Steve G.

The Fed’s massive redistribution of wealth today

In Libertarian on July 12, 2008 at 2:05 am

“Freddie Mac” — aka the Federal Home Loan Mortgage Corporation (FHLMC), a government-sponsored enterprise (GSE) that trades on the New York Stock Exchange — closed at $8 a share on Thursday. This morning, it opened at $4.26 a share and fell to an intra-day low of $3.89. Then Ben Bernanke made it known that the Fed would “lend” money to Freddie and its sister Fannie Mae, and the stock rebounded to close at $7.75.

Big deal, you say?

Consider this: The swing from $3.89 to $7.75 represents $2.5 billion in market capitalization (company value). All based on a few words from the Fed’s Fuhrer.

Oh, and Fannie Mae (the Federal National Mortgage Association)? Its one day swing from $6.68 to $10.25 represented even more money, nearly $3.5 billion.

Today, billions of dollars were lost by investors who finally gave in and sold these junk stocks. But they were suckers. They should have known the fascist Fed would offer to bail them out. The “smart guys” did, and they bought up the stocks and turned billions in profits.

Hmm… Do you think it’s impossible that some people knew in advance what Bernanke would say? No, the government would never do something like that for the benefit of private individuals, would it?

The system is crashing. Both Freddie and Fannie are down by more than 80% for the year.

  1. There are worse things to be.

  2. Keep your powder dry, stock up on necessities, and hopefully the trend toward totalitarianism resulting from “crisis” as Robert Higgs so succinctly puts it, will be substantial moves in the libertarian direction.

  3. I doubt it.

    The first thing most failing companies (and individuals) in this country do is run to the government demanding “help.”

    The housing crunch means that most boomers, who have no retirement savings, will be living on Social Security and Medicare for retirement. They’re going to demand huge government programs to keep them happy and playing shuffleboard in Florida for 30 years, as well as huge tax increases on the productive to tax away their savings and income to pay for Boomer irresponsibility.

    Then you’ve got the banks. During the boom times, they privatized all the profits from their mortgage business — but now that their decision to lend people 10x their earnings for an inflated house is resulting in mass foreclosures, they’re rushing to the government for bailouts.

    Indymac is the latest — and will not be the last — major bank to close up shop and get a big bailout from the FDIC.

    So no, reaction to crisis will probably not result in libertarianism. Rather, it will result in a collective scream for more government actions. Americans long ago abdicated any grit and self-determination that we once had. Now, what’s ours is ours in good times, and what’s yours is mine in bad times.

  4. Brian reads the newspapers or something. Most businesses and most individuals don’t run to the government for help. Most small businesses fail within a year of being organised and the founders go do something else.

    If you believe that the population is mostly on welfare, you’d have to also believe that the government can count the population. They haven’t counted me in two decades.

  5. Brian reads the newspapers or something. Most businesses and most individuals don’t run to the government for help.

    Something tells me you don’t live in a major population center.

    In most major metro areas, if something goes wrong, no matter what it is, the first two questions asked are:

    1) Why didn’t the government do something about this?!?

    2) What can the government do to solve this?!?

    Most small businesses fail within a year of being organised and the founders go do something else.

    And 40% of failed small business go out of business while owing the government Small Business Administration (SBA) money.

    Lots of entrepreneurs suck from the government teat too. Reality goes against the romantic fiction of the self-reliant hard-working risk-taking businessman. Oh well.

    If you believe that the population is mostly on welfare, you’d have to also believe that the government can count the population. They haven’t counted me in two decades.

    Then again, you’re far from representative of the average voter, aren’t you?

    So am I.

    The biggest mistake one can make isn’t necessarily analyzing the population and its habits, but rather assuming that most people are like oneself.

  6. “Something tells me you don’t live in a major population center.”

    I think Houston qualifies as a major population center.

  7. Brian, I’ve lived all my life in major metropolitan statistical areas, such as: New York City, Newark NJ, Houston TX, Kansas City MO, Hong Kong, London, Paris, Amsterdam, Tokyo, San Francisco, Sana’a. I’d be willing to challenge you to a contest of major cities visited worldwide.

    Dude, what you say about what questions are asked is what the mainstream media reports as the questions that are asked. The newspapers and the television stations ask those questions. Most Americans do not.

    I find your statistic about the SBA loans very dubious. Who told you that? The SBA? I very much doubt whether even 40% of businesses have such loans, let alone 40% of failed businesses. But, you again have to assume that the gov’t can count the businesses. Since being counted means being taxed, many aren’t.

    When you see me state an assumption, you can criticise it. Until then, don’t assume that I’m making assumptions.

  8. I find your statistic about the SBA loans very dubious.

    Of course you do, because it goes against your preconceived view of the situation at hand.

    This is a problem that many Libertarians have — they view the world through the lens of ideology and miss the problems… rather than viewing the problems through the lens of ideas to come up with solutions.

    I’ve found this problem to be one of the biggest impediments to libertarian mainstreaming. Criticize Ron Paul on his Marriage Protection Act, or on DOMA, and 1,000 of his screaming fans will demand “proof.” And, of course, no proof is ever good enough.

    Ditto for problems here in urban America, and the attitudes that average folks have in reacting to them. When one presents some of the dialogue from urban communities, especially minority urban communities, he gets shouted down by white guys who insist the problems couldn’t exist and the attitudes leading to them are media creations.

    All I can say is, at a certain point, people get tired of banging their heads against the wall, and they either leave or drop out. This is why the Libertarian Party has been going nowhere for so long.

    So yes, I could provide megabytes of PDFs proving my statistic, but I don’t think they’d do any good. It didn’t do any good when I talked about Ron Paul’s votes and newsletters, it hasn’t done any good when I’ve discussed the legal ins and outs of marriage, and it’s probably not going to do any good here either.😛

  9. “This is a problem that many Libertarians have — they view the world through the lens of ideology and miss the problems… rather than viewing the problems through the lens of ideas to come up with solutions”

    Very true Brain!
    Libertarians like you view the world through the lens of the ideology of individualism without any norms (negative freedom, freedom from) and miss the real fiscal problems the country is facing and the solutions Ron Paul is offering.

    He has been talking about it since decades, predicting the 1987 recession in 1983 etc. etc., but you do not support him in this as you do not regard him as a “Libertarian” or not “libertarian enough”. How sickening. Yes, Paul has a DOMA based on states, like Barr, and he has received a lot of gay/lesbian votes, Mr.
    “Outright Libertarian”.

  10. Well, perhaps, Brian, since I’ve called you out on it, you could provide some reference to substantiate your absurd claim. Place your data on a web site, perhaps, or link to the existing resources on this point. Claiming you have megabytes of data is amusing. Personally, I have gigabytes of data, and access to petabytes of data. None of it substantiates your claim.

    I’m not a Libertarian Party member, Brian, and I have not been for ten years. I’m sure you thought that barb would be a crushing blow to me, but it misses the mark.

    For a conservative Republican with sound fiscal, monetary, and tax policies, I rather like Ron Paul. I don’t expect a conservative Republican to be any good on most issues of individual liberty, but Dr. Paul has been surprisingly intelligent on many issues, such as the war in Iraq, the drug war, and domestic espionage. He has all the limitations I would expect of a Christian conservative living in a deeply Baptist community in the South, with the exceptions noted. I think Ron Paul would make an excellent president compared to any president since, say Calvin Coolidge.

    It is, of course, fair to say that Ron Paul is not a libertarian. He is far less authoritarian than most conservative Republicans, which is probably why guys like my atheist anarchist friend Doug Casey, and I, get along with him so well. Dr. Paul is a decent, sincere, kind, and loving man who has earned my respect. He is one of the best Christians I know.

  11. Mr. Miller, I am wondering why you are so obsessed with mentioning Paul’s alleged flaws in every circumstance? Dr. Paul dropped out over a month ago, and is no longer in the presidential race. Unless we were talking about the Campaign for Liberty, the Revolution March, or the GOP convention, Paul is no longer a relevent topic for the Libertarian Party, so get over it! In the meantime, please come up with a reason to support Bob Barr that doesn’t involve comparing him to a withdrawn candidate.

  12. Hugh, you are WAY to challenging – I can’t come up with a reason to support Bob Barr, PERIOD…

    ART
    LPMA Presidential Elector, who WON’T vote for Barr!
    speaking for myself

  13. Arthur, I admire your principled stand on not voting for Barr. I would much prefer it if you have the opportunity to vote for George Phillies, who is, as far as I can tell, a principled and sincere libertarian with ethical views on the issues of the day. It has been delightful to see the gov’t of Massachusetts, as horrid as they usually are on most things, so far acting to facilitate George’s presence on the ballot over Mr. Barr’s.

    There is something utterly delicious about George’s comments at the conclusion of his campaign for the nomination in Denver, pointing out the difficulties of the conservative and neo-conservative wackos who have promoted racism, war, sexism, protectionism, and other terrible policies, and finding George on the ballot in both NH and Mass. It seems clear to me that what George said about the enemies of liberty utterly passed by the delegates in Denver – given that they then nominated Bob Barr.

  14. […] Note: I wrote an article on the Fed’s “massive redistribution of wealth” via Fannie/Freddie for Last Free […]

  15. Thanks for the kind words Jim… I’d also much prefer to vote for George, and have said so in many different places. Unfortuneately I’ve also had a fair number of folks get on my case for not “supporting the LP’s nominated candidate” – Especially since I’ve made it clear that I not only will not be voting for Barr in the general (assuming he wins the substitution lawsuit) but that in the very unlikely event that the LP carries Mass. (probably among the least likely to go anything but D in the country) I will NOT be casting my Electoral vote for Barr…

    As is, I have stated, that while, if asked, I will sign a consent to substitute Barr for Phillies, I will NOT take any oath or pledge to vote for him in the electoral colledge.

    (This has gotten Richard Winger quite upset with me, as he is afraid that my position might negatively influence Barr’s chances of winning the substitution suit if the courts notice it)

    I also liked Georges speech in Denver, though I wish he hadn’t been so subtle… However George felt that in some ways Mary would have been as problematic a candidate as Barr, just with a different set of members being upset…. I’m not sure I agree, as I think the Mary fans are closer to whatever ideal definition of “Libertarian” that most of us have than the Barroids are, so I know which group I’d rather see walk out…

    At any rate, if there are any Libertarians on the ballot in MA, it will definitely have been with my help – I helped sort all our nomination petitions last Thursday, and have been on the road some ever since delivering some of the larger bundles to our 351 different cities and towns…. I’ll probably have racked up about 600 miles on my bike by the time I’m done, then do another 600 to go pick them all up so that we can turn them in to the Secretary of State…

    ART

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