Calls to reform, audit, and even eliminate the Federal Reserve have been growing in recent years. We certainly call for an end to the Fed and I encourage anyone interested in monetary policy and the Federal Reserve to read Free Prices Now by ACC co-founder Hunter Lewis. Hunter is a scholar of the highest order and a remarkably successful financier. If you want to understand the sins of the Federal Reserve read his book.
But many people already understand the sins of the Fed and many of these people gathered in a counter summit to the party the Federal Reserve was having this week in Jackson Hole Wyoming. One of the people criticizing the Fed was Benn Steil who, believe it or not, is a director of international economics at The Council on Foreign Relations.
China is, as we say, The Ultimate Crony Capitalist State. Business and government are an amalgam. Long a crony paradise where a premium was placed on compliance and government favor and not on real pricing.
It looks like reality is finally starting to hit however.
About 6 months ago I was talking to a China energy markets analyst and he explained the complexities of implementing a carbon tax regime in the country to me. One bit I found particularly interesting. He explained that no one knew what the real price of energy coming from a particular plant actually was. A mandate from Beijing had been handed down, that energy would cost X amount, and that was the number used for “business.” Everyone knew the official price was way below the actual market rate but it sounded like no one really knew what the market rate was.
One can’t keep running a country like this. One must have real pricing for long term prosperity. The problem is that real pricing can create problems for the political establishment, anywhere, but particularly in China.
It could have been a whole lot worse. The Dow opened down over 1000 points this morning. Then markets rallied. Then they fell off again. Massive shifts in markets. Craziness.
Now the world looks to Asia.
China down 8.5% FOR THE DAY. Europe down broadly, 3-4% on huge volume. And on Bloomberg everyone is asking, why?
Why? Because China (just China?) is in deep trouble. Because the Chinese central bank has intervened big time and has failed. The market has overwhelmed a large central bank and that is new.
I’m guessing that there were more than a few meetings at the Federal Reserve over the weekend.
August is supposed to be quiet.
Why is the stock market turning down now? Why the current carnage?
It’s hard to overstate how important it is that despite massive, massive, intervention from the Bank of China and huge political pressure from Beijing the Chinese market continued and continues to sell off. This is the first instance of a central bank post-2008 really losing control. And this is happening in the world’s second largest economy and arguably the world’s chief engine of growth.
I like Art Cashin. I used to read his UBS column and it was always full of great stories about the old days, even from before he came on the scene. I learned some interesting stuff from this guy. I can still picture in my mind’s eye him wearing his “Dow 10,000″ hat in 2008. (The joke being that he got the hat when the Dow was moving up and not crashing down like it was in 2008.)
It is entertaining. All the “Ready for Hillary” bumper stickers seem to have vanished over the last month or so. Donald Trump is making mincemeat of the GOP party apparatus. All sorts of assumptions about the 2016 presidential race have been tossed out. Rules have been broken. New paths are being blazed.
It has all thrown the DC political class for a loop. And that is a very good thing.
An interesting and somewhat desperate statement on corruption from a fan big government in Salon.
Thing is, as we say often, government is inherently corrupt. One can’t just get “good people” into office and then things will change. Government must itself be reduced.
Yes this means that many big modern liberal dreams must be abandoned.
I do not write this flippantly. I understand that this would constitute a political sea change.
The Export-Import Bank’s charter was not renewed earlier this summer. The vehicle for blatant crony capitalism, “Boeing’s bank,” closed its eyes. But it is not dead – yet.
Most Dems and a good number of particularly corporate inclined Republicans in the Senate and the House would like to see the bank resurrected. Ex-Im means big bucks to some very large companies. As such the lobbyists have descended on Capitol Hill en masse.
Put this thing into the ground. Or better yet, cremate it.
There is some debate around here as to the world’s most crony company. There are many candidates but consistently in the top 5 or so is Goldman Sachs, Government Sachs.
Few companies have exploited the taxpayer and political connections to the extent Goldman has. Truly it is a company built fundamentally on cronyism.
In 2008 Goldman Sachs was leveraged more than 100 to 1 on its assets. (That is probably a conservative estimate.) When the economic tide turned it was fully exposed. It should have died the disgraced death it deserved. It should have been crushed under the wheel of the market.
Goldman however had a former CEO at Treasury, Hank Paulson, who bailed out his buddies with money taken from taxpayers.
As one reader commented a few days ago, “It just doesn’t stop.”
Indeed it doesn’t. This is the culture of Washington. The big cash-in carrot is why many people go into government these days. In the warren of Washington regulation there are caches of dollars along the way. If you know where to look for them.
A tour (or multiple tours) in high level bureaucracy provides one with a nice map of potential taxpayer funded riches.
By Ron Paul
The drama over Greece’s financial crisis continues to dominate the headlines. As this column is being written, a deal may have been reached providing Greece with yet another bailout if the Greek government adopts new “austerity” measures. The deal will allow all sides to brag about how they came together to save the Greek economy and the European Monetary Union. However, this deal is merely a Band-Aid, not a permanent fix to Greece’s problems. So another crisis is inevitable.
The Greek crisis provides a look into what awaits us unless we stop overspending on warfare and welfare and restore a sound monetary system. While most commentators have focused on Greece’s welfare state, much of Greece’s deficit was caused by excessive military spending. Even as its economy collapses and the government makes (minor) cuts in welfare spending, Greece’s military budget remains among the largest in the European Union.
Despite all the handwringing over how the phony sequestration cuts have weakened America’s defenses, the United States military budget remains larger than the combined budgets of the world’s next 15 highest spending militaries. Little, if any, of the military budget is spent defending the American people from foreign threats. Instead, the American government wastes billions of dollars on an imperial foreign policy that makes Americans less safe. America will never get its fiscal house in order until we change our foreign policy and stop wasting trillions on unnecessary and unconstitutional wars.
Fascism and (Marxist) socialism are sisters. Close sisters. Both are fundamentally about controlling the economy in a quest for a greater “good.” They have important differences which are more than stylistic differences. But both are fundamentally opposed to free markets, free prices, and fundamentally the free will of individuals. At least most individuals.
What is “socialism” and what is “fascism” is a point of ongoing debate on this site. Invariably someone posts a meme which purports to define fascism as what we see it in the movies. See, FDR and Obama can’t have fascist tendencies. (In FDR’s case it was probably more than just a tendency.) They don’t (didn’t) wear jack boots and goose step around the White House. Fascists have a look. They are “right-wing.” (Right and Left as we know them in this country really are vestiges of another time and are less and less useful.)
But fascism is not about a look. It is about state control of a nominally private economy. And most of the fascists I know of tend(ed) not to watch Triumph of the Will on loop. Many look(ed) perfectly respectable.
I forgot who said it, but it is true that the most dangerous fascist of all may prefer tweed jackets to arm bands and over-starched shirts.