Commentary: Bankruptcy, not bailout, is the right answer (CNN)

Here is a most excellent article on why Bankruptcy not Bailout is the proper solution to our economic woes.

Bailout KO

I was quite pleased to see that the $700 Billion bailout was knocked out today, but the question remains if it will pull itself back up using the ropes in the next couple of days before the referee can count to 10. Hopefully it stays down for the count and we’ll be limited to 6 months to a year of recession, as opposed to a decade or more of economic calamity.

A few days ago I posted a letter signed by 192 economists urging the Congress not to pass the bailout bill. President Bush was asked what he thought about the letter. Here’s what he had to say:

“I don’t care what somebody on some college campus says.”

Quotable – Rep. Paul Ryan WI (R)

Watching debate on the bailout bill, on the house floor this morning on C-SPAN, I was struck by something one of the few Republicans supporting the bill said…

“This bill goes against my principles, but I will vote for it to preserve my principles.”

Maybe it’s just me, but I thought the whole purpose behind having principles was that you didn’t violate them.

Peter Schiff – 9/22/08 Bloomberg

Today must be Peter Schiff day at In Defense of Liberty.

12/26/2006 — Prophetic

From these videos it is easy to see why Ron Paul named Peter Schiff his economic advisor.  The two of them are on the same wavelength, and this quote I think speaks quite accurately of how they are viewed.

“A truth’s initial commotion is directly proportional to how deeply the lie was believed.  It wasn’t the world being round that agitated people, but that the world wasn’t flat.  When a well-packaged web of lies has been sold gradually to the masses over generations, the truth will seem utterly preposterous and its speaker a raving lunatic.” -  Dresden James

It should also be mentioned that Peter Schiff believes that soon the Dow will only be worth as much as one ounce of gold.

Thanks to CPL for posting these.

David vs. Goliaths (Dr. Paul takes on Bernanke & Paulson)

Many people would argue that Ron Paul should shut his mouth, because he’s not an “economy guy” like Paulson and Bernanke.  This of course is a false argument being that the three gentleman mentioned are all students of economics.  However, there is a difference in their respective schools of thought.  Paulson and Bernanke are of the Keynesian Economics school of thought, and Congressman Ron Paul is of the Austrian Business Cycle Economics school of thought.  So, who’s right?  I tend to go with the guy who’s school of thought has been accurately predicting all of our major economic calamaties over the course of decades.

Bailout Hearings

I had the opportunity to watch some of the hearings this morning concerning our looming economic crisis. I will say that I was glad to see that the politicians in Washington are not rushing into a decision, or at least they don’t appear to be at this point. For them to make a decision hastily due to political pressure from the Executive Branch and the Treasury would be foolhardy at best. Hopefully they take the advice of the economists who wrote the letter below. You can see the rather large list of names who signed it by clicking here.

To the Speaker of the House of Representatives and the President pro tempore of the Senate:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

Ron Paul on the Late Edition with Wolf Blitzer 9/21/08

Ron Paul Discusses The Current Housing Bailout

Henry Paulson’s Atomic Bomb

Just last month, Henry Paulson was quoted as saying this concerning the possibility of bailing out Fannie and Freddie: “If you have a squirt gun in your pocket you may have to take it out, but if you have a bazooka in your pocket, and people know you have a bazooka, you may never have to take it out.” Well needless to say, with today’s announcements concerning the American taxpayer being stuck with all of the bad debt currently held by Fannie and Freddie, Paulson decided to skip on the “rocket in his pocket,” and opted instead to tout the nuclear option (monetarily speaking).

At this point, it is plain to see that there is no end in sight to the bailouts. As the market worsens, and more and more corporations begin to fail, we will continue to see bailouts. Soon the American public will own the auto industry, the airline industry and any other industry that cannot sustain its own position in the market. As Ron Paul put it, “We are socializing our country without even a vote by the Congress. It’s a horrible situation.” This IS the harsh reality — that our country is being ruined not by elected officials, but by appointed individuals who have not been chosen by the people, that are part of an unconstitutional entity that continues to prolong our fiscal cancer, and indeed is the very source of the disease.

What can we expect the Congress to do in this situation? Will they play the role of doctors that will treat the source instead of the symptoms? This is not a likely outcome. Instead, they will continue along the same path that they have for years. The economy may limp along for a while longer, but they are just delaying the inevitable. Instead of facing reality and ending the Federal Reserve, we will continue along the path of fiat money until the ultimate proof of the failure of our central banking system becomes evident. That of course will come when the dollar is completely destroyed, and that day is in the not-so-distant future.