Senator Coburn gets it right on 'stimulus' Accolades to Senator Coburn
Senator Tom Coburn gets it right on "stimulus"
The slapstick comedy unfolding in Washington would be amusing, if it wasn't so dangerous. The few statesmen left in D.C. are stuck in the wrong debate - i.e., whether or not there should be more spending. Rather than getting a chance to make objective progress, the progress they can make is merely staving off further retrenchment of the free market.
The idea that we can borrow and spend to the hilt, burning through capital and savings, and not expect the cost of borrowing to increase, is lunacy. If spending stimulates an economy, then why are we in such a precarious situation?
It has been inflationary-financed consumption and over-spending that precipitated present circumstances. We are insolvent, and insolvency can't be regulated away, much less spent away. At this point, consumption that isn't paid for with genuine savings and production will only accelerate the trip to hell.
Instead of debating whether or not the government should spend another trillion dollars, the debate should be over how much of the federal budget will be cut. I have some suggestions.
I noticed that Germany is having similar problems selling its debt to that of the U.S. Treasury. (Up until this "anonymous indirect source" [code words for: Federal Reserve] came along, that is.) I thought to myself: heck, why doesn't the U.S. government just bailout Germany, too? And then I realized that it is subsidizing Germany. We still have troops in Germany, Okinawa, and Korea.
Hey, earth to politicians! The U.S. government is insolvent, having to borrow from abroad and from the Fed, in order to subsidize foreign regimes. Does this make sense? This would be akin to somebody who is about to have their home foreclosed taking out another loan in order to buy somebody else a house. So, for starters, why don't we get rid of all foreign aid? If this is too politically impossible, then we have some serious, serious issues.
The parlance I have heard from many corners in D.C. betrays the idea that politicians have a clue about what precipitated this mess, much less how to let us dig our way out. For example: when an "opponent" of the spending orgy bill makes an argument not based on principle, but over how the money is being allocated. The argument usually goes something like this: "We want a stimulus to help home prices recover, but golf courses and some of this other pork will do nothing to create jobs."
No. We shouldn't be trying to stimulate housing prices, either. Americans have been losing their homes because they are unaffordable. Kind of funny that supposedly the government's purpose was to make housing affordable (albeit, through inflation, which made housing unaffordable). During the height of the housing bubble, people protested how unaffordable homes were becoming. But now that home prices have been falling, the government has candidly adopted the position that it must make homes unaffordable. And this is what is wrong with the housing market.
Any effort to buy up bad mortgages, bailout a bad bank, or bailout a home owner, inflicts more damage on the housing market. No matter which way the government inserts itself into the housing market, it removes the need for home sellers to set prices pursuant to supply vs. demand (i.e., market-clearing prices). That's the problem. The government and the Fed are attacking the price mechanism. The market is now incapable of discovering real prices in terms of this disfunctional currency called the dollar. Thus we have homeless people and peopleless homes.
You want to help homeowners and help people get back into homes? Stop interfering with the market, and let the market discover real prices. Prices need to fall. Only then will homes clear the market.
You would think that after what the federal government has already done to education and healthcare, that politicians would get a clue. Well, you can add housing to the list now. The politicians have done the same thing to housing that they already did to education and healthcare. No surprise, BTW, that in the midst of this economic crisis, the three sectors that continue to spend money are the government, the education industry (de facto government), and the healthcare industry (de facto government). Unfortunately for Americans, most politicians believe that the more important something is (e.g., housing and healthcare), the more they should intervene. They get it backwards. If it's important, then politicians need to stay out. Do nothing.
All we need is for the government to enforce contracts. As I explained in a previous commentary:
If the free market were allowed to function, the government's role would be limited to enforcing contracts. If homeowners default, the bank would foreclose. But if the bank defaults, the bank's creditors - i.e., its depositors - would take over its assets. Thus, in the event of a bank run, depositors would then take possession of the bank's housing inventory.
But what does the FDIC do? If a bank fails, the FDIC sends in federal regulators to protect the bank's assets from its depositors. In many instances, the FDIC has arranged shotgun mergers with investment banks on Wall Street, turning investment banks into bank holding companies. So we can see this sleight-of-hand trick - under the guise of protecting depositors - is really designed to transfer real assets (i.e., housing inventories) from failed banks to Wall Street, while promising depositors nothing more than globs of Ben Bernanke's "liquidity."
So, being the price mechanism is under attack, and that consumption not paid for with production will inflict more injury, what are some other things that could be done to stimulate the economy? Stop the printing presses and abolish the Federal Reserve. Repeal legal tender laws, allowing people to transact in gold and silver bullion. Allow people to create banks that use real money, i.e., gold and silver, to make transactions with. And there are ways that one can invest his/her savings other than through a bank that does it surreptitiously with fractional-reserve banking, which makes banks inherently insolvent.
I offer a suggestion for an amendment to this "stimulus" bill. Compulsory reading of Murray Rothbard, Ludwig von Mises, Friedrich Hayek, and Henry Hazlitt for every member of Congress, the Senate, the entire government, and all students of schools that receive federal aid. Maybe, just maybe, if that happened, Americans would soon realize that what I write in this commentary is all true.
Senator Coburn, you did good on the Senate floor tonight. And if John McCain had campaigned the way he spoke tonight on the floor, perhaps he would be POTUS. His vote for the TARP lost him a lot of votes.
Mark served honorably for four years on active duty in the Marine Corps infantry, and was a Libertarian endorsed candidate for a municipal office in 2002. He re-enlisted in the ARNG in 2006 because he was depressed/at times SI without the military. He has held the NFA Series 3 license (futures and futures options broker) which he did a voluntary withdrawal on because he couldn't in good conscience sell managed futures since firms would do better to hire an in-house trader to trade a proprietary account with a discount broker, which he outlined in his well-written withdrawal request. Since the year 2000, he has spent much of his free time reading the great minds of the Austrian School of economics, such as Murray Rothbard, Henry Hazlitt, Ludwig von Mises, et al.
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