Foreign Policy contributes to terrorism.

Here is a good blog post on the silliness of our people in charge of our Foreign Policy (See Below my comments).  Until we actually start looking at "why" of why the terrorist attack us, we will never have a chance to actually rid the world of people that would like to do us harm.  And before people start saying, "oh that Crosley is nuts, he actually blames us for people the attacks of terrorism."  Thats not my belief at all.  I do believe our foreign policy drives more and more people to attack us, but that never excuses the actions of the people who do it.  The US constantly interfering in other countries affairs ALWAYS develops a hatred to us by a group in that country (Even in countries that like us like Germany and Japan).  Then the question really should become if you believe this is, Can the USA ever rid the entire world of ALL these extremist groups?  Can we kill them all?  I think just about everyone would agree this is impossible, both financially and realistically.  

How did the Afgan rebels beats the Soviets?  They outlasted them, they hid out in the hills in the caves, occasionally hitting the "enemy" all the while telling the countries people that they (USSR) was trying to take over their country.  They won over the hearts of their own people, and pretty much bankrupted the USSR till they had to leave, give up the fight.   And who gave them these ideas on how to win?   WE DID the United States.   Now they are doing the same thing against us, but now they are even more spread out, in many different countries and not nearly as organized.  So each time we hit a village with an airstrike, they lose a few people, but gain in many more ways.  There is almost always collateral damage, innocents are killed.  That wins the hearts of the locals and probably actually generates more "terrorists" than were killed in the strike.  Not to mention the Trillions of dollars that are spent on the "war."

But like I said my philosophy doesnt excuse the the terror the terrorist causes.  But what it does is give understand as to why they are doing it.  A similar example is when you see a father/mother kill someone who may have hurt their child.  You can totally understand where the anger came from to do such an act, but that certainly doesnt excuse the parents actions in killing.  

That’s Evidence for What?!

January 7, 2010

by Gene Callahan
I certainly don’t mean to try to decide the “root causes of terrorism” in a blog post, but I just read an “analysis” of this issue that’s so bad that, well, gosh darn it, I had to take up my pen (keyboard) and write (type).
The article in question was written by Rich Lowry over at National Review, and is called “The Death of a Theory.” What is the theory that has been decisively falsified by recent events?
“Umar Farouk Abdul Mutallab couldn’t ignite the bomb in his underwear on Flight 253 on Christmas Day. All he managed to blow up was a worldview. His failed attempt put paid to the notion that terrorism is the byproduct of a few, specific U.S. policies and of our image abroad.”
Ah, so, we are going to find out that Mutallab confessed to officials, “No, there is no U.S. policy that prompted me to do this — I just hate America!”
So it’s a bit of a surprise when, just a little later, Lowry tells us, “In taking responsibility for Abdul Mutallab’s attempted attack, al-Qaeda in the Arabian Peninsula (AQAP) claimed it was in retaliation for a U.S.-sponsored strike against its leadership in Yemen.”
So, wait… the group responsible says this was “the byproduct of a few, specific U.S. policies”?! Ah, but Lowry also mentioned Nidal Malik Hasan, the murderer at Fort Hood. So it must be Hasan who provides this killer new evidence that these attacks are unconnected to U. S. foreign policy, right? Not so fast: “Hasan reportedly was disappointed that Obama stayed in Afghanistan.” Huh? The perpetrator of this attack, too, says it was motivated by a specific U.S. policy? And these claims refute the idea that specific U.S. policies contribute to terrorism?
Now, I don’t contend for a second that these claims by the terrorists in question prove that Lowry is mistaken in his view that the terrorists “just hate America.” No, clearly they could be lying. But I find it absolutely bizarre to see these cases put forward as proof that the people who think U.S. foreign policy may play a role in terrorist attacks are wrong! Lowry apparently is basing his case on the fact that these are new complaints about U.S. foreign policy: “For years, we were told that the Iraq War was al-Qaeda’s best recruiting tool. Now, new recruiting tools are at hand.”
Of what possible relevance to the debate here is the newness of these “recruiting tools”? It’s as if someone tried to prove that smoking doesn’t cause lung cancer by pointing to the fact that even people who smoke new brands of cigarettes, that weren’t even out when the latest studies were done, also get cancer!
Well, for Lowry, the relevance seems to be, “if it’s not one thing, it will just be something else,” as he continues: “If we pull our troops from Afghanistan, they’ll object to our missile strikes in Pakistan.” Well, OK, but can’t one see how shooting missiles into a heavily populated country might be found objectionable, at least by some extremists? This seems another, specific U.S. policy that might be cause trouble.
“If we stop the missile strikes, they’ll object to our training of foreign militaries.” Once again, at least if these are “foreign militaries” crushing the opposition at the behest of some petty Arab tyrant, then one can understand possible objections.
“If we stop that, they’ll object that we have the temerity to maintain a blue-water navy.” Whoa, wait just a second! Lowry has seemingly attempted to lull us to sleep with some things terrorists are likely to really object to, before trying to slip his Trojan Horse past us. “A blue-water navy”? Has anyone, ever, heard a single terrorist claim something like, “I go to Allah now to decommission the blue-water navy of the great Satan”? No? No, I didn’t think so.
I guess the goal of the piece is to get these things all muddled, so the reader ends up shaking his head and saying, “Man, those terrorists won’t quit until we give up our navy.”
As I have stressed, Lowry may well be right: These terrorists may well be lying to us, and have the real goal of seeing our “suicidal abdication.” But this “killer” new evidence Lowry presents offers not an iota of support for that view; if this is the best Lowry can offer, then maybe it’s Lowry who can’t give up his “operating theory of terrorism, no matter how tattered.”

LOL, Does anyone take responsibility anymore?

http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/White-House-We-will-NOT-discuss-broken-C-Span-promise-80829987.html

I just don't understand why people cant fess up and take responsibility.  The President stated on numerous campaign stops that all discussions would be transparent.  They have not, my only question is why this wasnt brought up by most media during the beginning of the healthcare debate not probably just days before it goes to the presidents desk.  Which would you, the average citizen, want to hear?   "I made a promise I couldn't keep, the outside forces of congress and industry made it just about impossible for me to keep my promise and I am sorry?"  Or the total crap and total lack of respect that is being shown to the citizens currently?  Honestly I dont know who advises the president, but is there any wonder why his numbers are falling faster than the temperature in the Midwest?




Just shortly into the debate last year he broke the promise when he and congressional leaders had closed door meetings with industry leaders in healthcare insurance and drugs.  I dont understand why it wasnt huge news then but it is now, when its pretty much over?

But I do almost feel sorry for Spokesman Gibbs having to toe the line and lie for his boss.  Must be a very sucky job.

Government intervention, Corporatism, lack of taking responsibility for ones actions, all at the expense of the average American. 

Another interesting read from another Austrian Economist blog.

Ill just let you read it, and see if you would disagree with what Iceland did or the blogger's comments.

Congratulations to Iceland for figuring out that it is better to suffer a credit rating downgrade than to torture its citizens for a decade or longer. Please consider Iceland president vetoes collapsed Icesave Bank's bill to UK

Iceland was plunged back into crisis after its president refused to sign a bill promising to repay more than €3.8bn (£3.4bn) to Britain and the Netherlands after the collapse of the country's Icesave bank in 2008.


The escalating row threatens to further destablise the Icelandic economy, which went into meltdown after the failure of its three big banks, cutting off further aid from the International Monetary Fund and jeopardising efforts to join the European Union. The credit rating agency Fitch immediately downgraded Iceland, describing the latest political row as a "significant setback".


The British and Dutch governments had compensated savers who lost money when Icesave's parent Landsbanki filed for bankruptcy. But both have since put pressure on Reykjavik to repay the money.


Opinion polls suggest that Icelanders will overwhelmingly vote against the passage of the bill. A petition urging Grimsson not to sign the bill attracted 62,000 signatures, around one-fifth of the population. Critics say the bill would burden each citizen with a debt of €12,000 including interest.


In a televised address, Grimsson said: "It is the cornerstone of the constitutional structure of the Republic of Iceland that the people are the supreme judge of the validity of the law. It is...the responsibility of the president to ensure that the nation exercises this right." He said the referendum would take place as soon as possible.


Almost 300,000 British savers had deposits with Icesave, attracted by market beating interest rates. Their accounts were frozen in October 2008, sparking a diplomatic row between Britain and Iceland, which had only recently begun to thaw. Britain outraged ordinary Icelanders at the time by invoking anti-terrorist legislation to freeze the UK assets of Landsbanki.

Repayment Blocked


The Times Online Reports Iceland blocks repayment of £2.3bn to Britain

Today Iceland's President, Olafur Grimsson, vetoed a bill that would have enforced the repayment of the money by 2024.


Under Iceland's constitution there must now be a referendum on the issue.


But the repayment is deeply unpopular in Iceland. A poll in August found 70 per cent of the country was opposed to it.


The Icelandic Government issued a statement to try to reassure Britain and the Netherlands. It said: "Despite the President‘s decision, the Government of Iceland remains fully committed to implementing the bilateral loan agreements and thus the state guarantee provided for by the law."


Iceland’s parliament approved the Bill last week by a narrow majority of 33 votes to 30. Its passing was seen as a way to help boost the country's bid to join the European Union and get its shattered economy back on track.


The Bill is also opposed by the main opposition party.


This is only the second time in Iceland’s history that the President has not signed into law a Bill approved by parliament.


The money represents 40 per cent of the country's gross domestic product but Iceland said that it planned to repay it gradually to savers in the UK and Netherlands by 2024.

UK Denseness


A UK Treasury spokesman said: “The Treasury will consult with colleagues in Iceland to understand why this Bill has not been passed."


It should be perfectly clear that the bill passed but that the president, acting like I wish presidents here would act, went along with the wishes of the citizens of Ireland.


You have to be dense to not understand that, although I suppose it is amazing that presidents anywhere actually listen to its citizens.


You Take Risk, You Pay The Price


This case is easy. There is no free lunch. Extra yield comes with risk. If you take risks, you pay the price. Irish citizens should not have to bear the brunt of this folly. I commend Iceland for telling the UK and Netherlands where to go.


Including the Netherlands, the amount in question is about $5 billion. With the veritable $trillions being flipped like pancakes these days, $5 billion might not sound like much. However, it is a very big deal to Iceland.


Per Capita Cost


The Population of Iceland is 317,593 as of December 1, 2009. Let's do the math. $5,000,000,000 divided by 317,593 = $15,743.42.


Noridicom shows there were 116,000 Ireland households in 2005. Let's assume the number is 120,000 today. The household payout would be $41,666.67


Now how long would it take the average Icelandic household to pay that back? I commend Iceland for figuring out that a loan from the IMF is simply not worth the price.


The irony in this mess is that Fitch immediately downgraded Iceland. Heck, the way I see it Iceland ought to be upgraded. With a debt overhand from the IMF, Iceland would have had a default looming over its head for a decade with it citizens struggling under a burden of that debt for a decade or longer.


Iceland may have other problems but at least that one was resolved (hopefully), the quick and painless way. And that should have been the model for US banks as well. The stockholders and bondholders should be the first ones wiped out. Instead Bush started and Obama continued with a policy to punish the innocent to bail out the wealthy, leaving the average taxpayer deep in the hole, against the clear will of the majority.


Beware IMF Trojan Horses


Figuratively speaking, Iceland effectively told the UK and Netherlands to go to hell. That is a good first step. Next, it needs to vote out of office all the political dunderheads in parliament who voted for that ridiculous payout. That would seal the fate once and for all.


In the meantime, Iceland needs to continue its resolve while avoiding associations with the IMF, an organization with nothing to offer but Trojan Horses that would further weaken the country.


Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Too big to Fail.

Go this from Robert Wenzel's blog:
I certainly agree with Mr. Wenzel's commentary and with Mr. Johnson assumption.

Funny most are the direct players that started the Federal Reserve in the first place.  Read "The Creature for Jekyll Island" for a eye opening commentary on the start of the FED and all the problems its caused, and most notably the wealth it has created for a small group of bankers.

This morning at the American Economic Association meeting in Atlanta, Simon Johnson participated in a panel discussion, “Global Financial Crises: Past, Present, and Future,” with Allen Sinai (the organizer), Mike Intriligator, and Joe Stiglitz.

Among the points Johnson made:

1.The most serious problem we face is that 6 banks in the U.S. are now undeniably (in their own minds) Too Big To Fail.

2.What is going on is not standard regulatory capture, but the U.S. is now an advanced Oligopoly.

3. Banks have put money into buying intellectual influence.

4. There has been "false" financial innovation.

5. Europe is less captured by finance (Except Britain and Switzerland) .

The slide presentation that went along with Johnson's remarks is here. It is fascinating in its observations and a must read. I don't agree with everything Johnson says, most specifically that deregulation can be blamed, in part, for the economic crisis. I also have a problem with the lack of Johnson identifying the role of the business cycle in the current crisis. That said, there is much insight and much to ponder in these slides.

As for the six banks Johnson has in mind that think they are TBTF, my guess is:

Goldman Sachs

Morgan Stanley

CitiGroup

Bank America

Wells Fargo

JPMorganChase

Sigh, Government Corporatism at its finest.

I found this on Biggovernment.com.  Just more huge corporations making it virtually impossible to have competition by making the cost of entry so large its impossible to enter.  Funny part its under the guise of protecting the consumer.   Also the anti-competition is performed by the government, huge surprise.  Maybe if the tax code wasn't 67,000 pages long there wouldn't be many errors.?  So long, small mom and pop tax preparers, and be prepared for price increases by H &R Block since they and a few other large companies will essentially have a monopoly on the industry. Government corporatism at its finest.    

As noted by the author it sure would be nice if we had a simple postcard sized tax code that would put both the IRS and H&R block out of business.  Now that would be good for the consumer.

 

H and R Block and the IRS: An Unholy Alliance to Ransack Taxpayers

by Dan Mitchell The late George Stigler, winner of the Nobel Prize in economics, is famous in part because of his work on “regulatory capture,” which occurs when interest groups use the coercive power of government to thwart competition and undeservedly line their own pockets.

A perfect (and distasteful) example of this can be found in today’s Washington Post, which reports that the IRS plans to impose new regulations dictating who can prepare tax returns. Not surprisingly, the new rules have the support of big tax preparation shops such as H&R Block and Jackson Hewitt, which see this as an opportunity to squeeze smaller competitors out of the market.
The IRS and the big firms claim more regulations are needed to protect consumers from shoddy work, but this is the usual rationale for licensing laws and other government-imposed barriers to entry and the Institute for Justice repeatedly has shown such rules are designed to benefit insiders rather than consumers.
Tax preparers do make many mistakes, to be sure, but that is a reflection of a nightmarish tax code, and the annual tax test conducted by Money magazine showed that even the most-skilled professionals – such as CPAs, tax lawyers, and enrolled agents – were unable to figure out how to correctly fill out a hypothetical family’s tax return. But since the IRS routinely makes major mistakes as well, perhaps the moral of the story is that we need fundamental tax reform, not IRS rules to create a cartel for the benefit of H&R Block and other big firms. Would any of this be an issue if we had a flat tax or national sales tax?

The Internal Revenue Service plans to test, register and screen people who get paid to prepare tax returns, stepping into a virtually unregulated business on which millions of Americans depend for crucial financial services. …the moves could increase the cost of having tax returns prepared. …Starting with the 2011 tax season, the IRS plans to require paid preparers to register with the agency.  …The new testing and education standards will exempt certified public accountants, lawyers, and tax practitioners known as “enrolled agents,” who are cleared to represent taxpayers in dealing with the IRS… Tax prep giants H&R Block and Jackson Hewitt expressed support for the requirements announced Monday. Under the new rules, H&R Block “won’t be competing against people who aren’t regulated and don’t have the same standards as we do,” said Kathryn Fulton, senior vice president for government relations. …Citing a gap in the agency’s plan, Fulton said the IRS should impose the same rules on unpaid preparers of tax returns. …In field tests, the IRS noted Monday, tax-return preparers often gave bad advice. In a 2006 study in which employees of the Government Accountability Office posed as taxpayers and visited outlets of tax prep chains, all 19 preparers made mistakes, the IRS reported. …It is unclear how much of the blame rests with the tax code’s confusing nature, a perennial target of politicians’ criticism. Do regulated professionals such as CPAs perform better than their unregulated counterparts? The IRS commissioner said the agency does not have the data to answer that question.

Good Libertarian Essay

Thought this was a fairly good essay on current libertarian thoughts.  How the "state" should be the one having to prove its ok take our freedoms, not the libertarian having to constantly complaining about them being taken.

I just watched IOUSA, what a great documentary.

You can watch a 30 minute version of the movie at:  http://www.youtube.com/watch?v=O_TjBNjc9Bo

Its fairly non political documentary on the state of the Federal Debt of the USA, and how it is in critical shape.  It has the GAO's David Walker as a main person in the film, it really isnt political propoganda, he really gives a unbiased version of what both parties have done.  As a Austrian economist and a conservative libertarian I obviously have many ideas on how I would solve the problems that are addressed, but im not even sure if I was able to address all the problems it could solve the financial crisis this country is in.  The movie was made in mid 2008, so it doesn't even address the scale of the current administrations additions to the debt.  It states that if you add up all the federal debt in 2008 we are in debt to the tune of $53 trillion.  That includes the 12 trillion in federal debt + unfunded liabilities + other federal debts. 

Towards the end of the movie it states the more "popular" ways to solve the problem and states that they are not even close to solving the problem.

-Earmarks and Pork barrel spending accounts for 1% of the revenue needed.
-Rolling back ALL of the Bush Tax cuts accounts for 10% of the revenue needed.
-Ending the Iraq war immediately accounts for 3% of the revenue needed.

Thats 14% of the revenue needed to solve the coming financial crisis.

The 4 deficits in the US.

Federal Deficit
Savings Deficit
Trade Deficit
LEADERSHIP Deficit

It does mention the federal reserves place in the equation, but doesn't obviously highlight the huge problems that libertarians have with the FED.  It does give Ron Paul a fairly good plug during the movie.  It has him questioning former Fed president Alan Greenspan's ineptitude of hitting so called benchmarks.  Saying something like, "if I missed as many benchmarks as you do, as a doctor, I would have dead patients."

Its a well made movie for those without a degree in economics and does it in a fairly non political way.  I would recommend it to anyone.

A couple of Funnies from the web.

 

Found these appropriate funnys on the WEB.

I got this from Bob Murphy's Blog, where he got it from another.  All I can say is "WOW".  And I agree with Bob when he says the original posters comments about it are about as good as can be.

Ben Bernanke vs Ron Paul who has an economic clue?

Recently Bernanke, Head of the Federal Reserve, was named Time Magazines Person of the Year.  The article goes on to say he saved us from the Great Depression 2.0.  Im wondering if I was able to cause WWIII and pretend to stop it if I could get the same recognition. I dont dispute the theory that Bernanke is a very powerful man.  I think if anything he is more powerful than President Obama.  He controls the worlds financial system.  He is supposed to be responsible, as the the Federal Reserve President, to do the following as the objectives:

1.  Moderate interest rates for the economy.

2.  Maintain Employment for the United States thru monetary policy

3.  Maintain Stable Prices

Moderate interest rates - Well myself and many many economists feel that he was asleep at the wheel when it came to this aspect.  He and the Federal Reserve thru the artificial credit creation and keeping interest rates too low for far too long.  He created the housing bubble which was a main cause of the economic meltdown.  Now he is the "hero" for supposedly saving it by doing the same thing,  lowering interests even farther and pumping trillions of dollars into an already debt ridden economy.  My opinion is that this is just a imaginary blimp of a recovery, which has just just increased debt to the country and has severely increased the possibility of big inflation.

Maintain Full Employment - Obviously this has been proven to be a major mistake as well.  We are above 10% and if you use any of the old ways of determining unemployment it is more in the 20% range.  Many people also believe it will be hard to get many of the old lost jobs back either because they have been lost to other countries or because companies have learned to be more productive with less employees.  Why should companies hire anymore people after they stop laying people off, if they are getting near the same productivity with less?  Whether you can directly blame this on Bernanke because of him dealing with this aspect after the fact is questionable.  But I would say its the Federal Reserves duties to see bubbles ahead of time, though my philosophy states no one can accurately when they manipulate the economy so severely.  You certainly cant argue that they totally missed this bubble that occurred during their watch (Greenspan and Bernanke).  They had no clue of the bubble or its severity.
 
 Maintain Stabile Prices - House Prices and Oil are just a couple of the totally unstable prices thru the past several years.

Here are just a couple of the ridiculous quotes from the most important man in the world. 

On July 1, 2005, Bernanke stated with great confidence that the U.S. was not experiencing a housing bubble, saying: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”

In November of the same year, he talked about derivatives, saying, “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” He also said, “The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”

And a couple months after that, back on housing again, he said, “Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
And in February of 2008, he said, “I expect there will be some failures of smaller banks.” Bear Stearns collapsed just a couple weeks later…

As well as saying Freddie and Fannie were in fine shape and had very little chance of failing.


This from the Time Magazine Person of the Year.   Asleep at the wheel? or Incompetent?  You decide.  I would actually argue that really he and the Federal Reserve have no chance of doing well at their objectives because they cant accurately predict what the market is going to do when they manipulate it thru cheap credit and un"real" interest rates.


Lets compare those with some other and see who predicted this collapse and the carnage that ensued.

And in one of the speeches that George Bush made before he left office, I talk about a lot. He said that it´s Wall St.´s fault, Wall St. got drunk. Well what everybody forgets is, sure, yeah, Wall St. was drunk, they were stinking drunk on Wall St.. Everybody on Main St. was drunk, the whole country was drunk.The question is, WHY? How did they all get drunk? Where did they get the alcohol? Well it all came from the FED. The FED liquored everybody up. And now they are surprised at the way we acted and the decisions that were made, about the risks that were taken? The Federal Reserve was behind all of it!  Peter Schiff

The U.S. housing market, long considered vulnerable by many economists, is now on the verge of suffering a serious collapse in many regions. Commodities guru and hedge fund manager Jim Rogers warns that real estate in expensive bubble areas will drop 40 or 50%. Mainstream media outlets like the New York Times are reporting breathlessly about the possibility of widespread defaults on subprime mortgages.
When the bubble finally bursts completely, millions of Americans will be looking for someone to blame. Look for Congress to hold hearings into subprime lending practices and “predatory” mortgages. We’ll hear a lot of grandstanding about how unscrupulous lenders took advantage of poor people, and how rampant speculation caused real estate markets around the country to overheat. It will be reminiscent of the Enron hearings, and the message will be explicitly or implicitly the same: free-market capitalism, left unchecked, leads to greed, fraud, and unethical if not illegal business practices.
But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy – through the manipulation of interest rates and the creation of money – caused the artificial boom in mortgage lending.
The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990. Housing prices have risen dramatically not because of simple supply and demand, but because the Fed literally created demand by making the cost of borrowing money artificially cheap. When credit is cheap, individuals tend to borrow too much and spend recklessly.
This is not to say that all banks, lenders, and Wall Street firms are blameless. Many of them are politically connected, and benefited directly from the Fed’s easy money policies. And some lenders did make fraudulent or unethical loans. But every cent they loaned was first created by the Fed.
The actions of lenders are directly attributable to the policies of the Fed: when credit is cheap, why not loan money more recklessly to individuals who normally would not qualify? Even with higher default rates, lenders could make huge profits simply through volume. Subprime lending is a symptom of the housing bubble, not the cause of it.
Fed credit also distorts mortgage lending through Fannie Mae and Freddie Mac, two government schemes created by Congress supposedly to help poor people. Fannie and Freddie enjoy an implicit guarantee of a bailout by the federal government if their loans default, and thus are insulated from market forces. This insulation spurred investors to make funds available to Fannie and Freddie that otherwise would have been invested in other securities or more productive endeavors, thereby fueling the housing boom.
The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” Imagine a Brinks truck driving down a busy street with the doors wide open, and money flying out everywhere, and you’ll have a pretty good analogy for Fed policies over the last two decades. Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections. If housing prices plummet and millions of Americans find themselves owing more than their homes are worth, the blame lies squarely with Alan Greenspan and Ben Bernanke.
RON PAUL March 2007

He also predicted the collapse of both Freddie and Fannie in 2002, but no one listens.   



The one of the people in charge of the collapse gets to be Time Magazines Person of the Year the other, who predicted the collapse in time to prevent it, is mocked by the mainstreet media.

Freaking people still have no idea what causes bubbles and busts.

Sigh it is so frustrating to see articles like this.

Dec. 31 (Bloomberg) -- Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.
“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.
The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.
The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted.

Lax regulation of Fannie Mae and Freddie Mac led to the mortgage companies taking on too many risky loans, Wallison said.

“It turns out it was impossible to regulate them,” he said. “They were too powerful.” He said no one knows how much will be needed to keep the companies solvent.
The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.
“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.” 

Not one mention that the FEDERAL RESERVE kept interest rates far too low for far too long artificially creating cheap credit? Would we have had a bubble if mortgage rates were at 10% instead of 5%?   Dont you think that also the governmental interference in the "market" of pushing Freddie and Fannie to make loans that in a free market they would not have made is to be blamed?

The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.
“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”

Boy sounds like Freddie and Fannie would be good stocks picks since the risk of total loss to stockholders is zero, but when you compare that to the governments history of running practically everything into bankruptcy (postal service, amtrak, social security, medicare,...)  its probably still a horrible investment.

Now instead of reining in Freddie and Fannie, we (the taxpayers) are guaranteeing any amount of losses.  Hmmmm Does that give them even more reason to risk my (taxpayer) capital? Or am I to believe that somehow the government will find enough regulations to keep them honest, even though they couldnt find enough regulations to stop the Tech bubble, Enron, Housing bubble, derivatives debt swaps crisis.

I wonder if they will ever figure out that a real "free market" actually contains irrational decisions, and at least when it doesnt the people who created the risk and made the poor decisions are penalized not innocent people and taxpayers.