No Time for Utopian Anti-Interventionism

[nathanhulick]

Re: No Time for Utopian Anti-Interventionism

My $.02

Any institution too big to fail is too big to exist.

Why doesn't anyone have anything to say about the fundamental problem of letting these private banks, hedge funds, etc. exercise so much control over the money supply. If the money supply is so important, shouldnt it be controlled by the government. Maybe we should be talking about something in the bailout to end this obviously failed experiment with fiat money? Maybe there is something in the constitution about that...

Why are people like Paulson and Bernanke still in office? They told us there was no problem for years. (No one here believed them, of course). They are incompetent and need to be replaced.

If we are going to "bail out banks", why do we have to bail out failed banks, why not try to expand some of the banks that were not run into the ground by poor management and poor investments? Perhaps maybe start some new banks.

[vinoveri]

Re: No Time for Utopian Anti-Interventionism

This whole balance-of-payments thing... kind of important.

What do you mean? To whom? There need not be any break.

The U.S. has already defaulted once before in 1971 in any case.

[World Traveler]

Re: No Time for Utopian Anti-Interventionism

We-are-toast gave a good description of some Latin American countries. One of my hobbies over last 15 years has been perfecting my Spanish to a high level of fluency. As a result, I've been to Latin America several times, and spoken with many of the citizens there who do not speak English (that gives you a real flavor of what locals think and fear).

Ecuador 1995, Guatemala 1996, and Peru 1997 were amazing to me. In all 3 countries, I stayed with a local middle class family while attending Spanish language school.

The stories I heard... Quito - any one with resources typically lives in high-rise or townhome compounds, surrounded by high walls with cut glass embedded in them. In a few cases of houses that faced the street, there were armed guards on either side guarding the street. Armed guards in the stores at the one modern mall, in the stores. You had to park your car in the compound or guarded area or it was stripped overnight.

Guatemala - ditto. And I had a Guatemalan friend in Houston - I looked up her family when I was there - many sad kidnapping for money stories (kidnappers go after locals), some with bad outcomes. The family lived huddled together in a guarded compound on the outskirts of Guatemala City.

in the 1980's and 1990's, when poverty was escalating there, many Latin American countries were on the verge of becoming failed states and as close to controlled anarchy as I've ever seen personally.

What drives it - the great chasm between a tiny very rich elite and the rest of the country. Yes these countries have a middle class, but it's very small. The sad fact is that you are either rich or poor there.

To me these countries really seemed to be every man for himself type places - the elite seemed to feel no responsibility toward the rest of the nation and the poor grab what they can, since their options are few.

[grapejelly]

Re: No Time for Utopian Anti-Interventionism

I apologize to grapejelly for my calling him, even in jest, an anarchist and a socialist. These were intended as friendly barbs, but I realize now that he may not have taken it that way. It skirts the one and only hard and fast rule here which is that we all treat each other with respect, even if we disagree.

No need to apologize. I didn't take them personally.

I wrote to my subscribers today:

I said this was the "Billionaires for the Bailout" vs. "Can't Pay My Bills-ionaires Against the Bailout"

My "class warfare" and my comments are accurate. I have learned so much from iTulip and the FIRE economy explanatory theory is the biggie. And those who didn't benefit from the FIRE economy actually are PENALIZED because all those billions came out of the hides of people on Main Street.

Those "Can't Pay My Bills-ionaires" now are calling their senators (The lines are jammed) and no doubt saying "NO NO NO" to them. Because they don't want to have more money stolen from them through the miracle of the printing press.

Those who make their money in finance, banking, insurance, real estate, have a huge stake in continuing inflation and of course WANT the bailout.

Now, as far as this "people against the bailout are saying a Depression is a good thing"...that isn't what I am saying at all.

I believe the Austrian School has this right (much more correct than Irving Fisher). They say that a credit bubble leads eventually to the bubble popping. Even more credit expansion is needed to prevent a crash.

So far, that is exactly what we've seen since 1982. Each bubble bursts, then more inflation and credit expansion, then more debt is needed just to expand GDP an additional dollar.

Next, the Austrians say that as you postpone the credit bubble popping, you make the end result even worse when it eventually does pop.

That is true also, totally born out by today's economic news.

So the answer is not more credit expansion. The answer is to stop the poison that created this in the first place.

The result may be a depression. I can see how that may happen. But with bailouts, that is, pursuing the interventionist policies of the 1930s et seq, we almost guarantee a long period of economic stagnation as governments take over a huge percentage of the FIRE economy.

Mises said that the malinvestments made in the credit bubble must be corrected. The bailout stops this correction and makes the downturn much deeper and longer. It will last a decade instead of two years.

Goldbugs hate to hear this but dogmatic adherence by the US to the gold standard in the 1930s caused the US money supply to implode in the 1930s. Fisher predicted this in January 1930. The economies of countries such as France that suspended the gold standard temporarily fared far better. In the end, FDR had to cancel the gold standard anyway in a draconian way, after the economy collapsed.

Gold money is incompatible with unlimited monetary expansion.

That's the whole point of gold money. It is honest money.

When the Fed was began in 1913, that put the nail into the coffin of the gold standard.

The banks had expanded credit in an irresponsible way and couldn't honor redemptions. Again and again, this happened before the Fed was began, and when it did, banks were allowed to reneg on their commitments but that was only temporary. It was wrong, but it happened at least temporarily.

It was the wanton expansion of credit, to enrich Wall Street, that resulted in the Crash, not the gold standard. The gold standard was, as usual, suspended in times when banking ran too amok. This time permanently.

The next step is for taxpayers to bear all banks losses in an unlimited fashion. That is the last step, I suppose, to total bankruptcy due to fiat currency. The first step was the Fed, second step ending gold standard, and this is probably the end game.

Now our economy collapsing again because a debt deflation is taking its natural course. Without a gold standard the Fed is this time able to expand the money supply, but as fast as they pour money into the broken credit structure it is hoarded, much as in the 1930s, or is pouring out the hole in the bottom of the system as liquidations of assets.

Credit for small and large business and personal loans is quickly drying up, just as in the 1930s. This article is typical.

If this continues at this rate then within a year thousands of perfectly well managed companies with little debt and only modest financing needs will go under and tens of millions of workers will be laid off. Unemployment will surpass 10%. Federal income tax revenues will evaporate on top of the collapse of capital gains tax revenues and of local tax revenues from property taxes as has already occurred in states like NY. The knock-on effects include rising crime as prisons are emptied out because we will not be able to afford them. This is what the "let God sort it out" adherents fail to grasp. A debt deflation is not like a forest fire that burns only the dead wood and leaves the strong. It burns everything because the period of excessive credit growth that preceded it lulled the vast majority of businesses and households into dependence on a continuous flow of credit. They all go bankrupt.

Many of us here have no debt and plenty of liquid assets to protect us from such a fire. I get the sense that there are some here who relish the idea of being in a strong financial position while so many others are not; it's one way to rise above others, I suppose, for everyone else to fall. But the economic collapse survival fantasy of the guns and gold crowd is flawed. If the collapse comes to pass there will be no one to come pick the trash. No one to see that the water and food supply is not contaminated. No one to keep carjackers out of your city. Much of the order around us that is financed by taxes that we take for granted falls apart.

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”
-Andrew W. Mellon

GRG's quote expresses the position of the FIRE Economy V1.0 leadership of the day. It served their interests to crash the economy. They got to buy it up again later at fire sale prices.

Clearly it was a mistake to have allowed the US economy to become so dependent on debt growth for economic growth. I explain, and attempt to simplify, in my book the complex parallel developments that created the FIRE Economy since the early 1980s. But by allowing the FIRE Economy to crash, versus develop a constructive transition, libertarians are serving populists with the rallying cry that “capitalism has failed.” You can already read it on the blogs and in some mainstream papers, and the impact of the credit crunch on Main Street has only begun.

At that point, the logic of the American political economy dictates a hard swing away from market-based solutions. As an entrepreneur and capitalist, that’s not good for me and certainly not good for the country.

The FIRE economy will either crash slowly and make the downturn last many many years, or it will crash fast, and adjustments will take a few years.

If we socialize all the risks, we will ensure that the crash lasts many years, bailout after bailout, the government always "doing something" and a lot like the result of the Roosevelt years, namely a prolonged depression instead of a short one.

[Supercilious]

Re: No Time for Utopian Anti-Interventionism

I think any bail out needs to help main street and wall street equally.

IMHO the bailout needs to help only the main street since it's paid with taxpayer's money. If you believe otherwise, I want to let you know, I urgently need $10000 because I've lost all my money gambling at the (Wall Street) Casino and I'm serious need of recapitalization. If I don't go and gamble again tonight, ... well some of the Casino workers may loose their jobs (especially the girl I like to keep near my roulette table) and .... it will be bad for the economy. We would all suffer.

Even with a sensible bail out, do you still predict double digit unemployment?

That may be very well possible and it makes an additional argument for not throwing good money after bad. Those $700 bil may be needed soon for real and serious rescue plans.

For those who are against any bailout, do you think our society is really ready for what comes with that?

Even the most radical Libertarian (radical<---latin radix - roots - correct meaning= return to the roots and/or through changes at grassroots level) realizes markets are decapitalized and a serious liquidity injection is needed. No argument about that, nobody needs or wishes for a 1929 Great Depression.

The problem is that Ben&Hank's bailout plan ( even in the seriously lipsticked version called the King Plan) simply rewards bad behavior, corporate fraud and in generally establishes a tax on all of us in order to support the drinking habit of Wall Street.

Yes I said drinking habit, because the Paulson bailout is nothing else than giving a liver transplant to an alcoholic and handing him a bottle of Jim Beam to celebrate his new life.

The King Plan is only slightly better: after the transplant the alcoholic "diet" is restricted only to beer. Much better...

Well ... I happen to believe that after a liver transplant an alcoholic should not have access even to cherry liquor chocolates.

If any injection of capital is done with taxpayer's money it should not be directed to those "geniuses" on Wall Street who made all this mess with their Derivative Porn Fest.

IMHO as a minimum requirement for any capital infusion with taxpayer's money the Congress should for a start:
a) make illegal any mark-to-Enron "technologies"
b) make illegal naked short selling, (leaving normal short selling in place), but enforcing a strict T+3 (not T+ infinite) clearing rule through DTTC
c) restore and strictly impose the "up-tick" rule
d) restore completely and strictly enforce the Glass-Steagall act in it's original formulation and meaning
e) make a clear separation between the regulated market and OTC markets (like the Godfather style 144A private markets)
f) take a good look at the changes needed to the Federal Reserve System... because the taxpayer was told in 1907 and 1913 that the Fed is a necessary evil we have to accept in order to avoid a major crisis and potential economic collapse ... well the Fed didn't prevent squat ... actually I believe we should get rid of the Fed altogether...

This is not a something new. The current Financial Orgy Catering Club chaired by Ben Bernancke is the Third Fed in US history. Remember what Andrew Jackson said in 1832 when he successfully got rid of the Second Fed:

“Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.”

And in another speech the same year:

The bold effort the present (central) bank had made to control the government ... are but premonitions of the fate that await the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.

Until we do the right things in order to correct the errors that led us into this mess and to prevent a future Deep Capture of those institutions created to protect the Free Markets, we will have to live, over and over again, with this :

[grapejelly]

Re: No Time for Utopian Anti-Interventionism

Even the most radical Libertarian (radical<---latin radix - roots - correct meaning= return to the roots and/or through changes at grassroots level) realizes markets are decapitalized and a serious liquidity injection is needed. No argument about that, nobody needs or wishes for a 1929 Great Depression.

There is plenty of argument there.

The Great Depresssion did NOT start in 1929.

I argue that what would have been a deep but quick depression turned into a decade long one and it happend THROUGH government intervention JUST LIKE IS HAPPENING TODAY.

This is the script to a Tee.

1. Markets crash.

2. Government favors the banks (bank holiday, TAF, etc. etc.)

3. Doesn't help enough

4. Government spends taxpayer money massively

5. Doesn't help enough

6. Government does even MORE

etc.

That is what CAUSED the Great Depression.

[metalman]

Re: No Time for Utopian Anti-Interventionism

Bingo, and this is the critical point to Main St. We want to insure that creditworthy individuals and business have access to capital, and right now credit is drying up (event though the central banks are pumping enormous amounts of liquidity into the system) because banks don't want to lend to other institutions because they don't know which are solvent and which may default on the loans.

So in order to get credit flowing, all the toxic debt needs to become transparent and liquidated, and then voila, no more fear of lending. So IMHO, this is what needs to be done - value the toxic assets and get a bid from the private markets.
There'll always be a bid, but the price might result in insolvency of the seller - and this is what needs to happen. Worst case, the government buys the debt at mark to market (let the CBO value the assets).

If 401k and pensions take haircuts b/c of asset markdowns, so be it. If institutions are insolvent b/c of their toxic debt assets, they need to go down. Solvent banks can strengthen their balance sheets and and new institutions can be capitalized.

What am I missing?

letting the market clear is the right thing to do. that's what the japanese failed to do. what they got was growing uncertainty and a drop in lending.

a few weeks ago the fed tried to let the market clear itself of toxic debt securities. they let lehman fail. but it started a cascade of cross defaults around the world that is picking up speed.

what to do if you can't do the right thing?

there are no easy answers, i'm afraid.

[jtabeb]

Re: No Time for Utopian Anti-Interventionism

I apologize to grapejelly for my calling him, even in jest, an anarchist and a socialist. These were intended as friendly barbs, but I realize now that he may not have taken it that way. It skirts the one and only hard and fast rule here which is that we all treat each other with respect, even if we disagree.

That certainly means no name calling, jtabeb. It will not be tolerated.

I agree with most of what you say here, about the FIRE Economy, distribution of wealth between debtors and creditors, and so on. These are points that I have expressed here for years. We agree until we get to the point that is the subject of this thread: the need for intervention now and whether intervention was attempted in the 1930s BEFORE the economy collapsed.

Goldbugs hate to hear this but dogmatic adherence by the US to the gold standard in the 1930s caused the US money supply to implode in the 1930s. Fisher predicted this in January 1930. The economies of countries such as France that suspended the gold standard temporarily fared far better. In the end, FDR had to cancel the gold standard anyway in a draconian way, after the economy collapsed.

Now our economy collapsing again because a debt deflation is taking its natural course. Without a gold standard the Fed is this time able to expand the money supply, but as fast as they pour money into the broken credit structure it is hoarded, much as in the 1930s, or is pouring out the hole in the bottom of the system as liquidations of assets.

Credit for small and large business and personal loans is quickly drying up, just as in the 1930s. This article is typical.

If this continues at this rate then within a year thousands of perfectly well managed companies with little debt and only modest financing needs will go under and tens of millions of workers will be laid off. Unemployment will surpass 10%. Federal income tax revenues will evaporate on top of the collapse of capital gains tax revenues and of local tax revenues from property taxes as has already occurred in states like NY. The knock-on effects include rising crime as prisons are emptied out because we will not be able to afford them. This is what the "let God sort it out" adherents fail to grasp. A debt deflation is not like a forest fire that burns only the dead wood and leaves the strong. It burns everything because the period of excessive credit growth that preceded it lulled the vast majority of businesses and households into dependence on a continuous flow of credit. They all go bankrupt.

Many of us here have no debt and plenty of liquid assets to protect us from such a fire. I get the sense that there are some here who relish the idea of being in a strong financial position while so many others are not; it's one way to rise above others, I suppose, for everyone else to fall. But the economic collapse survival fantasy of the guns and gold crowd is flawed. If the collapse comes to pass there will be no one to come pick the trash. No one to see that the water and food supply is not contaminated. No one to keep carjackers out of your city. Much of the order around us that is financed by taxes that we take for granted falls apart.

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”
-Andrew W. Mellon

GRG's quote expresses the position of the FIRE Economy V1.0 leadership of the day. It served their interests to crash the economy. They got to buy it up again later at fire sale prices.

Clearly it was a mistake to have allowed the US economy to become so dependent on debt growth for economic growth. I explain, and attempt to simplify, in my book the complex parallel developments that created the FIRE Economy since the early 1980s. But by allowing the FIRE Economy to crash, versus develop a constructive transition, libertarians are serving populists with the rallying cry that “capitalism has failed.” You can already read it on the blogs and in some mainstream papers, and the impact of the credit crunch on Main Street has only begun.

At that point, the logic of the American political economy dictates a hard swing away from market-based solutions. As an entrepreneur and capitalist, that’s not good for me and certainly not good for the country.

I misconstrued your humor for a bout of deflectionism, Agree no name calling. My tit-for-tat response was an attempt on my part to call that out, but sadly, I chose the low road.

I do not disagree with your points, just the premise you used for their justification.


My one point is this, and it is an important one.

The Goldbug thing is not about burning down the entire world while we all watch, all huddled in a cave with our loved ones, guns, gold, and food.

It is about personal choice and personal accountability and most importantly EMPOWERMENT.

I disagree with Jim that there are "no safehavens". There are, and what really REALLY bothers me is when the governement PREVENTS or discourages people (via tax penalty and accesability) from talking the only safe refuge from the storm. The people out there that bought PM's did it because they KNEW they had no control over short selling rule changes, currency interventions, liquidity injections, etc.

It pisses me off that the Government does not allow people to protect themselves, AND, in fact, pro-actively establishes policies that work against individual people from acting in their own best financial intrests.

THAT IS NOT WHAT A GOOD GOVERNEMENT DOES TO ENSURE A STRONG DEMOCRACY AND STABLE COUNTRY.

It is pure madness!

That is the only point "goldbugs" are trying to make. We do not want the world to burn down into some post-apocolyptic nightmare. Does ANYONE (that is not mentally ill) want that?

[metalman]

Re: No Time for Utopian Anti-Interventionism

And the various lunatic fringes, some of whom call themselves libertarians, fail to know their history or even what Adam Smith had to say about justice, greed and capitalism:

"Justice [the human virtue of not harming others]…is the main pillar that supports the whole building. If justice is removed, the great fabric of human society which seems to have been under the darling care of Nature must in a moment crumble into atoms….Men, though naturally sympathetic, feel so little for others with whom they have no particular connection in comparison to what they feel for themselves. The misery of one who is merely their fellow creature is of so little importance to them in comparison to even a small convenience of their own. They have it so much in their power to hurt him and may have so many temptations to do so that if the principle of justice did not stand up within them in his defense and overawe them into a respect for his innocence, they would like wild beasts be ready to fly upon him at all times. Under such circumstances a man would enter an assembly of others as he enters a den of lions."
-- Adam Smith, "The Wealth of Nations"

99% of the time, that is correct. but not during a debt deflation. a distinction must be made.

[Tulpen]

Re: No Time for Utopian Anti-Interventionism

Even the most radical Libertarian (radical<---latin radix - roots - correct meaning= return to the roots and/or through changes at grassroots level) realizes markets are decapitalized and a serious liquidity injection is needed. No argument about that, nobody needs or wishes for a 1929 Great Depression.

You don't solve a liquidity problem by borrowing more money. It's as simple as that! :cool:

All that will happen is that people start to build on false hope. The crash will only become larger.

The only alternative is hyperinflation and the fat and rich are simply not going to stand for it so it will be a big crash.

I noticed that more and more iTulipers are getting confused and start to ride the hope wave.

[grapejelly]

Re: No Time for Utopian Anti-Interventionism

You don't solve a liquidity problem by borrowing more money. It's as simple as that! :cool:

All that will happen is that people start to build on false hope. The crash will only become larger.

The only alternative is hyperinflation and the fat and rich are simply not going to stand for it so it will be a big crash.

I noticed that more and more iTulipers are getting confused and start to ride the hope wave.

That isn't all that will happen. More people will start moving assets out of the US because they'll have time. Even an idjit who wasn't aware of the credit bubble now knows the truth.

Also, lenders will stop lending regardless. The bailout will allow banks to hide their paper losses, which is part of its intent. But the cat's out of the bag, so the bailout won't help increase the willingness of banks to lend. Not at all.

[grapejelly]

Re: No Time for Utopian Anti-Interventionism

99% of the time, that is correct. but not during a debt deflation. a distinction must be made.

a debt deflation is a healthy thing. It gets prices down to where they should be. It puts out of business many institutions that should be out of business.

If not now, when?

[Chris Coles]

Re: No Time for Utopian Anti-Interventionism

I've learned much from this forum but rarely post comments, since I'm just a "regular" person. But since you all promise not to bite, this one caught my eye.

My daughter is currently in Guatemala. She has never been out of the country before. I just spoke with her last night. She was amazed to report that there were armed guards everwhere, including markets and cafes. Her husband is Guatemalan, so he can help explain the situation.

Anyway, I lean toward realism, sometimes I'm accused of pessimism. I do not see congress "doing the right thing", now or in the near future. Maybe never.

If I'm going to live in a Banana Republic, I may just go to Guatemala where at least it's warm and the scenery is beautiful.

Some thirty years ago, I was repeatedly asked a very thought provoking question by of all people a railway signalman long past retirement, still working the local signal box where I used to collect my newspaper. Why?

It was his favourite word. Why?

Why do you need guns to protect you in third world countries?

Why are the local people so intent on stealing anything they can get their hands on?

I dare to suggest that it is because they mostly feel completely disconnected from the world we live in. That they do not see any fair, honest, working mechanism, in place that permits them to capitalise themselves and do all the things we think are normal. Build businesses, employ others, make something of themselves.

I readily admit that my use of the simile of the actions of the Nazi's at the end of WW2 as a way of suggesting that the bail out plan was flawed was offensive. (I came to that conclusion after I had posted), and as such I apologise for any offence. It was not intended.

But EJ, you have to recognise that, like it or not, the present system has left vast swathes of humanity not just sidelined, but totally removed from any chance of getting on board to offer their own input. Without access to capital, (that is interest free savings invested in the long term hope of success), no one succeeds. The present system is not just dysfunctional for a few, it is completely unaccessible for perhaps the majority.

You are justifiably proud that you sit on capital and are unburdened by debt. But what plans do you have to bridge the gap? As I see it, your solution is to prop up the present system.

What I am trying to get across, perhaps not very well is that we ought to be looking at what comes next. If you leave the FIRE economy still in place, you do nothing. Indeed, it can be argued that, considering that you of all people brought us to recognise that we were going into this situation; you should have also had a clear plan for how to stand amongst the wreckage of the FIRE economy and build anew.

Instead, right at the point of the failure, you run forward with a bucket of funds for the very thing you predicted would fail, the FIRE economy.

I am not revelling in the collapse, far from it. What I am trying to do is find a dialogue that brings people together with new thinking, new ways of moving forward.

How many are sitting on funds that could be put to good use but are waiting for the present system to renew so that their funds can go right back into the old system? How many of those, if offered a better solution, with new thinking, new regulations, new institutions, would instead step forward and make the difference? I believe that must be brought to happen. That we must find a new route away from the present systematic failures and yes, in the short term there will be difficulties.

But of one thing I am certain, no one here has every shirked from "difficulty". It is the one mountain we climb every single day. It is the very oxygen of our existence to overcome and prevail.

So I say, unashamedly, we must find a better way forward. Do not throw away that bucket of cash destined for Paulson and his friends and instead, get thinking forward towards how we build a better system with that cash as the primer, the capital we expect to risk in the expectation of future success.

[metalman]

Re: No Time for Utopian Anti-Interventionism

There is plenty of argument there.

The Great Depresssion did NOT start in 1929.

I argue that what would have been a deep but quick depression turned into a decade long one and it happend THROUGH government intervention JUST LIKE IS HAPPENING TODAY.

This is the script to a Tee.

1. Markets crash.

2. Government favors the banks (bank holiday, TAF, etc. etc.)

3. Doesn't help enough

4. Government spends taxpayer money massively

5. Doesn't help enough

6. Government does even MORE

etc.

That is what CAUSED the Great Depression.

where do you guys get this crap? from that mises site? seriously, spend some time over at the nytimes or time mag archives and read for yourself about what actually happened. it's all there in black & white for those not attached to their ignorance.

1929: markets crash.

1930: fed cuts rates 5% to 2% by dec.

1930: congress cuts taxes, but they weren't much so it didn't really help.

1931 - 1933: usa stays on gold standard. fed can't expand money supply. 1000s of bank fail. credit evaporates. businesses go bankrupt.

1933: money supply contracted 40%, lending by 50%. unemployment at 25%. the economy now officially fucked. nice going.

1933: NOW the gov't finally dumps the gold standard and the gov't bails out the banks (bank holiday, TAF, confiscate gold and reprice it, etc. etc.)

1934: government spends taxpayer money. too late! was like trying to push a 100 ton train with a bicycle from a dead stop.

moral: don't let the 1000 ton train come to a stop.

the end.

[metalman]

Re: No Time for Utopian Anti-Interventionism

a debt deflation is a healthy thing. It gets prices down to where they should be. It puts out of business many institutions that should be out of business.

If not now, when?

let me ask you, have you ever traveled to a 3rd world country?