets” because “recent experience has clearly illustrated the importance, for the purpose of promoting financial stability, of having detailed information about money markets and the activities of borrowers and lenders in those markets.” Sure sounds like Big Government to me.

This is the third time in 100 years that support for taken-for-granted economic ideas has crumbled. The Great Depression discredited the radical laissez-faire doctrines of the Coolidge era. Stagflation in the 1970s and early ’80s undermined New Deal ideas and called forth a rebirth of radical free-market notions. What’s becoming the Panic of 2008 will mean an end to the latest Capital Rules era.

In the campaign so far, John McCain has been clinging to the old economic orthodoxy while Barack Obama has proposed a modestly more active role for government. But the economic assumptions are changing faster than the rhetoric of the campaign. “Reality has broken in,” says Frank. And none too soon.

Is this a joke?

A Massachusetts liberal writing an article about the failures of capitalism using another Harvard grad, NJ born, Massachusetts representing liberal as a source?

Using the fact that the head of the Federal Reserve, which is about as anti-free market as you can get, wants to increase the organization’s power as evidence that free market conservatives are giving up on the free market? Who said Bernanke is conservative? Who said a central bank was free market?

Using the Great Depression as more evidence of free market failures?

Claiming John McCain is a free market conservative?

I’m just astounded by the amount of steaming feces coming off of this article.

Here is the video of Paul asking questions of Paulson and Bernanke from last Thursday. Prior only the audio was available.

It’s great to hear that the hearing over inflation and energy is happening. Lets hope it turns up something good that makes its way into the MSM.

Posted on his own website a few days ago,

Rep. Scott Garrett (R-NJ) called for answers in response to the reported value of the Bear Stearns portfolio released by the New York Federal Reserve today at 4:30pm. Garrett, a member of the Financial Services Committee, will be among those questioning Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke on Thursday, July 10 at 10:00am.

“The Fed’s action in bailing out Bear Stearns sets a precarious standard,” Garrett said. “This unprecedented expansion of authority without congressional approval exposes taxpayers to tremendous financial risk. Like most Americans, I want market discipline – but the Federal Reserve cannot create that by fabricating new regulatory authority.”

Garrett also criticized House Financial Services Committee Chairman Barney Frank (D-MA) for the delay in holding hearings into the incident. With the support of 23 other members, Garrett sent a letter to Frank requesting a congressional hearing, a request that was largely ignored for three months. It was only recently that Frank scheduled committee hearings to explore the potential systemic risk associated with the Fed’s actions. In the statement released by the House Financial Services Committee on Wednesday, Frank announced that the committee would explore the adequacy of current oversight and regulatory tools.

“Our nation’s hardworking taxpayers have been put on the hook for Bear Stearns’ collapse. They deserve a thorough explanation of the Fed’s rationale for the bail-out, as well as a solid plan for how the Fed will deal with future instances of this nature,” Garrett said. “While it is important that the government work closely with industry to ensure the stability and liquidity of our nation’s financial markets, we must be cautious about encouraging further risky business decisions by using government tools to prevent the free market from acting appropriately.”

An audio link of Garrett’s questions and Federal Reserve Chairman Ben Bernanke’s answers here.

Transcribed / paraphrased text on the other side of the jump…

Read More…

http://www.fortbendnow.com/…

In the face of $4 per gallon gasoline and predictions the price will rise to $7 by the end of summer, Congressman Ron Paul (R-Lake Jackson) is calling on Congress to explore how the weakened value of the dollar may be contributing to the rise in oil prices.

Paul, whose 14th Congressional District of Texas includes part of the Katy area and much of Cinco Ranch, said he wants Congress to hold hearings on the relationship between the falling value of the dollar and the recent rise of oil prices.

As ranking member of the House Subcommittee on Domestic and International Monetary Policy, Paul sent a letter earlier this week to Rep. Barney Frank (D-Mass.), chairman of the House Financial Services committee, asking for the hearings.

“The price of oil is currently among the most pressing issues to American workers,” Paul said. “Congress should be examining all factors contributing to the high cost of oil, and monetary policy is one of the key factors in the run-up in price.”

Paul’s letter pointed out that the price of oil in dollars has risen 39 percent this year. Oil in Euros has only risen 30 percent, resulting in degraded purchasing power of the dollar of at least 80 cents of the increased price of a gallon of gas.

“Neither the Federal Reserve nor the Treasury Department have been willing to take responsibility for the dollar’s slide over the past several years, while American consumers have been forced to pay continually higher prices for gasoline, heating oil and numerous other imported products upon which Americans depend,” Paul noted in his letter. “American consumers cannot afford to allow continued lax Congressional oversight of the Federal Reserve and the Treasury Department’s duties as stewards of the dollar, especially since the dollar is a major factor in the skyrocketing price of oil.”

Besides himself, 16 other Members of Congress signed on to the letter, including ranking member of the House Committee on Financial Services Spencer Bachus, and Chairman of the Republican Study Committee, Rep. Jeb Hensarling.

Hopefully DownsizeDC will get something going on this. If anything this could be an educational tool for those who would be participating. The more congress critters who understand economics, even a little bit, the better.