Thursday, June 18, 2009

#117 Economics Again--Force and Fraud

As stated previously, Libertarians don't want the Government that they pay for to interfere with their private pursuit of Life, Liberty, and Happiness (or Property, as Jefferson originally re-penned Locke's words). And, by altruistic extension, we don't like it when the Government interferes in the lives of others either. VERY happy to hear that crazy-man Libertarian Ron Paul was the lone vote AGAINST a House Resolution supporting the Iranian protesters. This is just "meddling," he said from the floor, and we "should adhere to the foreign policy of our Founders, who advised that we not interfere in the in the internal affairs of countries overseas." Of course this is the same guy who thinks that it might have been better for Lincoln to let the South secede from the Union. But he's got the right idea here, and I'm frankly mystified that his opposition didn't get at least some token supporters. I just don't understand the political expedience. But this leads us to other sad tales of Middle-East Madness, which I'll take up in a later post.

Two things the Government is paid to interfere about, however, are Force and Fraud committed upon our persons. We pay "protection money," if you will. In this case, for the well-being of The Economy. Our public servants haven't been doing their job, and we're individually and collectively suffering for it. Law-abiding taxpayers--consumers, borrowers, mortgagors, investors--have been generally DEFRAUDED ... and it's been the cause of economic collapse. I may have overstepped the boundaries of my expertise in the Dismal Science, so here's an excerpt from an analysis by economist John W. Shoen which makes it painfully clear Why strict regulation is/was needed, even by Libertarian principles:

There's little debate that regulatory failures played a critical role in the collapse of the housing bubble and the global financial system. Mortgages were written for buyers with no proof of income, backed by fraudulent appraisals. They were packaged by Wall Street firms that paid agencies for AAA safety ratings based on promises that investors would be protected by trillions of dollars of unregulated risk insurance called credit default swaps. Banks were allowed to cut their reserves against loan losses to razor-thin margins. Consumer protections against predatory lending weren't beefed up until 2008. after the market already collapsed and foreclosures had begun to soar. Despite multiple warnings, regulators at the SEC failed to take action against rogue fund manager Bernard Madoff before he cut a multi-billion dollar path of destruction through the accounts of thousands of investors.

There it is. These folks just didn't have the money to cover their bets ... but pretended they did. And the Government should have been there to break their legs. Forgetaboutit. That's what we pay the Feds good money for. Now I'm not sure that Obama's plan to give increased regulatory powers to the half-dozen watch-dog agencies plus one--his Consumer Financial Protection thing--will work, or not. He perhaps should have stripped them all of their "territories"--the old ways have failed, after all--and started fresh with a super-Agency that would integrate and consolidate all financial oversight. I'm for that one, but at least Obama is trying, and the positive, placebo effect of all of this busywork will pay off in the long run.

He's not trying hard enough in other needful areas, however, and I'll have to pick those bones in future.

(Nota bene: don't forget about Mosteller Musings.)

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