11 posts tagged “financial crisis”

Is the financial crisis really over?

The mainstream media and the politicians say that its end is near.

Take a step back, though. Too much spending and borrowing, we are told, helped cause the crisis. And what has been the response? More spending and more borrowing has been the response by the power elite. It is not only that. They think that the answer to a bubble that has started to pop is to inflate it again. Instead of bad assets being liquidated, the Federal Reserve has basically become a giant hedge fund. What about the stability of banks? Every week, quietly behind the scenes, the FDIC takes over yet another failed bank or two and transfers their deposits to another bank.

Unemployment figures remain high, but they don't tell us the full story. A more accurate accounting of these figures reveals that the numbers are much higher than what politicians tell us. GDP figures are similarly distorted to even include such things as Cash For Clunkers. If President Obama started to build a Tower of Babel tomorrow for a trillion dollars, it would be positively added into the GDP. And who knows what the so-called Plunge Protection Team is doing to influence the stock market.

What about gold? Right now it is roughly $1,100 per ounce.

Mr. Charles Goyette, author of The Dollar Meltdown: Surviving The Impending Currency Crisis With Gold, Oil, And Other Unconventional Investments, says that the rising price of gold is "the canary in the coal mine." The assorted commodities are moving upward and the dollar is moving downward. The trend is clear.

Dollars are multiplied in quantity almost ad infinitum. Fed Chairmen Ben Bernanke, like his predecessor, is convinced that solving our problems can be done by creating more money and by attempting to price fix interest rates to levels lower than they otherwise would be at. Instead of interest rates being determined by the relationship between the supply of savings and the demand for them, men have been led to believe that this process can be, for all intents and purposes, socialized.

The supply of money has shot up to new heights. This (unhappily) canceled out, I believe, any kind of potential "deflation" from happening at the outset of the crisis. Bernanke, despite his double talk, has been aware that this monetary expansion would lead to a downward dive in money's purchasing power. Consequently, he started to pay banks not to loan new money. Taking, somehow, all or much of this new money out of the banks is virtually impossible. And Bernanke, to be sure, is still however worried about any kind of deflationary events in the future. Those in power will take "inflation" over deflation any day.

Government debt is out of control, to put it mildly, and is ultimately not payable. Its maintenance is akin to a Ponzi scheme. When such bills come in, government goes into even more debt by issuing more bonds to sell and often by simply creating more paper money. This can't last forever.

Leaders around the world see what is happening. They are not blind to the fact that dollars are not a good investment long-term. Rather than what were private whispers, there are public talks about moving away from the dollar as the reserve currency of the world. For example, India's central bank recently purchased 200 metric tons of gold. There is a clear shift in the world's view of both U.S. dollars and bonds.

This is not mere speculation, this is happening as we speak. The world will not support the U.S. Leviathan forever. It's only a matter of time, it seems to me. And Empires don't last forever; they go bankrupt.

In his book, Goyette shows---if you are not yet convinced that there's a problem---that the real figures to calculate U.S. debt are largely hidden. Added up, it is not $12 trillion but nearly $100 trillion. That's about $1.3 million for a family of four. Direct taxation undoubtedly has severe limits when it comes to these figures. Only repudiation and printing up money can solve this in the end. And if the Chinese backed away from buying more bonds tomorrow, U.S. authorities have no solution but (surprise!) repudiation and the printing press. That's it.

How did we get here? "America has become a piñata," answers Charles Goyette. Politicians, looking to get votes, pass the democratic stick around to various special interest groups so that they all can take a whack. Grabbing millions from this piñata are not enough. Even billions are too small. Now it's trillions. Next, I suppose, it will be quadrillions, then quintillions, and then sextillions. The piñata won't survive. We never think about that, says Goyette. We think of benefits, never costs.

He notes that the Iraq War alone, when you attempt to figure in all of the hidden costs, amounts to 4 or 5 trillion dollars according to Joseph Stiglitz and Linda Bilmes (which is even more than their conservatively titled book). Just think about the fear premium on the price of oil! Once again: We think about the supposed "benefits" of Empire, never the costs. China has it right: It is cheaper to buy oil than to steal it. Right now, like good capitalists, they are searching the globe to find it.

For these and other reasons the author of The Dollar Meltdown argues that a future currency crisis is unavoidable. The supply of dollars keeps moving up, and this speed is even in a position to potentially accelerate even more than it has already, and its demand is on the edge of falling. If dollars from around the world start to come home, hyperinflation is the next stop. There is no "quick fix" to turn this around. Politicians are not going to go straight and the American public is not going to wake up until the crisis happens.

So what can we do? All we can do is protect ourselves and our families to the best of our abilities. The more that protect themselves, the better off all of us will be. We can even profit. But note, no one has a magic ball. How things play out will depend on many factors, of course, and the question of "when" is always difficult to answer, but the responsible thing for any man to do is to insulate his family from the possibility of a currency crisis, be it a relatively mild one or a severe one.

Section four of the book is where Goyette walks us through his recommendations. Gold as you can easily guess is one of them. So is silver. Oil and agriculture are also recommendations. All of these things are explained in a straightforward way. You don't have to become a day trader or anything like that.

He names specifics, explains exactly how to invest in them, and how each of these markets work.

Silver, for instance, has much potential. Much of its demand is purely for industrial use. This would change in a currency crisis and the speed of it shooting up in price could easily be faster than gold. This, shown in the book, has historical precedence.

Agriculture contains many profit opportunities. There is a growing world population and therefore more and more mouths need to be fed. "Jim Rogers," writes Goyette, "says that ten years from now instead of twenty-nine-year-old stockbrokers driving Maseratis, it will be twenty-nine-year-old farmers."

Charles Goyette's expertise and intellect is clearly seen in the book. Section three of it explains "what happens next." In addition to some of the things already mentioned, here for example he explains what the probable reactions would be by the government in a currency crisis. (Hint: All of their reactions would be bad and would make the problems worse. They would attack the symptoms.) The second section talks about "how we got here" and the first section explains "where we are."

He additionally shows the link between sound money, liberty, and the rise and fall of civilizations. To harden his analysis, he looks at ancient Athens, the Byzantine Empire, and the city of Florence. He turns to Britain and early America. For historical cases of massive inflation, he looks to France and Germany.

Mr. Michael Nystorm, in his review of the book at The Daily Paul, remarks that it's "interesting that these lessons can be learned intuitively simply through the study of money."

Take a look, Goyette says at the end of the book, at America's earliest coins, which "portrayed Liberty," in comparison to today's coinage, which "celebrates the state." Look at today's symbols and its culture, and you'll understand where we are.

The following excerpt is from Dr. Guido Hülsmann's The Ethics of Money Production, pages 170 to 172 (all emphasis is untouched):

“The West is still at the beginning of its great experiment with paper money-----thirty years is not a long time for a monetary institution. But already the foregoing considerations find a ready confirmation in the economic statistics of the past thirty years, which witnessed an exponential growth of the money supply, as well as of debts private and public, in all major western countries.

“Evidence for moral hazard on a mass scale could be found in the last ten years or so in the stock-exchange mania, as well as in the real-estate boom in the United Kingdom and the U.S. Here the market participants have invariably displayed the same characteristic behavior. They have evaluated the assets without regard for the price-earnings ratio, speculating entirely on finding, at some point in the future, a buyer who is even more bullish than they are now, and who will therefore consent to pay an even higher price.

“Consider the current (2006) U.S. real-estate boom. Many Americans are utterly convinced that American real estate is the one sure bet in economic life. No matter what happens on the stock market or in other strata of the economy, real estate will rise. They believe themselves to have found a bonanza, and the historical figures confirm this. Of course this belief is an illusion, but the characteristic feature of a boom is precisely that people throw any critical considerations overboard. They do not realize that their money producer-----the Fed-----has possibly already entered the early stages of hyperinflation, and that the only reason why this has been largely invisible was that most of the new money has been exported outside of the U.S. Money prices have increased tremendously above the level they would have reached without the relentless production of greenbacks, but the absolute increase of the domestic price level (as measured by CPI figures) has been relatively moderate so far. However, as soon as foreigners slow down their purchases of U.S. dollars domestic prices will start soaring, and then hyperinflation looms around the corner.

“In the past, governments have tried to counter this trend through regulations. Moral hazard first became visible in the banking industry, and today this industry is indeed very strongly regulated. The banks must keep certain minimum amounts of equity and reserves, they must observe a great number of rules in granting credit, their executives must have certain qualifications, and so on. Yet these stipulations trim the branches without attacking the root. They seek to curb certain known excesses that spring from moral hazard, but they do not eradicate moral hazard itself. As we have seen, moral hazard is implied in the very existence of paper money. Because a paper-money producer can bail out virtually anybody, the citizens become reckless in their speculations; they count on him to bail them out, especially when many other people do the same thing. To fight such behavior effectively, one must abolish paper money. Regulations merely drive the reckless behavior into new channels.

“One might advocate the pragmatic stance of fighting moral hazard on an ad-hoc basis wherever it shows up. Thus one would regulate one industry after another, until the entire economy is caught up in a web of micro-regulations. This would of course provide some sort of order, but it would be the order of a cemetery. Nobody could make any (potentially reckless!) investment decisions anymore. Everything would have to follow rules set up by the legislature. In short, the only way to fight moral hazard without destroying its source, fiat inflation, is to subject the economy to a Soviet-style central plan.

“Central planning or hyperinflation (or some mix between the two)-----this is what the future holds for an economy under paper money. The only third way is to abolish paper money altogether and to return to a sound monetary order.”

Here are two excellent discussions with Hülsmann (mp3s):

• "Austrian Theory of the Business Cycle"
• "What Should Geithner and Bernanke Do?"
  

(The Financial Boom was Bad [An Example of Not Allowing the Market to Work!])

The prophetic Mr. Peter Schiff, author of Crash Proof: How to Profit from the Coming Economic Collapse (2007), talks at the Mises Institute's Austrian Scholars Conference.

I hope you have some gold under your mattress.

Oh, by the way, I wonder. Who has a better track record: Mr. Greenspan----or, maybe I should call him, Mr. Monopoly Man----or, say, the Austrian economists?

Hmm. What did Greenspan say in 2003 about housing and what did the Austrians say? Why, let's time travel back and read, how about, "Housing Bubble: Myth or Reality?" by Dr. Frank Shostak.

Or, even more generally, who has a better track record: The typical Keynesian economists you see on TV----who say they have the answer, even though they did not see this coming----or the Austrians?

***

Without Mr. Monopoly Man there would not have been any bubble in housing, as Dr. Thomas Woods says:

The housing bubble could not have arisen without the Federal Reserve. Had people started buying houses at unusually high rates, banks' loanable funds would have begun to deplete, interest rates would have shot up, and that would have been the end of it. That would have discouraged any additional speculation in real estate. But Alan Greenspan and the Fed could create money out of thin air, thus giving the banks more to lend and driving interest rates down, thereby perpetuating the destructive bubble in housing.

***

Despite the earnest intentions of those who call for a return to a "gold standard," perhaps they do not realize how severe this economic crisis is and is becoming (thanks to those in power who will not allow the market to rid itself of the various malinvestments that occurred in the artificial "boom"). Government with the gold standard abused it, more or less, from day one. Given its top-down and centralized nature, it was a system that was waiting to be abused. As a matter of fact, the prerequisite to have a gold standard is abuse, fraud, and anti-market interventionism! Because of this, nothing will suffice but the complete privatization of money production.

As Woods points out in his excellent book Meltdown, F. A. Hayek argued that this is exactly what needs to be done (read Hayek's "Toward a Free Market Monetary System"): "I am more convinced than ever that if we ever again are going to have a decent money, it will not come from government: it will be issued by private enterprise, because providing the public with good money which it can trust and use can not only be an extremely profitable business; it imposes on the issuer a discipline to which the government has never been and cannot be subject. It is a business which competing enterprise can maintain only if it gives the public as good a money as anybody else. . ."

(At the end of my blog essay "Money and Civilization" I give a quick outline on how this can be done.)

And, do I really need to type this? (OK. I guess I do, given what President Bush on steroids Obama is doing.) Economic progress comes from capital accumulation; not spending. Read Dr. George Reisman's brilliant essay on that here.

***

A Note on Deflation and Inflation.

We all have to be careful with the terms inflation and deflation because they are defined differently by different people. But the best definitions are, as is usually the case, the classical definitions: Inflation is nothing but an increase in the money supply via fiduciary media (put bluntly: counterfeiting). Deflation is nothing but the decrease in the money supply. In this very specific sense, therefore, deflation is practically always a statist phenomenon. A recession or depression often sees some fiduciary media extirpated. (This is not a bad thing, for both ethical and economic reasons.) On the other hand, deflation qua the overall fall in prices (we'll call it: "definition 2") is more generally and often a free market phenomenon. (Though, definition 2 often follows definition 1 in a recession or depression.) For instance, imagine that we have a robust economy with a free market money that is by and large gold as its medium of exchange, with no fiduciary media, and thus a banking system based on 100% reserves. Naturally, then, man would see overall deflation in this very specific sense. Gold would of course increase, but extremely slowly as compared to the increase in the amount of goods being produced. Hence, purchasing power would go up, prices would go down, and saving and investment would be encouraged. This would be a magnificent thing. Deflation is not evil. In contrast, inflation qua the overall increase in prices is, ultimately and generally, a statist phenomenon. It would not be something we would see in a free society.

Some of his articles:

• "Fed Up"
• "Tooth Fairy Economics"
• "Washington and the Stimulus: A Parade of Blockheads"
  
• "Banana Republic, U.S.A."
• "Unnatural Disaster"
• "The Deck Chairs Are Fine Where They Are"
• "We Need Our Heads Examined, Says Harvard"
• "Government: The Cause of – and Solution to – All Our Problems" (MP3 Here)
  
• "Don't Know Much About Capitalism"
• "The Harding Way"
• "No, the Free Market Did Not Cause the Financial Crisis"
• "Beware of Obamanomics"
• "Question Authority (Unless I Say Not To)"
• "Response to the 'Market Failure' Drones"
  
• "Krugman Failure, Not Market Failure"
  
• "Should We Absolve the Fed?"
  

And visit his website.

***

Perhaps it was about ten months ago---although I am uncertain---that I turned my radio on to hear what Mr. Sean Hannity had to say. I could not take listening to his program for any longer than about five minutes. He was ranting on how the "fundamentals" of the economy are sound and then repudiated those who claimed that the economy was in a recession.

Of course today everyone will admit there is a recession. Statists like Mr. Hannity have been proven to be absolutely incorrect----whereas gentlemen like Dr. Ron Paul have been proven to be absolutely correct. (See, e.g., chapter six of The Revolution: A Manifesto.)

Unfortunately, I think one can say the exact same thing about the "d" word, depression. I.e., the establishment will be forced to admit that the "d" word is an accurate description of the situation. Things are going to be getting a lot worse, and we are just in the beginning of this.

Due to the State's monetary policies and due to the fascistic arrangement the banking industry and much of big business has with the State, many individuals and families have been living in a credit card illusion.

We live in a world of monetary socialism. It is with this arrangement, ever since the creation of the Federal Reserve System, that over 95 percent of the value of the dollar has been lost.

It's an arrangement that has encouraged debt, short-term thinking, and short-term planning. It's an arrangement that punishes thriftiness and other conservative work ethics. Thus I would call the Fed not only an anti-economic institution but an anti-social institution as well. (For a more extensive look into its anti-social nature, see "The Cultural and Spiritual Legacy of Fiat Inflation" in The Ethics of Money Production by Dr. Jörg Guido Hülsmann. Download PDF here.)

It's an arrangement that has also brought about various artificial bubbles, leading to unsustainable booms, which then lead to inevitable busts. This occurs when the Fed floods the banking system with credit, thereby lowering the interest rate.

But the only "natural"----versus artificial----way interest rates can lower is if man saves more. Briefly, this means that man has held off present consumption for the future; that he is saving and investing more in temporally lengthy projects. If the Fed, on the other hand, floods the market with credit (via the printing up of money from nothingness), this in turn artificially lowers the interest rate, despite the fact that man has not saved more. Temporal coordination of production in the economy is consequently distorted. Investments that receive the credit are made to seem profitable. In effect, such industries get subsidized as they are flooded with this new credit that was created from thin air. An artificial bubble develops (à la housing). But as this new money trickles through the market, the old consumption-saving proportions reassert themselves (which, to iterate, determine the "natural" interest rates) and those investments are then seen for what they really are; namely, hot air. They will no longer be profitable. Resources are not there to keep the "boom" going. People have not saved more. People, instead, wanted more present oriented things. And, furthermore, people were actually pushed into saving less (and hence consuming more) than they otherwise would be due to the lowering of the interest rate. But investors were being incompatibly pushed, by the artificial paper money stimulus, into future oriented things based on the illusion of freed up resources, with its large pool of savings, in the future. This is when a recession or depression occurs.

So, since today's artificial "boom" resulted in massive misallocations of resources into various temporally unsustainable lines of production (via credit expansion and hence an artificially depressed interest rate below what the market would have set it), it is only the bust that will get us on the correct course. More production projects were started up than could be completed. Thus technically speaking, the bust is not the problem; it was the "boom" generated by the Fed. Resources, capital, and labor must be able to move with the market---a market that is ridding itself of these government-generated bubbles.

It is accordingly imperative that the State not interfere with this adjustment process.

As Mr. Jim Rogers says, the unsound must fall and the sound must rise. And therefore, to repeat what has been said on this blog before, the government must allow the market's pricing system to rediscover what is truly sound and what is truly unsound, and allow men to act accordingly.

Politicians, no doubt, don't like to hear that.

Neither do they have a real incentive to listen. This is because a crisis is a great time for them to expand their power and wealth. Consequently, there is little reason to be optimistic concerning the future.

(But if they want to "do something," I do have some advice later in this blog entry.)

Moreover, these politicians propagate to the public false hopes that the State is savior. They act as if they can magically create something from nothing. This propaganda is truly sophomoric. The State has no wealth of its own which it does not coercively take from others in the productive economy. All it can do is redistribute wealth and override the market's free and voluntary interactions of men.

You can accordingly call the "stimulus" bill a wealth destruction bill.

If the politicians keep this up, they will be sending us into a deep and long depression.

***

We must keep in mind the big picture, always. Henry Hazlitt, one of the great Austrian school economists, was right. We must think about the seen and the unseen, the short-term and the long-term, individual groups and all groups. Only in this manner should we examine so-called government "solutions."

For example, the State can "create" jobs only by taking away jobs that would have been created in the market. You might see the government jobs and so forth, but you don't see that there has only been a diversion. Instead of those jobs employing resources and money to serve the direct needs of consumers, resources and money are being employed by these jobs through State dictate; independent of voluntarily paying consumers, independent of the market's profit-and-loss system, independent of the market's competitive milieu. Ordinary people are made that much poorer because they are forced to pay for these jobs, if they like it or not, and have that much less money to spend (or save) on what they want, employing who they want.

And what does it tell us that such "created" jobs are independent of voluntarily paying consumers? They must not be worth much to the needs of ordinary people. It must be wasteful. And, even if it is not, there is no way to tell, unless we subject such jobs to the market. Only then can we see if the costs are justified, i.e., if the costs of this labor are less than what this labor produces. In addition, only then can we determine if those jobs are serving the higher versus lower needs of people. The costs and expected profits can subsequently be compared and contrasted with other possible labor employments. This additional point is important, since we live in a world of changing conditions and uncertainty. Consumer demands are not static, after all. But State "created" jobs cannot engage in cost accounting and will be restrictive in movement as against a free market of labor. The maximization of wealth with a free market's labor mobility is non-existent and hence standards of living must be lower than they otherwise would be.

Such "created" jobs might even be completely destructive in every way, i.e., the costs might be greater than the output. (Even if they are not, there is no way to know if these jobs are serving the higher or lower needs of the public, as shown above.) Indeed, the State can "create" lots of jobs. It can have men build many bridges, if they lead to somewhere is beside the point. It can draft all young men into the military. [Hey, Mr. Obama, I thought we were getting out of Iraq?!] And so forth.

A free market, in contrast, allows rational calculation. It helps prevent labor (and resources in general) from being allocated to unwanted and uneconomic lines of production. This is because it is based on private property which allows for profit-and-loss calculations with a universal medium of exchange. What is more, activities in a free market are not only dependent on voluntary consumer demands, but are also in a milieu that is competitive. As a result, it helps divert labor away from their less wanted and less needed locations and into their more wanted and more needed locations. And, implied in this, the free market helps men cut down on waste and to economize to the conditions of what people demand and to the underlying reality of the finite supplies of goods and natural resources that are in existence.

However government has no such ability, by definition. Thus, government "created" jobs will be arbitrary in terms of real wants, needs, expenses, and resources. There will be general misallocation, and hence standards of living will be lower than they otherwise would be. Since such "created" jobs are not based on voluntary demand, their activities will be independent of the wants and needs of people. Thus, given such a non-market position, this labor's costs can be very high and its quality output can be very low. This will actually multiply due to the fact that such labor has no need to worry about competition. And, because the factors of production employed by such "created" jobs cannot be sold on the market, they will be independent of their capital value and hence there will be over and under utilization thereof.

The very same basic lesson of the seen and unseen applies to the wealth destruction bill in its multiplicity of schemes [see the link --- an essay by Dr. Woods]. All that it will do is override people's free choices and make people that much poorer. Dr. Woods calls it "tooth fairy economics." We all must remember: the State has no resources and it lacks the free market's ability to economize. If we are to come out of this economic downturn fast, we need the pricing system to sort out resources. All the State can do is distort that process and make this downturn that much longer and that much deeper.

***

Or, the State can try to inflate more as a "solution." Though all that would do is intensify bubbles and increase the pain at the end of the road. It would be an attempt to cure our problems by the very means that caused our problems (as I wrote about above). It would result in the unsound increasing and the sound decreasing. More than that, a redistribution of wealth would occur from the poor and middle classes to those special interests who received the new money first.

And, we should all be aware, it is perfectly clear that wealth is expanded by enlarging the amounts of goods (not money). Wealth, for society at large, is not increased by growing money on trees. Just as important, it is about increasing capital. That means saving is a good thing------despite what the mainstream media might say. Even at an intuitive level, it should be crazy to anyone when a talking head suggests that an individual, a family, a community, a society in financially difficult times should go on a spending spree.

And, to repeat again on this blog, men saving would actually make the recovery faster. Time preferences would have gone down and, hence, would put man closer to the artificially low interest rates. Less adjustment would be needed because "real" rates would be closer to the "fake" rates, so to speak. (See Rothbard on this.)

***

Though I am pessimistic, the only way that we all can avoid a long and deep depression is if government stops doing anything more than it has already done. Yes, there will be some major pain. But at least it would be over (comparatively) quickly.

Even better: it can cut its budget. And while this is a radical statement, I suppose, it is a much needed statement: money and banking must be uncut from the government; namely, it must be left to the private market. We need private money (which would most likely be gold and silver): private minting, private coining, etc. without a central bank, legal tender laws, fractional reserve banking, etc.

Furthermore, we all need to see the State as it really is. It's essentially a parasitic institution, and should be treated as such.

If a given activity is by definition theft and if it is unethical, then it is not possible to deny that this unethicalness of theft applies consistently without throwing out the first starting principles. An act of theft/murder/slavery/etc. does not become right because a man of the State is doing it. Socialism in all of its forms must be rejected.

***

I'll conclude this entry by saying that modernity has brought a de-civilizational decline in cultural and social life. Modernity might also, ultimately, do the same with material wealth. There has been, what you can almost call, financial stagnation and soon we may have a financial depression. The credit card illusion will be ending. On top of this, statism has become so powerful with its welfare-warfare apparatus that it will ultimately bankrupt itself (unless the market creates some huge innovation to keep it going longer, e.g., a new energy source).

Now I'm sure some would criticize me as a "naïve youngster." Though, all a man has to do is glance back at how the culture was, say, 60 years ago (even though he must take into account the problems of those years as well). Performing such a glance is not that difficult. Just look at the differences between the television shows back then and those of today.

An underlying error of my make-believe critic is to subconsciously accept a Whig theory of history and to be so orientated to what exists at present-------as if the present is detached from the past; detached from what it carves out for the future; and is King.

This overall attitude explains, I think, why so many men will not accept a statement like this: "The U.S. Empire will not last forever." It explains why many men think an economic depression "could never happen again."

It additionally explains why it is too difficult for many men to think about the future Death of the West. Today's ethos makes this thought about the future too shocking to be thought of as true: "Dying civilization?" "It can't happen here. ... That only occurred in the irrelevant and detached past. ... Open your eyes and see what is around you. The present is totality."

Man's present orientation, high time preference, and subconscious acceptance of the Whig theory of history, makes him go with a leftist and statist flow, and being part of that flow makes it hard for him to discern right from wrong. It makes him unable to see, for example, that the culture is in a major crisis, and that the West is dying. And, for example, it makes him unable to see that the current monetary system, with its high fragility, cannot last forever.

***

Some Previous Entries on The Paleo Blog:

• "Money and Civilization" (If you only read one, please read this one.)
• "Prolonging and Deepening the Recession"
• "Hazlitt: 'Saving the X Industry'"
• "Subsidizing Badness"
  

[Hmm ... I retired this blog? Oh, well... This subject is too important.]

Mr. Rockwell writes in his piece "The Myth of Good Government": "If ... money is used to prop up failing companies, that's particularly bad since it is an attempt to override market realities, an attempt that is about as successful as trying to repeal gravity by throwing things up in the air."

Redirecting the market economy to have resources flow out of relatively sound lines of production and into relatively unsound lines of production cannot possibly speed along the recovery. As Henry Hazlitt said, doing this will drive capital and labor "out of industries in which they are more efficiently employed to be diverted to an industry in which they are less efficiently employed. Less wealth is created. The average standard of living is lowered compared with what it would have been."

Government interventionism that does this, in essence, rewards those who have used their resources and money unwisely and punishes those who have used their resources and money wisely. No sound economy can work on this principle without bad consequences.

When you think about this, it becomes apparent that this is how almost all statist interventions work. Many of the government's operations work on a principle that has the effect of rewarding losers and punishing thrifty individuals. Jeffrey Tucker's wonderful article "Good Kids, Bad Kids" does a great job illustrating this point; a point that I have been recently talking about to a friend.

As a young man I have seen how public education reacts to students who should not be there. If you are around my age (or younger), then you know what I mean. In no sense should these specific youngsters be at school. But compulsory education forces them to be there, despite their loutish behavior and almost complete uninterest in academic work. On net they contribute more negative than positive to the environment.

Instead of a system that expels them (punishes them), and thereby forces them into the workforce to develop productive and civilized skills, the system practically allows them to get away with their conduct and/or places them into "special education." This not only brings down the environment, and thus hurts students that should/can be there, but it additionally has a bad impact on these youngsters as well. They are allowed to "free ride" the system and do not get their just ejection which would have forced them to mature. As a whole, society is hence made worse off. This entire system sets into motion an increase of uncivilized behavior and decrease of civilized behavior.

To return to Mr. Tucker's article, he mentions that inflation is a prime example of how the State "discourages goodness and subsidizes badness." That it is. Nothing is so forcefully fused into the market economy than monetary socialism.

Money, as you all know, is what makes the market work. It is what allows transactions to develop without the need to constantly pray and hope for a double coincidence of wants. Money integrates the economy. It is similar to language. Furthermore, it is what allows the vital importance of cost accounting (calculation) to develop.

Thus to impose socialism in this vital area----the economy's "lifeblood"----is only asking for trouble. And, yes, trouble is what we have got from this arrangement. Financial incompetence is what monetary socialism rewards. Society becomes a credit card society. "It rewards," Tucker writes, "short-term thinking and punishes long-term thinking. It rewards debtors and punishes savers. To that extent, it degrades our characters and causes cultural decline."

One of the side effects of inflation is the distortion of cost accounting. Murray Rothbard wrote in What Has Government Done To Our Money:

“By creating illusory profits and distorting economic calculation, inflation will suspend the free market's penalizing of inefficient, and rewarding of efficient, firms. Almost all firms will seemingly prosper. The general atmosphere of a 'sellers' market' will lead to a decline in the quality of goods and of service to consumers, since consumers often resist price increases less when they occur in the form of downgrading of quality. The quality of work will decline in an inflation for a more subtle reason: people become enamored of 'get-rich-quick' schemes, seemingly within their grasp in an era of ever-rising prices, and often scorn sober effort. Inflation also penalizes thrift and encourages debt, for any sum of money loaned will be repaid in dollars of lower purchasing power than when originally received. The incentive, then, is to borrow and repay later rather than save and lend. Inflation, therefore, lowers the general standard of living in the very course of creating a tinsel atmosphere of 'prosperity.'”

Why, this is (sadly) easy to apply to today's situation.

What's more, monetary socialism leads to chaotic booms-and-busts in the economy. Jim Cox writes in The Concise Guide To Economics:

“When an artificial increase in the money supply through the banks occurs, this increases the available money in savings and depresses the interest rate, thereby encouraging an artificial increase in spending which is highly sensitive to the interest rate--capital spending. This run-up in the capital goods industry is the boom, and the subsequent depression results when consumers reestablish their consumption to saving ratio--thus revealing that the capital goods boom was indeed artificial. The only way to prevent the depression is to pump another dose of new money into the system to maintain the higher savings ratio, but eventually this must end or there will be a runaway inflation.

“The artificial increase in the money supply therefore is a government subsidy--through monetary policy--to the capital goods industry. Naturally the subsidy stimulates production in the capital goods industry. Once that subsidy is removed by consumers reestablishing their preferred saving ratio, there is a crash in the capital goods industry.”

Dr. Cox gives the popular analogy of a drug addict. Meaning, we as a society are a bunch of drug addicts when it comes to credit. (This is what monetary socialism brings about.) It is the Federal Reserve's pumping of credit into the market that brings the "high." Sustaining this high requires more and more pumping. However, as the author mentions, there is a limit to this. Near the end of the road either this pumping must be stopped or hyperinflation will occur. When the pumping stops pains of withdrawal occur.

These necessary pains are when the market adjusts back to reality, and away from the artificial high. As the credit (money) expansion flows through the entire economy, the real consumption-saving ratio will be reasserted (with men spending this new money) and the government-generated bubbles and distortions then dissolve.

A (general) deflationary credit contraction is another possible ("secondary") happening in a recession/depression. To be concise, this occurs----besides the (specific) unsound naturally falling----because banks are generally more conservative during this time, and this thereby lowers the supply of money. Additionally, demand for money generally increases. This happening is actually a good thing. It increases the speed of the recovery since it helps reverse inflationary effects. Thus it gives an additional push for men to save and invest more in capital production, and helps to purge malinvestments. (On deflation, read Deflation and Liberty [pdf] by Jörg Guido Hülsmann. And read Rockwell's latest article "The Force Is With Us": "falling prices are an important means for flushing economic error out of a system that is rife with malinvestments generated during boom times." If this deflation will last, is another question...)

In terms of our current economic predicament, not only has the Federal Reserve's Soviet-like management of the economy created massive misallocations (which brought us to where we are today) but the economy's ill-health has been further augmented by the moral hazard created by government protected (and created) Fannie Mae and Freddie Mac and the forcing of banks to engage in uneconomic affirmative action policies. Government, because of this, created a competitive field where it became necessary for banks to engage in bad loaning practices. In other words, the State encouraged bad behavior and discouraged good behavior. Realizing this does not require reading a 1,000 page economic treatise.

For today's economy to be healthy it goes without saying that government should not be subsidizing badness. So exactly what should it do? The answer is nothing. Doing something is what brought us here. Doing nothing would let the market's pricing system, and its checks and balances (which the government ceaselessly attacks), rediscover what is truly sound and what is truly unsound, and let men act accordingly. As Mr. Tucker says: "Laissez-faire is sometimes seen as an 'anything goes' philosophy. It might more accurately be described as a 'reap what you sow' philosophy."

The government, nevertheless, can help the adjustment process along by cutting spending, regulation, and taxation across the board. These actions would be compatible with it "doing nothing." Ending monetary socialism, especially, would be a great thing to do. It would prevent future bubbles. The allocation of resources in higher and lower order industries would be untainted with artificial tamperings of the interest rate.

The last thing the government should do in this period of market correction, according to Rothbard in America's Great Depression (a must read), is to "prevent or delay liquidation," "inflate further," "keep wage rates up," "keep prices up," "stimulate consumption and discourage saving," or "subsidize unemployment." Any of these interventions will only prolong and deepen the adjustment process. These things promote badness, and therefore can turn a year recession to a ten year depression.

Not that the government is likely to listen to those who predicted today's mess, viz., the Austrians and Austro-libertarians. But we all can hope.

To use the lines of libertarian activist Ernest Hancock: "Freedom is the Answer. What's the Question?"

It is freedom, and freedom alone, that brings us financial affluence.

***

See the Following:

• "The Austrians Were Right" by Ron Paul.
• "How the Government Wrecked the Economy": Rockwell interviews Peter Schiff on why we are here and what is to come. (A must listen.)
  
• "Von Hayek in 1975": An interview with Hayek on inflation. (Keynesian nonsense is all over this interview, e.g., trading off unemployment for inflation.)
• The Depression Reader at LRC.
• The Bailout Reader at Mises.org.
  

Walter Block, "Mr. Libertarian, Jr.," (who recently got into trouble by the PC police)* frequently jokes in interviews and lectures that he is truly a moderate. He does not always advocate voluntary, peaceful relationships as the only relationships that are justifiable and defendable. (Those men are extremists.) He allows an exception to this rule. Thus, he is a moderate. What one exception is that? That people be forced to read Economics in One Lesson by Henry Hazlitt, or another similar book.

Because I'm an extremist, I cannot advocate this. (Haha.) Though, I do hope that you all order this book. Or, if you already own it and have read it, buy a few to give as Christmas gifts. Iterating what I have said before on this blog, this book is very relevant today. A case in point is the discussion on American automakers.

Instead of attempting to out-do (or copy), in my own feeble way, Hazlitt, maybe I should just quote him directly. After all, I am just a midget compared to him. And I will not waste my finite time trying to match his elegance.

Here is Henry Hazlitt:

“It is obvious in the case of a subsidy that the taxpayers must lose precisely as much as the X industry gains. It should be equally clear that, as a consequence, other industries must lose what the X industry gains. They must pay part of the taxes that are used to support the X industry. And customers, because they are taxed to support the X industry, will have that much less income left with which to buy other things. The result must be that other industries on the average must be smaller than otherwise in order that the X industry may be larger.

“But the result of this subsidy is not merely that there has been a transfer of wealth or income, or that other industries have shrunk in the aggregate as much as the X industry has expanded. The result is also (and this is where the net loss comes in to the nation considered as a unit) that capital and labor are driven out of industries in which they are more efficiently employed to be diverted to an industry in which they are less efficiently employed. Less wealth is created. The average standard of living is lowered compared with what it would have been.”

(Excerpt from Chapter XIV: "Saving the X Industry.")

*See this. Listen to this [mp3].

Economics in One Lesson: Still Relevant Today.

“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”

You will find at the Mises Institute a series of online videos discussing Economics in One Lesson by Henry Hazlitt. Among the various videos, please let me highlight the one with Thomas Woods where he chats about credit and loaning. He applies some of the book's lessons to what is happening now.

Watch Here at Youtube.

Another video of this series to highlight----even though you should watch them all----would be the one with Roger Garrison. Dr. Garrison chats about business cycles and the myth that saving is "bad."

Watch Here at Youtube.

This book of Hazlitt's was first published in 1946. It is 2008 now, and it would be putting it mildly to say that the central lessons that are contained in this work have still not been learnt. (I guess economics is "the dismal science," as Thomas Carlyle called it.)

On Friday I was watching The McLaughlin Group and just could not believe what I was hearing. Now, true, I am just a dumb layman, but how individuals in the media are viewing this mess baffles my mind.

Thanks, Government. Thanks a lot.

Watch Jim Rogers at LRC.

Mr. Rogers, a great prophet of this depression, says that the bankrupt must go bankrupt. Everything the government is doing is the wrong move (surprise, surprise). The frightening thing is, the current gang in power is likely to cause an "inflationary holocaust" when they are done with us.

(Government power never works. For a new liberty, anyone?)

No Problem.

"You Cannot Patch a Busted Dam With Water."

Says Mr. Shedlock. (Via CharlesGoyette.com)

"Regulation: The Cause, Not the Cure, of the Financial Crisis."

Writes Dr. Long.

A World Central Bank?

It might be coming...

Read Dr. Hoppe's excellent 1990 essay "Banking, Nation States, and International Politics: A Sociological Reconstruction of the Present Economic Order" [PDF].

Mr. Justin Raimondo at Anti-War.com writes about "The Bubble Boys."

“The Greenspan bubble benefited the banks, the real estate moguls, and, most of all, the war profiteers.”

***

Monetary socialism is an evil not only because it generates----through the Federal Reserve's artificial lowering of the interest rate via credit expansion----chaotic booms-and-busts in the economy, but is also an evil because it's an essential part of the military-industrial complex and the U.S. Empire. They rely on the Fed for sustenance.

This is why I believe it is very important for those of us who value liberty and, as a corollary, peace to point out to the public the need to eliminate the Fed and unbacked fiat money. We must all show the public the importance of a 100 percent gold dollar (or other equivalent free market money).

Ending monetary socialism is the only way to severely limit the State in its war making powers. If there is something the peace movement should rally around, it should be this. It would take away what feeds Leviathan's wars. It would help extirpate the fascistic influence of neoconservatism. Future neocon (and left-liberal) elective wars would not be an option as easily as they are today.

And ending monetary socialism is the only way to cure our credit addiction. It is the only way to promote the conservative work ethics of thrift. It is the only long-term solution to our current financial crisis. To paraphrase Mr. Lew Rockwell: We must all stop living in and believing in an illusion and a lie.

Government bailouts and other regulatory interventions can only result in prolonging and deepening today's recession. But the recession is not the problem. We should not be getting angry about that. The problem was the bubble that was created by the Fed in the first place. It was that creation that made the recession inevitable. And it is the recession that leads us out of our current mess. This is how the market is trying to correct the economy. The market must bring man back to reality and away from the unreality of the Keynesian fairyland of bubbles.

I thought this for many, many months now (actually, maybe longer), and I very much hope I am wrong, but I think it is 50-50 in terms of some kind of depression developing. My fears seem justified. Today's politicians appear to be copying what Hoover and FDR did. They tried to stop the market from correcting the socialist distortions, as readers of the late Murray Rothbard know. But by continually not allowing the market to fix the economy, it resulted in the Great Depression.

All of you one or two regular readers of The Paleo Blog know the economists of the Austrian school predicted this entire mess. There is a library of scholarly and popular work on this subject available at Mises.org for all to read. Correct ideas do not spread on their own. They need educated men to spread them.

I think it is about time to listen to those who have been right all along, like the Austrian economists and like Dr. Ron Paul. They all say that the bailouts and regulations are a wrong move. The default reaction by the statist establishment to "prevent" any kind of recession is a wrong reaction. What the politicians are doing now will be felt in the future, and it will not be pretty. Hopefully the politicians will not do any more destructive intervening. If they do implement more socialist schemes, well, the Austrians can say "We told you so" ...again.

Watch, Read, and Listen:

• Ron Paul on what the State is Guaranteeing.
• Read Ron Paul's Statement.
• Put the Time & Effort into Reading American's Great Depression by Murray Newton Rothbard.
• See The Bailout Reader at Mises.org.
• See The Recession Reader at LewRockwell.com
• Mr. Charles Goyette on Anti-War Radio. (Charles, please come back to radio soon.)
• Listen to Dr. Frank Shostak at Mises.
• Listen to Dr. Joseph Salerno at Mises.

It's The Economy, Stupid

Mises.org provides an excellent "Bailout Reader." Be sure to check it out!

LRC also provides a Reader.

The Mises Institute has published Murray Rothbard's textbook The Mystery of Banking in hardback.

It is only $18. Rothbard's many books on money and banking are more relevant than ever.

Read Rothbard's "Money: Its Importance, Origins, and Operations." (Excerpt from his book.)

"Economics," wrote Ludwig von Mises in Human Action,

must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man's human existence.

On Anti-War Radio, both Lew Rockwell and Ron Paul are interviewed. Be sure to check out some of the other interviews as well.

Let me also highly, highly recommend The Lew Rockwell Show. All of the interviews are informative.

Pat Buchanan says that the "Day of Reckoning" is here.

Read "Blaming the Victim: The Free Market" and "The Truth About Gasoline Shortages" by Gary North.

(When will people learn? See The Paleo Blog's "Defending the Undefendable": Price-Gouging.)

"No More Help, Please" by by Stephen Fairfax.

And read Rockwell's "Bush the Socialist and Destroyer" and "Learning About the State."

It Must be the Market's Fault!

The notion, as propagated blindly & emotionally by some men who never seriously studied economics (especially as it relates to monetary issues), that the establishment (e.g., government, mainstream media, etc.) is supportive of free markets and is therefore engaged in hushing critics of the free market, is contradicted by the very fact that the establishment has pushed for bailouts that are inherently uncapitalistic and anti-market. So too is the comment that many politicians have supposedly moved from an anti-regulation perspective to a pro-regulation perspective a vacuous comment. (When has the GOP been a paradigm of free market support beyond mere word say?) Saying such a thing is happening is based on the assumption that the respected areas that are in trouble are without regulation. It is based on the assumption that Fannie Mae & Freddie Mac, for example, were market institutions vs. statist institutions whose risks & losses were nationalized, creating moral hazard. It is based on the assumption that banks were not forced to engage in affirmative action in loaning. It is based on the assumption that easy credit did not flood the market from the government. If you ignore the government's hands all over each and every problem and believe that there is no such thing as law in a scientific sense as it relates to economics and arithmetic, then it is easy to say that it is the "free market" at fault.

By definition, only the government can inflate or force uneconomic affirmative action policies. When government collectivizes risks, checks and balances go away. Firms can act irresponsibly without worry of bankruptcy. When the government floods banks with credit, the government thereby lowers the rate of interest to a level lower that it otherwise would be at. Investments then will be misdirected out of lines they would have gone instead. It creates, roughly speaking, the illusion of added wealth (by the increase of paper money versus real capital in terms of a real interest rate forming) so as to make it seem feasible to sustain higher order investment. Government thus creates the incentive to loan to risky people----which would not have happened if the market was left alone.

Asking where checks and balances are located in the market is begging the question of where the checks and balances are for the government. That it is a coercive monopolist in a particular territory of ultimate decision making or jurisdiction means that disputes between parties are ultimately up to the government, as a sovereign, to resolve, which include conflicts that involve the government itself.

Ron Paul's Campaign For Liberty
- The Revolution Continues

Ron Paul Endorses Chuck Baldwin for President.

I'm a non-voter because I don't think you can find salvation or liberty in the democratic process. Nonetheless, if I had to vote, I would vote for this gentleman. Ron Paul made the right choice. Go Baldwin!

Daniel McCarthy shares some of his thoughts on Paul's endorsement.

Paul Gottfried writes about Stephen J. Sniegoski's The Transparent Cabal.

The "beating of war drums" against Iran continues, says Justin Raimondo.

"Republicans on the Left and Democrats on the Right," writes Ivan Eland.

VDare.com: "Racial Quotas In Malaysia: Grim Warning For America" by Jared Taylor.

Groups.

Some libertarians, it seems, just do not want to believe there could be any differences between groups of people. They think such thinking is “abstract." (This is similar to those who think libertarianism is too "abstract" when talking about the individual.) But "collective" judgment is not always a bad. Is it bad, for example, if I say that women and men have differences? Am I a pseudo-thinker, a socialist, an anti-individualist, and/or anti-libertarian?

"Men on average have greater upper-body strength than women."

This statement is a collective statement; it is true; it does not imply socialism; it does not disregard the individual or go against methodological individualism, and it does not deny individual rights. It also does not deny that we could find a counter-example. Of course we could. We could find a woman who has greater upper-body strength than a man. It thus does not deny that individuals differ.

The late Robert A. Nisbet (1913 - 1996) is without a doubt one of my favorite conservative scholars. Reading several hundred pages of his works has benefited me immensely. In this montage entry, please let me recommend you buy Nisbet's Prejudices: A Philosophical Dictionary. Now this book is not one to read straight through. It is one in which you will probably jump around, as I did. And it is a book that you will only want to read one or two "dictionary" entries at night per day. This way you can absorb what Nisbet has to say. It is a book like this that makes me love (anti-statist) cultural conservatism.

Nisbet's biographer, Dr. Brad Lowell Stone, is right. It only makes sense to be a libertarian in a Nisbetian sense.

Joe Sobran writes on "The Wisdom of Humanae Vitae."

"The Cultural Revolution in 16th-Century England" by Murray Rothbard.

A Poison in Libertarianism.

Located in some libertarian factions is a great poison that is anti-religion & anti-spirituality. They try to conflate libertarianism's anti-state position with an anti-religion position. Strictly speaking, though, libertarianism is a narrowly confided political philosophy. It examines the nature of the state, private property, aggression, defense, and punishment theory. But it is not a philosophy of life. It has nothing whatsoever to say about religion. A libertarian can be an atheist or a non-atheist, a Catholic or a Jehovah's Witness.

"Paleolibertarianism" came into being to combat this poison, among others. From a strategic frame of reference, libertarianism must be bourgeoisie to have the public embrace it. More than that, I find most atheist libertarians childish. They do not know the difference between authority and power. They do not understand the vital importance, for instance, the Catholic Church had and has on the development of Western Civilization. (See Dr. Thomas Woods' How the Catholic Church Built Western Civilization.) They see civilization and society as rootless.

Even some atheist libertarians who are not necessarily anti-religion, like Dr. Walter Block, conflate war and religion. Block might as well, like those who believe in using violence against the non-violent, conflate capitalism and war. But there is no conflation, properly understood, in either of the two cases. Now once being a borderline atheist myself, I can somewhat understand how they view existence and the world, and am tolerant of those who are non-militantly atheistic or agnostic in their views. Rothbard himself, while understanding the importance of Christianity and so forth, was an agnostic.

It is funny; many of these libertarians think that only those with low reasoning & deductive skills, a low IQ, and mental problems could possibly see before their eyes more than the materialistic and worldly. Though in my experience, those who are militantly anti-religion had some kind of bad experience growing up in a household that was religious.

On the Mises Institute's blog Mr. Jeffrey Tucker quotes F.A. Hayek from the newly reissued book Prices and Production [Buy It | Download It]:

“Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. ... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection--a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end. ...It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression. We must not forget that, for the last six or eight years, monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.”

(Next month I plan to buy and read Hayek's book.)

The fear that the world as we have known it will completely end if it is not for government bailouts (a.k.a. "welfare for the rich") is ridiculous, even if we assume the very worst. Under the assumption of the very worst, so to speak, it is especially essential and vital that the market allow the failures to take place and to then allow the market to readjust to reality.

That the government, its left-neocon bodyguards, and those who are at the receiving end of the bailouts paint such a picture should not be surprising. All that needs to explain this is that they gain at the expense of the public at large by painting this "world-is-going-to-end" picture. To be sure, this doomsday rhetoric is very common among the statist establishment. Just recall the pictures that were painted by those who demanded a "preemptive" war with Iraq.

However, as great economists like Murray Rothbard have shown, by not allowing the market to readjust to reality, which requires a non-interventionist government policy, it will take that much longer for reality to set in. The economic crisis will thus be deeper and longer than it otherwise would be if the current statist ideas succeed. Since the artificial "boom" resulted in massive misallocations in various temporally unsustainable lines of production, the "bust" must be allowed to happen. (That, in fact, is a "good" thing.) Trying to hold together all of these various bubbles (which were all created by the government) or, worse, trying to inflate them to a larger size is going to only delay the inevitable. It will make that inevitable result only worse. The unsound must be allowed to fall and the sound must be allowed to rise. Resources, capital, and labor must be able to move accordingly. Therefore if one was to ridiculously assume the very, very worst possible ("the world is going to end"), it would only be prudent, and even more so in this case, to let the market readjust and liquidate what it needs to liquidate. The worst thing to do is to follow what Hoover and FDR did. Doing that would truly create a crisis of gloom and doom.

Indeed, if Hoover copied what occurred in the depression of 1920-1921, the economic crash that occurred in 1929 would have ended swiftly. There would have been no Great Depression, which lasted a full decade. The crash in 1920 was by all statistics worse than the first year of the Great Depression and, despite this, it ended very fast. Why? The government did nothing. Notwithstanding the historically erroneous idea that Hoover was a "free market" guy, Hoover instead interfered with the market's adjustment process, and such interference only continued and intensified with FDR.

'We' better not make the same mistake. ...Though I fear that we will.