2:20pm 6/27 Bloomberg He is against Obama's plan and had good points about regulation (Sabanes-Oxley negatives)... Other arguements were generic. Thoughts? I'll post the video when it gets uploaded to youtube or elsewhere.
I want to like Ron Paul. I do, I really do. But I can't. I can't get behind the theory that the federal reserve is the main cause here. Whether they did their job right, or exacerbated the problem I'm not sure. But the fact is we didn't see a huge increase in all assets and debt. We saw a huge increase in one particular sector-housing. Of course that leads to more and more debt, but housing is where it started. The subprime market increased by 350% in just a few years. While there was/is increases in other markets, nothing compared to that of the subprime boom which if course leads to a house boom/equity boom. Keep in mind that subprime backed securities are not inherently more profitable than standard mortgage backed securities. The market is efficient and their is a direct correlation between risk/reward. The only change is whether you want to make very small amounts over time or make a lot at once, only to lose most of it during the times when it doesn't work, or to put it in other terms, the only change is in the way the profit is eventually received. In the end, the risk profiles are the same. With that in mind, if there was a universal bubble (like one created by the fed) we would have seen a rise in demand for all mortgage backed securities. The reason we didn't is because the demand was created by the ostensible safety net that CDS's provided. Demand for subprime back securities in particular (remember, 350% rise) rose because there became a disconnect between risk and reward, or so it seemed (obviously, the balanced that equation eventually). I do agree with him that more regulatory agencies isn't the answer. I'm sorry Mr.President, but they don't work. It may sound obvious but what we need are GOOD regulators and the government, by its nature, sucks at everything. Obama needs to figure out a way to make regulation actually do its job. Towards the end of the video it seem obvious that Paul doesn't have much of a plan either. Let the bankruptcies go forward ok, fine. Then he says "liquidate debt, decrease spending and decrease taxes". Oh, perhaps that's what we haven't thought about all this time. There is no free lunch. Debt doesn't self liquidate without revenue. Plan to cut taxes to increase revenue? Dubious, but ok, short term debt is going to skyrocket best case scenario. I do like the bill he is sponsoring about the Fed. some shady, shady business has gone on there (for better or worse I can't say) regarding the fed and them forcing certain companies to buy other companies. He closes by again blaming the fed, which as I said, I don't agree with. Having said all that, I change my mind-I like RP, I just think he doesn't quite comprehend the complexity of the macro situation.
I don't think most people grasp the simplicity of the macro situation. Big Money can create a crisis with some planning. They used both political parties to deregulate, to remove the sensible regulation we had since Roosevelt's time. They used the Democrats to force lenders to place loans that could not be paid back. Who knows, maybe they put the bee in the ear of the lenders on how to securitize the loans. Greed took the ball and ran with it.. then they had their crisis and they put BO in office. Now they are capitalizing on the crisis by expanding the power of the Federal Reserve and moving us closer to a one world government that they will run.. eventually a worker's pay will hit it's natural limit, about a day's food for a small family for a day's work.. it's not like they like us at all, they call us "useless eaters".
A revolution will start long before that ever happens. People are too fat and happy to care now. However, take away their extra spending cash and weekends at the mall and they will revolt.
I think at the core of Ron Paul's argument (not discussed in this specific interview) is that the Fed is dangerous and powerful because it is able to control the money supply by 1) manipulating interest rates 2) auctioning new gov't debt in the form of Treasuries and 3) changing reserves for banks and effecting the fractional reserve system.... and therefore by doing so sets up inflationary threats. Since the FED has control of the money supply, then it creates much larger booms and busts than a normal free market would. There is MORE capital in circulation.... more capital to put in stocks for example. So in the 1990s when Greenspan continually lowered interest rates more money went into stocks and hence the bull market and ultimately tech boom. An equal big problem is the value of the US dollar... if the growth in money supply is faster than the growth of the US economy (or other factors effecting the value of the US dollar), then our currency is less valuable and there is a threat of inflation. If you do some research on the US dollar to other main currency pairs (specifically the EURO), you will see that the EURO went up 100% in a decade. Jim Rogers said it best (on another thread I saw).... If the stock market rallies 20%, but the US dollar falls 20% against other major currencies... then the investor does not gain anything. (Profits are unreal because the US dollar is worth less.) In order to profit, the US investor needs to be hedged against the dollar. Another issue with the FED and with both the Bush and Obama administrations is the massively growing federal budget deficit. Is it possible that our government can default? Who knows? But we may be potentially getting ourselves into so much debt that printing more money and auctioning new Treasuries may just result in inflation. We cant just keep auctioning treasuries for another decade.
Bubbles don't occur across all asset classes. There was the dot.com bubble and more recently the real estate bubble. These were fueled by the policies of the Federal Reserve. As Meyer Rothschild, founder the the international banking dynasty stated - - - 'Give me control of a nation's monetary system and I care not who writes the laws.' A good introduction to how the Federal Reserve (no more 'federal' than Federal Express, and with nothing in 'reserve') is the book "The Creature from Jekyll Island". - - - IMO most politicians either don't understand these issues, or understanding them - - - use it to plunder the citizenry, (while playing the Right Wing vs Left Wing, Dems vs Reps divert their attention game). Ron Paul is the lone exception in the national political realm that I'm aware of. Regards, - - -
Good points and truthfully ou respective conclusions may not be at odds. The real estate bubble occurred because of easing of credit guidelines, which occurred because of a rise in demand for debt in the secondary market, which occurred because of ostensible ability of companies to hedge themselves against risk. Now if you are saying that the Fed made it possible for the financial companies to be able to create so much demand through low interest rates, I perhaps may agree (not positive). But as I said, we may not be at odds.
We probably agree more than not - - check out the book cited above. Greenspan tried to defend himself by saying that he didnt cause the housing bubble because he only controlled short term rates. But that low rate money primed the pump for all sorts of excesses, including the purchase of lots of consumer junk from China which they used to buy treasuries and which kept our mortgage rates down below where they would have been otherwise. That drove the housing bubble. No cheap money, no bubble. - - - People nowadays are attacking capitalism, and the free market. We haven't had a free market in a long time. How can you have a free market when the price of money itself is controlled ? You do have a wonderful means for creating booms & busts (with all their accompanying opportunities for you to benefit) if youre one of the oligarchs, however. Under such a system people will eagerly vote for their own slavery when needing a 'savior'. - - In our own country the battle of what form of government & economy we wanted started from the beginning. Thomas Jefferson believed in a government based of preserving personal liberty, private property (a man cannot be free without control over the product of his own labor), and leaving others alone. Hamilton wanted to re-create the system found in England, with the government granting special priviledges such as monopolies to merchants that paid & supported the royalty. He also wanted the establishment of a new American empire in the New World. Of course, he thought the 'elites' , such as himself, should be in charge. - - Nothing much has changed. Unfortunately, Hamilton's scheme was much more attractive to the central bankers & lawyer/liar politicians so that's what we've inherit. Regards, - -