Clarity in decision making requires that you first accurately define the problem. When it comes to the housing bubble, no one does that better than Peter Schiff.
Episode 104. Peter Schiff: Why Was Anyone Surprised By the Crash?
(scroll down to episode 104)
In this podcast from a couple of months ago, Peter Schiff explains the bubbles (Internet and Housing) that created our current economic collapse. It is over an hour long, but if you find the time to listen to it, you will never see your home in the same way again.
This podcast has also left me scratching my head over what the current administration is doing.
How can they think they can fix something without understanding why it failed in the first place?
What happened to the grand idea of "change"?
Our current government's only answer to our economic woes is to prop up the failed policies of past administrations...
Re-inflating the bubble will not work.
Thursday, July 16, 2009
Wednesday, July 15, 2009
Politicians Will Not Save This Economy
I have often been accused of being “idealistic” and even “Utopian” in my libertarian beliefs that an individual’s self-interest can steer our economy without the superior hand of government regulation. Humankind is inherently evil, after all, isn’t it?
Greed exists in all systems. Why then do people erroneously believe that once elected to government, politicians some how become pure “angels” with no ulterior motives but to do what is right? I believe, very un-Utopian-like, that government bureaucrats are every bit as greedy as their fellow citizens, those they propose to regulate.
This clip of Milton Friedman on the Donahue Show a few decades ago goes a long way to sum up why I believe those who question my idealism are really the one’s possessing the “Utopian” view. After all, an individual’s self interest -- or greed, as some may call it -- is self-regulated by fear and and the task of managing risk. Beyond that, there are already laws to throw those who commit fraud or theft into jail, and therefore, no need for further regulation that does not directly address protecting the individual rights of others.
As for those who propose more government over site, imperialistic regulation, and czar-like central planning as a way of "stopping" greed, “where in the world do you find these “angels” who are going to organize society for us?” I am sorry to report, but these uber-human beings (who are somehow excluded from the common mortal’s desires and process no greed or self-interest) do not exist. It is indeed, Utopian to believe one person can understand, much less fairly regulate, another person’s desires.
Greed exists in all systems. Why then do people erroneously believe that once elected to government, politicians some how become pure “angels” with no ulterior motives but to do what is right? I believe, very un-Utopian-like, that government bureaucrats are every bit as greedy as their fellow citizens, those they propose to regulate.
This clip of Milton Friedman on the Donahue Show a few decades ago goes a long way to sum up why I believe those who question my idealism are really the one’s possessing the “Utopian” view. After all, an individual’s self interest -- or greed, as some may call it -- is self-regulated by fear and and the task of managing risk. Beyond that, there are already laws to throw those who commit fraud or theft into jail, and therefore, no need for further regulation that does not directly address protecting the individual rights of others.
As for those who propose more government over site, imperialistic regulation, and czar-like central planning as a way of "stopping" greed, “where in the world do you find these “angels” who are going to organize society for us?” I am sorry to report, but these uber-human beings (who are somehow excluded from the common mortal’s desires and process no greed or self-interest) do not exist. It is indeed, Utopian to believe one person can understand, much less fairly regulate, another person’s desires.
Wednesday, July 8, 2009
AIG and the Blame Game
A friend posted a great article from Vanity Fair about the insiders at A.I.G. on Facebook.
Though it may be accurate, the article seems to miss the forest for the trees. I can't help but feel the article blames the players, rather than the game itself. Here are my thoughts on it:
In his efforts to rightfully exonerate Jake DeSantis's role at AIG, Lewis wrongfully shifts the blame on the insecurities of Joseph Cassano. Cassano was a dupe, just a sucker unlucky enough to be holding the bag in the end. Whether AIG took on all these credit-default swaps themselves or, as Lewis points out, someone else did-- “There was no real reason that company had to be A.I.G.; it could have been any AAA-rated entity with a huge balance sheet. Berkshire Hathaway, for instance, or General Electric. A.I.G. just got there first.” --isn’t the issue now that it is time to assess blame for the “greed” that created this. These were all just players playing a game created by someone else. That “someone else” is the Federal Reserve.
And Lewis does touch on the real culprit in all this mess. “In the run-up to the financial crisis there were several moments when an intelligent, disinterested observer might have realized that the system was behaving strangely. Maybe the most obvious of these was the effects of U.S. monetary policy on borrowing and lending. The combination of the dot-com bust and the 9/11 attacks had led Alan Greenspan to pump money into the system, and to lower interest rates.” Low interest rates created the atmosphere in which these institutions had to operate.
The Federal Reserve--an unregulated, unauditable private entity, kept interest rates artificially low to “stimulate” the economy, which forced financial institutions to seek out higher risks to make profits. The only thing that can truly “regulate” greed is fear. The Fed removed that up front. Higher interest rates would have “slowed” the economy, but given financial institutions the opportunity to make their profits on more quality investments.
Now out of fear of systemic risk the government continues to subsidize this greedy behavior by backing these (“too big to fail”) bad investments. What incentive does anyone have to fear risk, knowing the government will be there to put them on life support when things go bad? If something is rotten, it should be allowed to fail. Then next time, fear will actually be allowed to do it’s job: regulating greed.
And if those in congress are truly upset by these people getting huge bonuses, they should stop taking the contribution checks THEY receive from these institutions. They are all hypocrites pointing fingers at each other. Wall Street, The Federal Reserve, and government intervention all deserve the blame for this crisis and, just as importantly, it’s future continuation. None of these groups want to “fix” anything. They all get their money from this faulty system and we, the common citizens are left paying for it.
BTW- the three biggest recipients of cash from AIG in the last election cycle? Obama, Dodd, and McCain.
http://www.opensecrets.org/orgs/toprecips.php?id=D000000123
Though it may be accurate, the article seems to miss the forest for the trees. I can't help but feel the article blames the players, rather than the game itself. Here are my thoughts on it:
In his efforts to rightfully exonerate Jake DeSantis's role at AIG, Lewis wrongfully shifts the blame on the insecurities of Joseph Cassano. Cassano was a dupe, just a sucker unlucky enough to be holding the bag in the end. Whether AIG took on all these credit-default swaps themselves or, as Lewis points out, someone else did-- “There was no real reason that company had to be A.I.G.; it could have been any AAA-rated entity with a huge balance sheet. Berkshire Hathaway, for instance, or General Electric. A.I.G. just got there first.” --isn’t the issue now that it is time to assess blame for the “greed” that created this. These were all just players playing a game created by someone else. That “someone else” is the Federal Reserve.
And Lewis does touch on the real culprit in all this mess. “In the run-up to the financial crisis there were several moments when an intelligent, disinterested observer might have realized that the system was behaving strangely. Maybe the most obvious of these was the effects of U.S. monetary policy on borrowing and lending. The combination of the dot-com bust and the 9/11 attacks had led Alan Greenspan to pump money into the system, and to lower interest rates.” Low interest rates created the atmosphere in which these institutions had to operate.
The Federal Reserve--an unregulated, unauditable private entity, kept interest rates artificially low to “stimulate” the economy, which forced financial institutions to seek out higher risks to make profits. The only thing that can truly “regulate” greed is fear. The Fed removed that up front. Higher interest rates would have “slowed” the economy, but given financial institutions the opportunity to make their profits on more quality investments.
Now out of fear of systemic risk the government continues to subsidize this greedy behavior by backing these (“too big to fail”) bad investments. What incentive does anyone have to fear risk, knowing the government will be there to put them on life support when things go bad? If something is rotten, it should be allowed to fail. Then next time, fear will actually be allowed to do it’s job: regulating greed.
And if those in congress are truly upset by these people getting huge bonuses, they should stop taking the contribution checks THEY receive from these institutions. They are all hypocrites pointing fingers at each other. Wall Street, The Federal Reserve, and government intervention all deserve the blame for this crisis and, just as importantly, it’s future continuation. None of these groups want to “fix” anything. They all get their money from this faulty system and we, the common citizens are left paying for it.
BTW- the three biggest recipients of cash from AIG in the last election cycle? Obama, Dodd, and McCain.
http://www.opensecrets.org/orgs/toprecips.php?id=D000000123
Saturday, July 4, 2009
Be Independent
"Whenever you find yourself on the side of the majority, it is time to pause and reflect." -Mark Twain
Happy Independence Day
Happy Independence Day
Thursday, July 2, 2009
The Upside of This Economy
I have been thinking about my brother Bubba's column (and post from a couple of weeks ago) about how we spend too much time worrying about money, but I can't say I completely agree. Although it is not something to be obsessed about, neither is it something to be ignored.
Money is, simply put, a tool.
Money, when not wasted on things you do not need, is an instrument to be used to attain one's own personal freedom. In Timothy Ferriss's book, The 4-Hour Work Week, he explains people don't want to be millionaires, they want to live like millionaires. Big difference. (And more on that book on future posts -- I just started reading it.)
Like any good tool, if you want it to work for you, it must be taken care of, even respected. A great place to start? Saving. Here is a great eHow blog I stumbled upon this morning. I especially like Step One, Step Seven, and Step Ten. Check 'em out.
The best thing about this economy is that it has gotten people away from mindless consumption. People are now actually stepping back and evaluating the things that are really important.
Money is not something we should spend our lives pursuing, but something we should use to pursue the lives we want to live.
Money is, simply put, a tool.
Money, when not wasted on things you do not need, is an instrument to be used to attain one's own personal freedom. In Timothy Ferriss's book, The 4-Hour Work Week, he explains people don't want to be millionaires, they want to live like millionaires. Big difference. (And more on that book on future posts -- I just started reading it.)
Like any good tool, if you want it to work for you, it must be taken care of, even respected. A great place to start? Saving. Here is a great eHow blog I stumbled upon this morning. I especially like Step One, Step Seven, and Step Ten. Check 'em out.
The best thing about this economy is that it has gotten people away from mindless consumption. People are now actually stepping back and evaluating the things that are really important.
Money is not something we should spend our lives pursuing, but something we should use to pursue the lives we want to live.
Wednesday, July 1, 2009
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