Thursday, November 15, 2007

It's The Fed, Stupid!

Found this article today on MSN....

Who’s To Blame for This Mortgage Mess

Well, I will say, it’s nice to see that Greenspan and the Federal Reserve are getting the blame for the fallout from the real estate bubble. Greenspan was like a ostrich with his head in the sand, denying the bubble even existed.

But on the flip note, I find it funny that the author attributes Greenspan’s actions to his "naive brand of Ayn Rand libertarianism". I’m not sure if the author means libertarianism is naïve, Ayn Rand’s version of libertarianism is naïve, or Greenspan’s interpretation of Ayn Rand’s philosophy is naïve. While I can’t speak for the latter two, the first charge would be highly erroneous. It would be just as erroneous as blaming "capitalism" or "the free market" for this mess.

The Federal Reserve represents, essentially, a socialized monetary system. It is an institution of central planning, charged with manipulating a core and fundamental aspect of the economic system – the money supply. When the Fed tinkers with rates, alternately loosening and restricting the rate of money creation, it impacts and distorts the natural entire economy in a myriad of ways. The U.S. dollar is fiat currency, backed by nothing, and able to be manipulated at the will of the central planners on the board of governors. As a result, inflation and recessions are a permanent feature of our economic landcape, as the dollar continually erodes into worthless scraps of paper.

The article goes on to point the finger at other players in the sub-prime mortgage market. Most of them are prominent businessmen and such. Whether there was a bona-fide conspiracyor not is a matter of debate, but one thing is certain. None of the actions of companies like Merrill Lynch, etc. would have possible but for the actions of the Fed. In fact, I might even go so far as to say that it was inevitable that these companies would have pursued the policies they did with a determined Greenspan intent on weilding the carrot and stick to induce said economic activity. And the author’s complaint that Greenspan rebuffed "more oversight" of the mortgage industry misses the point. It’s the Fed that’s the cause here. How does more control over industry solve the problems created by the people with the power to manipulate the entire economy?

The bottom line is, central planning does not work. Assumption of such power by a few individuals is bound to lead to disaster. This was THE lesson of the 20th Century and its various experiments with socialism. Its time we learn the lessons of the past, and reform our monetary system accordingly. We need to get back to a regime of sound money.

Oh look, Ron Paul advocates a return to sound money.

2 Comments:

Blogger The Objectivist Club at UCI said...

Ayn Rand was not a libertarian:

http://www.aynrand.org/site/PageServer?pagename=education_campus_libertarians

11:39 PM  
Blogger Libertarian Jason said...

Agreed. Many libertarians look up to her, though, and like it or not, she is identified with the libertarian movement.

3:37 PM  

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