Yes. I am advocating for breaking up Feddie and Fannie and privatizing them. In addition, gov should get out of the housing market completely, that means eliminating numerous gov agencies, several subsidies and tax deductions.
As for the Fed, I advocate for figuring out the most effective way to shut it down and establish a real, unregulated free-banking system with a market based currency.
While doing away with the Fed is still very radical and will take a long time to get done politically, getting rid of Freddie and Ffanie, should be much easier. Just need some politicians with a bit of wisdom and courage.
The common misconception of the Fed’s problem was its re-start in the early 1900s.
But much earlier (and the second biggest flaw in the Founding Fathers’ thinking after the “commerce clause”) Washington, Adams and others allowed Alexander Hamilton to set up the first federal bank – the Bank of NY – the first Fed.
His excuse was this bank charter was the best way to pay war debts and to make the central government stronger. He promptly made his NY cronies shareholders and bondholders.
So the Fed began simultaneous with crony capitalism. So why is Hamilton celebrated today?
it’s important to remember that Hamilton was not very original on this point. The Bank was modeled on the Bank of England—a private/public partnership that could finance the public debt plus have the added benefit of extending a steady supply of credit throughout the country. Jefferson and Madison railed against the Bank when proposed and passed, but when both men came into power, both accepted it as a valuable institution that leant stablility to the government’s financing. When the Bank failed to gain recharter in 1811, despite President Madison’s backing, the country was left without a valuable means of securing credit internally and externally just as it was about to go to war. After the conflict the much more famous “monster” Second Bank of the United States was chartered. The point here is not that Hamilton was right because he eventually got even many of the Jeffersonians to agree the Bank was a good idea, but that the state of economic thought at the time was progressing towards a more consistently pro-capitalism and expressly laissez faire attitude that in the 1830s and 1840s led to the death of the second bank, protectionism, and most state and federal internal improvement projects.
Michael, yes but. Did we really need the original Fed bank? The US should have always lived on its income except in time of war. Then in that event, the Treasury could sell bonds to (borrow money from) anyone – US citizens, US companies and anyone else, foreign or domestic who wanted to buy and at whatever rate the market dictated.
I maintain it was the creation of the first Fed that invented the government “printing press” for creating money out of thin air. The Treasury had all the power to borrow, collect taxes and provide for legitimate spending.
The Fed was and is a statist dream creation – regulate private banks and print money. And please remember printing money is hidden taxation through inflation.
I don’t think the argument that ‘Capitalism didn’t fail in 2008 because it didn’t exits’ is very compelling. It reminds me of the North American communists during the Cold War dismissing the failures of the Soviet Union by saying that that wasn’t ‘True Communism’. True, we have a mixed economy: a certain amount of freedom to do business and a certain amount of government control. Capitalism means the government does not interfere with the economy. The prevailing message in the media is that in the decade leading up to the financial crisis, economic regulation was reduced; i.e. there was a move towards Capitalism. People as credible as Paul Martin, the Canadian finance minister who eliminated the Canadian federal deficit are being quoted saying so. Supposedly this deregulation caused the financial crisis. If people believe that a small step towards capitalism, was so disasterous, then they will believe that those who advocate a big step are impractical idealogues. The ‘Capitalism didn’t exist’ approach evades an argument which must be refuted.
Stephen, I don’t think there’s any question that if you just stopped at “There was no capitalism” you wouldn’t convince anyone. But it’s an important *first step* because it gets people to ask the question, “Well, if we didn’t have capitalism but a mixture of capitalism and controls, was it the elements of capitalism ***or the massive number of controls*** that caused the crisis?”
10 Comments to “Yaron Answers: Did Capitalism Cause the Financial Crisis?”
Yaron, are you calling for the repeal of the laws that keep Fanny Mae, Freddie Mac and the Fed open for business?
Yes. I am advocating for breaking up Feddie and Fannie and privatizing them. In addition, gov should get out of the housing market completely, that means eliminating numerous gov agencies, several subsidies and tax deductions.
As for the Fed, I advocate for figuring out the most effective way to shut it down and establish a real, unregulated free-banking system with a market based currency.
While doing away with the Fed is still very radical and will take a long time to get done politically, getting rid of Freddie and Ffanie, should be much easier. Just need some politicians with a bit of wisdom and courage.
The above is from me. Sorry.
Yaron
Pardon me, but you mentioned in the video that you would link out to a number of resources, and I haven’t been able to find those links.
Never mind, I found the post.
The common misconception of the Fed’s problem was its re-start in the early 1900s.
But much earlier (and the second biggest flaw in the Founding Fathers’ thinking after the “commerce clause”) Washington, Adams and others allowed Alexander Hamilton to set up the first federal bank – the Bank of NY – the first Fed.
His excuse was this bank charter was the best way to pay war debts and to make the central government stronger. He promptly made his NY cronies shareholders and bondholders.
So the Fed began simultaneous with crony capitalism. So why is Hamilton celebrated today?
it’s important to remember that Hamilton was not very original on this point. The Bank was modeled on the Bank of England—a private/public partnership that could finance the public debt plus have the added benefit of extending a steady supply of credit throughout the country. Jefferson and Madison railed against the Bank when proposed and passed, but when both men came into power, both accepted it as a valuable institution that leant stablility to the government’s financing. When the Bank failed to gain recharter in 1811, despite President Madison’s backing, the country was left without a valuable means of securing credit internally and externally just as it was about to go to war. After the conflict the much more famous “monster” Second Bank of the United States was chartered. The point here is not that Hamilton was right because he eventually got even many of the Jeffersonians to agree the Bank was a good idea, but that the state of economic thought at the time was progressing towards a more consistently pro-capitalism and expressly laissez faire attitude that in the 1830s and 1840s led to the death of the second bank, protectionism, and most state and federal internal improvement projects.
Michael, yes but. Did we really need the original Fed bank? The US should have always lived on its income except in time of war. Then in that event, the Treasury could sell bonds to (borrow money from) anyone – US citizens, US companies and anyone else, foreign or domestic who wanted to buy and at whatever rate the market dictated.
I maintain it was the creation of the first Fed that invented the government “printing press” for creating money out of thin air. The Treasury had all the power to borrow, collect taxes and provide for legitimate spending.
The Fed was and is a statist dream creation – regulate private banks and print money. And please remember printing money is hidden taxation through inflation.
I don’t think the argument that ‘Capitalism didn’t fail in 2008 because it didn’t exits’ is very compelling. It reminds me of the North American communists during the Cold War dismissing the failures of the Soviet Union by saying that that wasn’t ‘True Communism’. True, we have a mixed economy: a certain amount of freedom to do business and a certain amount of government control. Capitalism means the government does not interfere with the economy. The prevailing message in the media is that in the decade leading up to the financial crisis, economic regulation was reduced; i.e. there was a move towards Capitalism. People as credible as Paul Martin, the Canadian finance minister who eliminated the Canadian federal deficit are being quoted saying so. Supposedly this deregulation caused the financial crisis. If people believe that a small step towards capitalism, was so disasterous, then they will believe that those who advocate a big step are impractical idealogues. The ‘Capitalism didn’t exist’ approach evades an argument which must be refuted.
Stephen, I don’t think there’s any question that if you just stopped at “There was no capitalism” you wouldn’t convince anyone. But it’s an important *first step* because it gets people to ask the question, “Well, if we didn’t have capitalism but a mixture of capitalism and controls, was it the elements of capitalism ***or the massive number of controls*** that caused the crisis?”