April 03, 2007

Well, I think Ron Paul has just wrapped up the HP vote

Here's his paper on the housing bubble / housing crash, in its entirety.

Don't Blame the Market for Housing Bubble
by Ron Paul


The U.S. housing market, long considered vulnerable by many economists, is now on the verge of suffering a serious collapse in many regions. Commodities guru and hedge fund manager Jim Rogers warns that real estate in expensive bubble areas will drop 40 or 50%. Mainstream media outlets like the New York Times are reporting breathlessly about the possibility of widespread defaults on subprime mortgages.

When the bubble finally bursts completely, millions of Americans will be looking for someone to blame. Look for Congress to hold hearings into subprime lending practices and “predatory” mortgages. We’ll hear a lot of grandstanding about how unscrupulous lenders took advantage of poor people, and how rampant speculation caused real estate markets around the country to overheat. It will be reminiscent of the Enron hearings, and the message will be explicitly or implicitly the same: free-market capitalism, left unchecked, leads to greed, fraud, and unethical if not illegal business practices.

But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy-- through the manipulation of interest rates and the creation of money-- caused the artificial boom in mortgage lending.

The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990. Housing prices have risen dramatically not because of simple supply and demand, but because the Fed literally created demand by making the cost of borrowing money artificially cheap. When credit is cheap, individuals tend to borrow too much and spend recklessly.

This is not to say that all banks, lenders, and Wall Street firms are blameless. Many of them are politically connected, and benefited directly from the Fed’s easy money policies. And some lenders did make fraudulent or unethical loans. But every cent they loaned was first created by the Fed.

The actions of lenders are directly attributable to the policies of the Fed: when credit is cheap, why not loan money more recklessly to individuals who normally would not qualify? Even with higher default rates, lenders could make huge profits simply through volume. Subprime lending is a symptom of the housing bubble, not the cause of it.

Fed credit also distorts mortgage lending through Fannie Mae and Freddie Mac, two government schemes created by Congress supposedly to help poor people. Fannie and Freddie enjoy an implicit guarantee of a bailout by the federal government if their loans default, and thus are insulated from market forces. This insulation spurred investors to make funds available to Fannie and Freddie that otherwise would have been invested in other securities or more productive endeavors, thereby fueling the housing boom.

The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” Imagine a Brinks truck driving down a busy street with the doors wide open, and money flying out everywhere, and you’ll have a pretty good analogy for Fed policies over the last two decades. Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections. If housing prices plummet and millions of Americans find themselves owing more than their homes are worth, the blame lies squarely with Alan Greenspan and Ben Bernanke.

42 comments:

Anonymous said...

Just another reminder...

Who owns the Federal Reserve and why do we allow the Federal Reserve to continue to control our entire economy?

The real answer to this question is that the Federal Reserve is like a big Mafia loan shark. It owns America in the same way a loan shark owns his “clients!” There is absolutely no difference between the two, according to author Jim Marrs’ 1990 book, Crossfire.

No matter what the situation, whenever there is news related to the Federal Reserve, a big, loud coordinated, conspiratorial lie of omission is committed by every single news outlet in our nation.

What is this lie? It is keeping up the false impression that the Federal Reserve is part of our government. “The Fed,” as it is sometimes called, is a private for-profit bank that controls our government and our economy. They control the money supply, inflation, depressions, recessions, etc.

They are not accountable to Congress, the Executive branch or anyone in government.

FlyingMonkeyWarrior said...

Two of our Presidents that wished to abolish 'The Fed' were Kennedy and Lincoln.

Anonymous said...

Good luck.

The old boy network likes the existing system.

Anonymous said...

Stocks Surge on Home Sales Data.

What you cookin up in response to this Keith. I can almost hear your keyboard getting a workout.

Anonymous said...

Where does this info come from?

Anonymous said...

hey keith how about allowing a dissenting pint of view? why do you censor my posts? no profanity, no insults, just a different poit of view. if you are so sure you're right what are you afraid of?

Anonymous said...

wrapped up the HP vote...OK so he has the nutjob vote. Now what about the rest of the 299,999,980 Americans?

marxist said...

So, the Federal Reserve created corrupt lenders and greedy, short-sighted real estate clerks. It caused greedy home "owners" to "cash-out" so they could spend thousands on TVs and SUVs.

The Federal Reserve invented speculation and created the society where people value the accumulation of "wealth" over the health and well-being of other people.

The Federal Reserve caused people to believe that “it’s different this time”.

It's all the Federal Reserve's fault. So much for Republican personal responsibility.

The Federal Reserve did what it did with interest rates but if there is any such thing as personal accountability anymore (which apparently there isn't) then it was still people under the trapping of this capitalist system that ruined everything.

But everybody didn’t buy into this.

Anonymous said...

The Federal Reserve is not a governmental organization? That's just crazy talk.

Anonymous said...

With the 1913 Federal Reserve Act, Congress and President Wilson unconstitutionally delegated Congress' specifically assigned duty to coin debt-free money secured by its precious metals. This was done ostensibly to control the market forces which caused bank runs and periods of economic uncertainty. In retrospect, it has done neither (i.e. Great Depression) and has only undermined the financial solvency of the nation it proposed to better serve.

Allowing private institutions to set monetary policy by creating paper notes instead of holding banks to within the confines of the precious metals has proved to be a mistake. We have not yet paid (again) for this collossal error, but we soon will.

Here in Maryland, I see new banks being built every day. My grandfather used to say that banks will one day own everything - he has been proven right. However, the payback will be when the vortex of unscrupulous loans swallows their profits, and destroys the implicit trust the public has in our monetary system. People just assume a dollar is real money - they will find out otherwise soon.

Anonymous said...

Ron Paul has my vote...

Anonymous said...

Ron Paul is a libertarian and runs as a Republican for convenience. He was the Libertarian Party 1988 candidate for president and pulled about 400,000 votes. That's about as much as Thomas Jefferson would get if he came back and ran for president. America has become a land of socialists who are too ignorant and stupid to even realize this. Ron Paul is an advocate of the free-market Austrian School of Economics, which advocates a 100% gold money supply. Under such a system Internet and housing bubbles would be essentially impossible. If the human race survives another century of so without blowing itself to hell, we will probably be living under a free market with an Austrian influenced economy. This will lead to a peaceful society with small government that will have little power. Every Department of our current federal government will be gone except for a small State Department, a small War Department (call it by its real name), and an honest Justice Department. There probably won't be a Treasury Department because it will be much safer to let private banks issue money than any government department. Of there may be a small Treasury to collect small taxes based on use fees, contract guarantes, perhaps small sales-type taxes, or whatever small and unobtrusive means are used to raise the small funds for running an honest and quite small government.

Anonymous said...

Allowing private institutions to set monetary policy by creating paper notes instead of holding banks to within the confines of the precious metals has proved to be a mistake. We have not yet paid (again) for this collossal error, but we soon will.

Before the Federal Reserve, like in the 19th century, actually private institutions (the Fed is not) certainly did create paper notes and credit "at whim" the way the Fed does today. But it was much less regulated and much more corrupt. There were bank failures and much worse financial panics as well as far worse fluctuations in interest rates, along with engineered credit crunches designed to strip hard-working people of their assets.

The actual historical facts of 19th century pre-Fed banking is very different from the Doomerist/Fantasyland delusions of contemporary libertarians and gold bugs.

Indeed bank notes, legal paper money, were obligations entirely of private banks. Yes, your local bank literally printed their own money, and as much or as little as they wanted. They controlled regional economies for their own private gain. So you would have to read the note to see if you trusted that bank as being reliable or possibly sleazy. And certainly many were sleazy and without modern communication, auditing and regulation, far more sleaze and corruption was present.


By the way, the types of people railing against the Fed today were against the banking cartel in the 19th century and certainly against the tie of gold to money combined with truly privatized money creation which was quite destructive.

The idea that the US only dealt exclusively with gold coin even in the 19th century is farcical yet a persistent and very popular illusion, and in any case there is no reason to limit economic growth to the thrall of environmentally destructive mines in South Africa, Russia and Canada.

Ron Paul et al go on a very simplistic and wrong algorithm: "government bad". Fannie and Freddie were required, by regulation, to invest only in the most safe prime loans and best tranches of other pools. It was entirely private sector bubble funding and capitalist greed which created this problem.


Yes, today with today's HousingPanic the Fed and Treasury really were to blame, but not because of its intrinsic setup, but their lack of regulation.

Specifically they needed to increase reserve requirements on banks making toxic subprime baloney loans, and crack down on bad underwriting. That's what a banking regulator does! Fed and OHFEO are certainly in this business.

Greenspan does deserve some blame, Bernanke, none.

LauraVella said...

FMW said:"Two of our Presidents that wished to abolish 'The Fed' were Kennedy and Lincoln".

Exactly FMW... and we know what happed to them.

Hilary Obama said...

Anyone EVER have examples of government getting SMALLER? i dont think so. Not significantly.
I mean clinton had hiring freezes and closed military bases, thats it.

expect in 100 years for 50% of the workers to work for either federal,city, state or county government. They are already way way overwhelmingly the #1 employer.

Everyone else will work at walmart.

Anonymous said...

They're letting Paul into the debate on may 3. He's gonna cause TROUBLE!

Nine GOP White House hopefuls will participate in a May 3 debate at the Ronald Reagan Presidential Library, an event hosted by the Ronald Reagan Presidential Foundation, in conjunction with MSNBC and The Politico.

Accepting former first lady Nancy Reagan's invitation are Sen. Sam Brownback (Kan.), former Virginia governor Jim Gilmore, former New York City mayor Rudy Giuliani, former Arkansas governor Mike Huckabee, Rep. Duncan Hunter (Calif.), Sen. John McCain (Ariz.), Rep. Ron Paul (Texas), former Massachusetts governor Mitt Romney and former Wisconsin governor Tommy G. Thompson.

Anonymous said...

No one can force you to accept the unbacked (by gold) paper notes of a private bank. Idiots can do whatever they care to do and not pay attention to what their banks are doing. Prudent people will insist that privately issued money have the necessary assurances that there is real gold backing the notes, checks, paper...whatever they issue. What we don't need is a government that forces us to accept the paper of favored institutions, whether they are private or government. Leave it up to an uncoerced free market.

Charles said...

F&u@k!n A!!!!!!!!

Anonymous said...

I thought the Federal Reserve came in to being in 1910 or so and the president’s mishap in 1865 (lead poisoning) during a showing of OUR AMERICAN COUSIN I might add.

Mort said...

Voting is for chumps. We have no choice and no voice. Ron Paul is crying in the wilderness. The PTB will never let him win.

onemore said...

Most Americans seem to have this Pavlovian-like response to housing bubble bursting: Government Bad! Government Bad!

It is precisely the lack of
governmental supervision that caused this mess. 20 percent down...no, that is so old-fashioned. All you need is to write down your income here.

Nobody enforced lending standards and banks were allowed to do pretty much whatever they wanted. Greenspan was busy pleasing political leaders by adding liquidity to the system in every turn. He simply did not do his job.

We could abolish central banks but that would mean bank runs and customers really losing all there money. Even rumours were enough to cause banks go bankrupt in the 19th century. Many people would put there money under pillow instead of that money financing new companies via banks.

Anonymous said...

>> People just assume a dollar is real money - they will find out otherwise soon.

You, sir, underestimate the stupidity of the American people.

Bitter Renter said...

Libertarians: The Worst of both worlds. The selfishness and greed of the stereotypical conservative with the hedonism of the stereotypical liberal.

I see libertarians as the fratboy-types who don't want to pay taxes that support their society but want to be able to get high and go to strip clubs without interference.

Anonymous said...

FlyingMonkeyWarrior said...
Two of our Presidents that wished to abolish 'The Fed' were Kennedy and Lincoln.

April 03, 2007 3:26 PM


Don't forget Andrew Jackson!

Anonymous said...

Greenspan was a printing maniac. print out way out of a short term problem.
The guy is f''''' loser.

CptPicard said...

Funny how the blame game shifts depending on your political leanings. From the Libertarian perspective, all of a sudden individuals aren't responsible for their actions within some given situation when the blame can be put on a government agency instead of the individual. It's awfully convenient.

I am absolutely certain the view would otherwise be totally the opposite if one would argue that someone "had to agree" to horribly unbalanced terms in a situation that the same Libertarian would deem to have been appropriately free-market (that is, no government involved). After all, nobody forced anyone to agree, regardless of how much the external circumstances were pushing in certain direction!

That said, don't blame the Fed. It was people who took out the loans beyond their means, and the lenders who didn't practice due diligence. When some people willfully get in over their heads, the blame lies squarely on them, not on any other market actor, government or private.

Anonymous said...

"Before the Federal Reserve, like in the 19th century, actually private institutions (the Fed is not) certainly did create paper notes and credit "at whim" the way the Fed does today. But it was much less regulated and much more corrupt. There were bank failures and much worse financial panics as well as far worse fluctuations in interest rates, along with engineered credit crunches designed to strip hard-working people of their assets.

The actual historical facts of 19th century pre-Fed banking is very different from the Doomerist/Fantasyland delusions of contemporary libertarians and gold bugs."

Sorry, but Greenspan himself calls bullshit.

http://www.321gold.com/fed/greenspan/1966.html

"A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion."

Anonymous said...

"Greenspan does deserve some blame, Bernanke, none. "

Wha???
How about getting your head of your ass for one thing...

The FED IS 100% responsible. And should get ALL the blame. (See Ron Pauls speech)

Anyone who cant see that fact is dumber than a rock, and probably went to public schools. Geeessshhhh....

Mohammed Saeed al-Sahaf said...

If the government can expand the money supply at will, they can inflate away the value of the currency. This is really a tax on everything. I don't know what will happen in the future. Since consumer spending makes up a very large percentage of the US GDP, and that spending was financed by borrowing against real property, any decline in home values will certainly cause the US consumer to reduce spending. It may prove difficult for the US government to monetize debt because foreign central banks can unload their bonds, pushing up interest rates. The question is, can they print faster than foreign central banks can sell.

Interested readers should check out mises.org, or look up the Mogambo Guru, who comes across as a bit of a nut job.

The greatest threat to America isn't from a bunch of brown skinned foreigners, the threat comes from those who suspend human rights, who spy on their own people, who destroy the wealth of their nation by reckless spending. America will meet the same fate as the other empires which preceded it.

Anonymous said...

I think his point is, how long has Bernanke been Chairman of the Fed? He hasn't been in the office long enough to have much culpability....

Anonymous said...

What is this lie? It is keeping up the false impression that the Federal Reserve is part of our government. “The Fed,” as it is sometimes called, is a private for-profit bank that controls our government and our economy. They control the money supply, inflation, depressions, recessions, etc.

They are not accountable to Congress, the Executive branch or anyone in government.


Of course they are. They are created by an act of Congress. The head is required, by law, to testify to Congress periodically.

The President nominates candidates for the board of directors, and the Congress approves it.

And, profits from Fed operations are donated to the US Treasury.

In all effective senses of usual "control" in a business situation: ability to appoint management and ownership of profits, the Fed is a US Federal institution.

There are some legalities in the sense that employees may not be exactly civil service and they are not officially part of an Executive branch department, but the difference is, in reality, minor.

If Congress wanted to stop the Fed and have its functions transferred to Treasury, then it could do so with a law. The 'owners' of the Fed would have no right to sue to block, unlike a truly private company.

Think about it this way. Could Donald Trump and friends attempt a hostile buyout of the Fed and appoint their own chief? No.

What I'm more disturbed about is that sometimes the notion that "The Fed" is unaccountable, secretive, not in our interests, yadda yadda, are minor league preludes to a deeper underlying paranoia which eventually reveals itself: irrational fear of Jews. Like Dianetics as 'lite' Scientology.

Anonymous said...

Liberals want everyone else to pay taxes and follow the rules except them. The classic example is Al Gore who lives in a huge mansion, flies in private jets, and rides around in a limo while telling Americans that they are using too many fossil fuels. It's the same with the rest of those nutty Hollyweird liberals. John Kerry is the richest Senator and he pays less than a 5% tax rate. Liberals are also notoriously cheap when it comes to charities.

bozonian said...

I have the solution to bypass the Federal Reserve.

Let Mutual Funds and ETFs give out debit or credit cards.

If you spend $600 say on your Gold ETF credit card, 1 ounce of gold would be deducted from your account at the end of the day. If the Fed inflates the money to where gold is worth $1200 per ounce, then spending $600 would only cost you 1/2 an ounce of gold. All the calculations would be done at the closing price of the asset at midnight.

Oil, Silver, Real Estate, Corporate Stock, Bonds, literally any kind of non-currency asset could be set up with a debit/credit card and thus your purchasing power would be tied to hard assets, not paper money.

There. Solved. No more bullshit fiat currency problem.

Bitter Renter said...

Actually, it's conservatives who are cheap when it comes to charity. The book you conservatives like to cite (though I doubt any of you has actually READ it) was analyzed by the Chronicle of Philanthropy.

http://tinyurl.com/y8dyq7

Seems religious cons give slightly more than religious liberals. However, secular liberals give far more than secular cons who give very little. No surprise there, that's those fratboy/ sorority girl jerks again.

I find it funny how conservatives want everyone to think they're generous people. Then they consistently vote against anything that benefits the common good.

Liberals don't need to put the word "compassionate" in fron of their ideology. Liberals don't need to publish propaganda that tries to convince the world that they're good people.

The difference between rich liberals and rich conservatives is this: the rich liberal will climb the ladder and extend a hand back to help others move up. Rich conservatives will step on your fingers and cut the rungs off the ladder as they climb.

Conservatism is savagery.

Anonymous said...

Sorry Ron, not gonna happen!

No name recognition!

Anonymous said...

Liberals are absolute Hypocrites!

Al Gore's family fortune was made from Occidental petroleum and an open pit zinc mine!
Tells us how to act, conduct our lives, meanwhile he burns plenty o fuel, whether for a corp. jet, or his mansions!

Lets not even bring up John Edwards!

John Travolta, 'We need to lower our carbon footprint', whatever the F**K that means! Owns and operates his own fleet of jets!
One and old retrofitted Boeing 707 four engine airline aircraft!

While I stand my narrow ASS in a line at the airport with every other schmoe waiting for my little seat on whatever airline the terrorists wanna F**K with that day!

You libs are an embarassment to yourselves!

Face the facts, This country was Blessed by GOD Almighty, and you curse it!

God created the trees, you hug them!

You want to abort the most innocent, and save the worst in society with no death penalty!

You libs want taxes, taxes, taxes....as long as someone else pays for them!

How come every time I drive on the freeway, there's some A.H. in an old gas burner with a 'No blood for oil' bumper sticker!

You are such Hypocrites!

Clinton was your boy, well you may take claim to him, we don't want anything to do with that Bloated lying, S.O.B. Or his asshole wife!

LIBERALISM is a Mental disorder!!!

Bitter Renter said...

Conservatives never find themselves in ethical dillemas because in order to have them you must first have ethics.

When one starts from a position of being a greedy, stingy, selfish miscreant that is proud of it, it's hard to trap a republican in any ethically compromising situations. Even when they get caught like all those republicans indicted or imprisoned before the last election it hardly fazes people many of whom expect their republicans to be criminals. People who ascribe to that gutter ideology worship those who create new and different ways to screw others out of money, legal or ILLEGAL. The only thing important to a walking brainstem conservative is money.

In fact, I once knew a republican who ate his MOTHER because someone told him he'd shit MONEY.

Filthy animals.

Anonymous said...

Liberals want everyone else to pay taxes and follow the rules except them. The classic example is Al Gore who lives in a huge mansion, flies in private jets, and rides around in a limo while telling Americans that they are using too many fossil fuels.

Oh, gawd: do we have dittoheads in the audience? :)

You all do realize that Al Gore is an ex-vice-president of the U.S.? You do realize that he has a Secret Service contingency that accompanies him wherever he travels? Would you have him travelling in a 2-door Yugo, instead of a limousine that's been modified with armor to protect from small-arms fire? You don't think Al Qaeda (and whack-job dittoheads) wouldn't like to put a cap in his ass?

Is that the way you want our ex-public servants treated? Would you have them flying on regular commercial flights, too?

Anonymous said...

I'll bet when Dick Cheney is out of office and flies on private jets with secret service you libs are gonna have a S**t coniption!

Al Gore is a nonentity, he was worthless as a V.P. he is even more worthless as an ex v.p.!

He is now running a traveling sideshow, and he is head snakeoil salesman and huckster...mind you not even a believable one!

V.P. or not, he's got alot of nerve telling me (us) what to drive or how much. When he made his fortunes off of oil, zinc, shall we also bring up tabacoo?

Hypocracy!

Anonymous said...

Dittoheads!

It's amazing you would know who dittoheads are!

Must be one yourself!

Anonymous said...

onemore said...

" Most Americans seem to have this Pavlovian-like response to housing bubble bursting: Government Bad! Government Bad! "

A little regulation would have gone a long way towards preventing the present situation with housing.

You know who those Libertarians remind me of? The students in Red China who used to carry around books of chairman Mao's quotations. They are very dogmatic and find it inconceivable that a free market would screw up.

Anonymous said...

"If the American people ever allow private banks to
control the issue of their money, first by inflation
and then by deflation, the banks and corporations
that will grow up around them (around the banks),
will deprive the people of their property until their
children will wake up homeless on the continent
their fathers conquered."

-Thomas Jefferson