Liberty & Power: Group Blog
David T. Beito
A clip from the Howard Stern radio show(1/10/2008) in which Sal Interviews"Obama Supporters" in Harlem. It is a street interview with a twist; Sal attributes McCain's positions -- and even McCain's VP pick (Sarah Palin) -- to Obama and finds that people support Barack because he is prolife and they think Palin was a good choice for VP. This is the audio link sans video and, so, it downloads quickly.
Jane S. Shaw
The penetration of the"social justice" movement into our society can be glimpsed in schools of education. Jay Schalin, writing for the Pope Center for Higher Education Policy, has looked carefully at syllabi of one school, the University of North Carolina at Chapel Hill.
He quotes from the description of the school's educational leadership program:
". . . we are first and foremost concerned with the agenda of constructing democratic learning communities which are positioned in the larger society to support an agenda of social action which removes all forms of injustice.”
There's much more. (A previous article explores the philosophy behind"social justice.") And you thought education schools were about teaching teachers how to teach.
Anthony Ryan, acting undersecretary for domestic finance at the Treasury, told those attending the annual meeting of the Securities Industry and Financial Markets Association: “As these banks and institutions are reinforced and supported with taxpayer funds, they must meet their responsibility to lend, and support the American people and the U.S. economy.” Like Perino, he felt the need to add a thinly veiled threat: “It is in a strengthened institution’s best financial interest to increase lending once it has received government funding.”
So much for the idea that because the government is taking nonvoting preferred shares in exchange for its handouts, it will have no influence over how the privileged banks are managed. Indeed, the idea that it would keep its hands off was always preposterous, regardless of the formal status of its newly acquired ownership stake. In view of the many ways in which the government can hurt a bank whenever it wishes to do so, no ownership position was necessary in any event.
As always, government officials are worshiping at the altar of easy credit, confident that any economic problem, no matter what it may be or how it may have arisen, can be solved by dumping cheap credit on it. Evidently, government leaders have not paused to reflect on how the economy came to be in its present troubled condition.
If they had given the matter any informed thought, they would have realized that outpourings of cheap credit lie at the root of the entire sorry situation. Recall how the Fed pushed the Fed Funds rate down to 1 percent in the wake of the dot-com bust of 2000-2002. With Fed credit available to banks for years on end at a negative real rate of interest, how could they resist plowing ahead with loans that normally would have seemed absurdly risky, especially when they could pass much of the rotten paper along to Fannie, Freddie, and other buyers in the secondary market? The rest, as they say, is history.
Now, the banks and other lenders have been chastened by the nasty turn of events during the past year. Giants such as Bear Stearns, Lehman Brothers, AIG, Wachovia, Washington Mutual, Merrill Lynch, Fannie Mae, and Freddie Mac have drowned in the swift currents stirred by years of feckless lending. Lenders have properly become more cautious. Eager to rebuild depleted capital and reserve balances, they are reluctant to lend except to clearly creditworthy borrowers. Riskier borrowers, if they are served at all, must pay hefty interest-rate premiums to compensate the lenders for dealing with them.
So, the present so-called credit crunch deserves to be recognized as an exhibition of prudence, which now reappears after a long absence, whereas the credit markets during the past five or six years deserve to be recognized as an exhibition of a fool’s paradise. Seemingly too good to be true at the time, they were, indeed.
Yet, in this concert hall, the government knows the lyrics to only one song: lend, lend, lend. Worry not about the morrow. After all, should you get into trouble, you can again draw from the government’s bottomless well, which is fed by its base-money fountain, to slake your thirst for another bailout.
So far, however, the banks have chosen to allow their reserves at the Fed to build up astonishingly. For the week that ended September 10, reserve balances with federal reserve banks averaged $8 billion. Then they began to increase rapidly, and by the week that ended October 22, they averaged $301 billion.
Although reluctance to lend to poorly qualified borrowers may explain a large part of this buildup, we might also note that on October 6 the Fed announced that henceforth it would pay interest on required and excess reserves, thereby greatly increasing the incentive for banks to hold the latter. So, on the one hand we see the government giving banks a reason not to lend out excess reserves, but to hold them in a riskless form while nonetheless earning interest on them, and on the other hand we see the government threatening banks that do not lend out their excess reserves, regardless of the risks associated with such lending in the present circumstances. If you suspect that the left hand does not know what the right hand is doing, you may well be barking up the right tree.
Frank Furedi, professor of sociology at the University of Kent in the UK, asks what capitalism is good for.
Furedi writes for spiked, an online resource edited by the self-identified libertarian Marxist Brendan O'Neill. I guess Furedi would also accept this tag. Often the articles they write are more libertarian in content than those written by self-proclaimed defenders of private property and free markets. Readers of Liberty & Power are unlikely to agree with everything Furedi writes in this article but they may be surprised with just how much they do agree with him.
David T. Beito
Simon Jenkins suggests his supporters should lower their expectations.
"His desire to disengage from Iraq is not appreciably different from that of the Bush administration and the Iraqi government. On the other hand, his clearly expressed wish to beef up the war in Afghanistan is reckless."
"Obama has approved the bombing of targets inside Pakistan (and presumably now Syria) and proposed invasion to "secure" that country's nuclear arsenal. He has backtracked on compromise with Iran and done nothing to suggest an end to the macho provocation of Russia.
"At home Obama would appear from his statements and voting records to be a conventional Democrat, essentially tax, spend and protect with tariffs. While some of this is America's business, the world economy needs a protectionist US like a bullet in the head. American markets open to world goods are vital for recovery, as is America's active participation in the easing of world trade. Obama has shown no sign of accepting this."
I suppose it is important that a claim like that is being voiced in the mainstream media, but, really, is that news?
David T. Beito
The investigation was conducted by researchers at the University of Pennsylvania's Annenberg School of Communication and the Drug War Chroniclequotes the authors as saying that, “The evidence does not support a claim that the campaign produced anti-marijuana effects. There is little evidence for a contemporaneous association between exposure to anti-drug advertising and any of the outcomes... Non-users who reported more exposure to anti-drug messages were no more likely to express anti-drug beliefs than were youths who were less exposed.” They went on to assert that, "Despite extensive funding, governmental agency support, the employment of professional advertising and public relations firms, and consultation with subject-matter experts, the evidence from the evaluation suggests that the National Youth Anti-Drug Media Campaign had no favorable effects on youths' behavior and that it may even have had an unintended and undesirable effect on drug cognitions and use."
Senator McCain has said he wants to take an axe to the federal budget while Senator Obama has said a scalpel is needed. Axe or scalpel, this useless and often slanderous program needs to be eliminated.
Cross posted on The Trebach Report
A fascinating account of the British Bankers' Association's London Interbank Offered Rate, arguably the most important interest rate in the world.
Jeffrey Rogers Hummel
"But this hardly indicates a liquidity trap, for at least four reasons: (1) Base money can only be held as reserves or currency, and the allocation of a massive base increase between the two tells you absolutely nothing about the overall demand for base money. (2) At the same time that the Fed stomped on the monetary accelerator, it began paying interest on bank deposits at the Fed, obviously increasing the demand for reserves. (3) A sudden SHIFT outward in the demand for base money does not in and of itself demonstrate a liquidity trap, as the history of bank panics teaches us. (4) You must allow for lags to see whether this incredibly sudden base increase works its way into the broader monetary aggregates. The year-to-year annual growth rate of M1 has already risen from 0 to over 7 percent, whereas that of M2 is up slightly from 6 to 7 percent."
Bryan also questioned whether all of the base increase was indeed going into reserves. Again, my comment:
"Accurate numbers on bank reserves are devilishly difficult to get and interpret, because the official figures are often adjusted for changes in reserve requirements and do not include excess vault cash, required clearing balances, and Fed float. But you can tease out recent estimates by going to the Fed's weekly H.3, H.4.1, and H.6 releases and by checking against how much of the base increase has ended up as currency in the hands of the general public. Using these means, I put total reserves for the entire banking system (not adjusted for changes in reserve requirements and not seasonally adjusted but counting all vault cash and clearing balances) at $72 billion in August. Currently, as of October 22, total reserves are somewhere between $343 and $358 billion. Notice how close this comes to matching the corresponding increase in the base, from $847 billion to $1,149 billion. The remaining increase constitutes currency in circulation."
"In all my years of writing this column, from which I am standing down, I have been amazed at the spinelessness of Britain's elected representatives in defending liberty and protesting against state arrogance. They appear as parties to the conspiracy of power. There have been outspoken judges, outspoken peers, even outspoken journalists. There have been few outspoken MPs. Those supposedly defending freedom are whipped into obedience. I find this ominous."
Roderick T. Long
[cross-posted at Austro-Athenian Empire]
Congratulations to Keith Preston, who has won the Libertarian Alliances essay contest on the relation between libertarianism and big business. Check out Keiths essay: Free Enterprise: The Antidote to Corporate Plutocracy. (Why Rothbard and Reagan are unhappily yoked together at the top of the page I couldnt say.)
Roderick T. Long
Jane S. Shaw
No, it wasn’t hearing the cowardly politicians mouthing banalities as they endorsed the “rescue” package; no, it wasn’t the slow crash on Wall Street (I don’t actually remember how Wall Street fared in Atlas Shrugged).
It was buying gasoline this morning. At the Crown gas station across the street from my office, all the pump handles were shrouded in plastic that said “Out of Order.” So I went next door to the Shell station. There, all the pump handles except for “regular” gas were covered.
My car takes premium, but as I sat there wondering what to do, more cars began to stop and turn in, adding to the few already filling up. It began to get crowded. I saw what was happening. I bought $20 of regular and left.
North Carolina has a price-gouging law. The governor and attorney general have been threatening gas retailers with punishment if they break the law by charging too much. At least one newspaper is cheering them on. It’s eerie.