GRAYWOLF's Brain Farts

Dear Friends:

The financial meltdown the economists of the Austrian School predicted has arrived.

We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.

Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I'd only be repeating what I've been saying over and over - not just for the past several days, but for years and even decades.

Still, at least a few observations are necessary.

The president assures us that his administration "is working with Congress to address the root cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?

We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.

Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).

Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."

Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?

Then come the scare tactics. If we don't give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

It's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.

F.A. Hayek won the Nobel Prize for showing how central banks' manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own:

Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.

To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end... It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.

The only thing we learn from history, I am afraid, is that we do not learn from history.

The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?

Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people.

The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them.

I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects - the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.

H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.

In liberty,

Ron Paul

Dear Friends:

The financial meltdown the economists of the Austrian School predicted has arrived.

We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.

Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I'd only be repeating what I've been saying over and over - not just for the past several days, but for years and even decades.

Still, at least a few observations are necessary.

The president assures us that his administration "is working with Congress to address the root cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?

We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.

Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).

Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."

Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?

Then come the scare tactics. If we don't give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

It's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.

F.A. Hayek won the Nobel Prize for showing how central banks' manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own:

Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.

To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end... It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.

The only thing we learn from history, I am afraid, is that we do not learn from history.

The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?

Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people.

The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them.

I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects - the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.

H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.

In liberty,

Ron Paul

There is a Republican debate on PBS right now (9/27/7 8-9:30 PM)

 The cowards have shown their stripes and chose to not show up. There is no surprise who they are. They stated they were afraid the environment would be hostile.
 

With all the wins Ron Paul is racking up from the debates, you'd think the media would have to give him some press...Not hardly! So far he has won every debate (according to the debate polls), but yet, the media still goes out of its way to keep him out of the people's minds and on the rare occasion they do mention him, they do their best to make him look bad (even here on KDFW).

It is so bad that Sean Hannity actually lied during the post debate coverage trying to claim that Paul's minions were repeatedly texting to boost the numbers. The only way that would have been possible is if the people had a different phone for each vote. FNC had their system set to not allow more than one vote from a phone.
 

I have only pulled the parts that pertain to Ron Paul…it isn't a long read. (the full transcript is here:)

HUME: [Fred Thompson] will be a guest later tonight with Jay Leno. Polls have him in second or third place, depending on whether you're looking at national polls or some of the early state polls.

So the question is: Who has made the smart moves here, you guys who are here and who have been out on the trail all this time or Senator Thompson?

TEXAS REP. RON PAUL: But I'm proud to be sharing the stage with these guys because we're running for president and we're delighted to be here, and I certainly appreciate getting this opportunity.

HUME: Congressman Paul, you've been out beating the bushes, looking for votes and getting your ideas out all this time. And look where he stands and look where the rest of you guys stand. What do you think?

PAUL: Well, I welcome him to the race because, very specifically, he will help dilute the vote for my benefit...

(LAUGHTER)

... because he will be pro-war and I'm the anti-war candidate representing the Republican traditional position.

(APPLAUSE)

GOLER: Congressman Paul, another gun issue for you, if you will. You have said that the 9/11 attackers might have had second thoughts if they'd felt that some of the passengers aboard the airplanes might have been armed.

We have seen airplanes -- airflights diverted because people heard Arabic on planes, because they heard Muslims praying. What do you think it would do to the travel industry of this country if passengers felt others were carrying guns aboard, sir?

PAUL: Well, first off, you're quoting me incorrectly.

GOLER: I'm sorry.

PAUL: I said the responsibility for protecting passengers falls with the airline, not the government -- not the passengers. The airline's responsible for the aircraft and the passengers.

If we wouldn't have been dependent on the federal government to set all the rules, which meant no guns and no resistance, then the terrorists may well have had second thoughts, because the airlines would have had the responsibility.

PAUL: But we assumed the government was going to take care of us. After 9/11, instead of moving toward the direction of personal responsibility and private property and second amendment, we moved in the opposite direction. We turned it over to the federal government. And look at the mess we have now at airports.

I mean, the airlines -- private industry protects their property all the time. People who haul around money in armored trucks protect their money all the time. But here is one example when the federal government was involved and they messed it up, and if we put the responsibility on the right people, respected the second amendment, I sincerely believe there would have been a lot less chance of 9/11 ever happening.

(APPLAUSE)

HUME: Thank you, Congressman.

WALLACE: Congressman Paul...

(APPLAUSE)

Congressman Paul, your position on the war is pretty simple: Get out.

What about, though, trying to minimize the bloodbath that would certainly occur if we pull out in a hurry? What about protecting the thousands of Iraqis who have staked their lives in backing the U.S.? And would you leave troops in the region to take out any al Qaeda camps that are developed after we leave?

PAUL: The people who say there will be a bloodbath are the ones who said it will be a cakewalk or it will be a slam dunk, and that it will be paid for by oil. Why believe them? They've been wrong on everything they've said.

PAUL: So why not ask the people...

(APPLAUSE)

... why not ask the people who advised not to go into the region and into the war? The war has not gone well one bit.

Yes, I would leave. I would leave completely. Why leave the troops in the region? It was the fact that we had troops in Saudi Arabia -- was one of the three reasons given for the attack on 9/11.

So why leave them in the region? They don't want our troops on the Arabian Peninsula. We have no need for our national security to have troops on the Arabian Peninsula.

And going into Iraq and Afghanistan and threatening Iran is the worst thing we can do for our national security. I am less safe, the American people are less safe for this.

It's the policy that is wrong. Tactical movements and shifting troops around and taking in the 30 more and reducing by five -- totally irrelevant.

We need a new foreign policy that said we ought to mind our own business, bring our troops home, defend this country, defend our borders...

(APPLAUSE)

WALLACE: Congressman Paul -- and I'd like you to take 30 seconds to answer this -- you're basically saying that we should take our marching orders from Al Qaida? If they want us off the Arabian Peninsula, we should leave?

(LAUGHTER)

PAUL: No.

(APPLAUSE)

PAUL: I'm saying we should take our marching orders from our Constitution. We should not go to war...

(APPLAUSE)

PAUL: We should not go to war without a declaration. We should not go to war when it's an aggressive war. This is an aggressive invasion. We've committed the invasion of this war. And it's illegal under international law.

That's where I take my marching orders, not from any enemy.

(APPLAUSE)

(AUDIENCE BOOING)

(CROSSTALK)

[This was hailed as the best part of the debate by the FNC on air staff:]

HUCKABEE: Senator McCain made a great point -- and let me make this clear: If there's anybody on this stage that understands the word honor, I've got to say Senator McCain understands that word...

(APPLAUSE)

... because he has given his country a sacrifice the rest of us don't even comprehend.

And on this issue, when he says we can't leave until we've left with honor, I 100 percent agree with him because, Congressman, whether or not we should have gone to Iraq is a discussion the historians can have, but we're there.

We bought it because we broke it. We've got a responsibility to the honor of this country and to the honor of every man and woman who has served in Iraq and ever served in our military to not leave them with anything less than the honor that they deserve.

PAUL: Can I respond...

(APPLAUSE)

HUME (?): Go ahead. You wanted to respond. He just addressed you. You go ahead and respond.

PAUL: The American people didn't go in. A few people advising this administration, a small number of people called the neoconservatives hijacked our foreign policy. They're responsible, not the American people. They're not responsible. We shouldn't punish them.

(APPLAUSE)

HUCKABEE: Congressman, we are one nation. We can't be divided. We have to be one nation, under god. That means if we make a mistake, we make it as a single country: the United States of America, not the divided states of America.

(APPLAUSE)

PAUL: No, when we make a mistake -- when we make a mistake, it is the obligation of the people, through their representatives, to correct the mistake, not to continue the mistake.

(APPLAUSE)

HUCKABEE: And that's what we do on the floor of the Senate.

PAUL: No, we've dug a hole for ourselves and we've dug a hole for our party. We're losing elections and we're going down next year if we don't change it, and it has all to do with foreign policy and we have to wake up to this fact.

HUCKABEE: Even if we lose elections, we should not lose our honor, and that is more important (inaudible) the Republican Party.

(APPLAUSE)

[FNC cut the video at this point on the replays]

PAUL: We have lost over 5,000 Americans killed in -- we've lost over 5,000 Americans over there in Afghanistan, in Iraq and plus the civilians killed. How many more you want to lose? How long are you going to be there?

How long -- what do we have to pay to save face? That's all we're doing, is saving face. It's time we came home.

(APPLAUSE)

HUME: Gentleman, thank you.

WALLACE: Congressman Paul, your answer is to cut both taxes and spending. You say that you would eliminate the IRS, the CIA, the Federal Reserve, the Department of Homeland Security, Medicare.

WALLACE: I know that you used to want to end the FBI. I'm not sure whether you still support that idea, sir. Perhaps you can tell us. But if you get rid of the CIA, let alone the FBI, how would President Paul have any idea, any intelligence of what our enemies, foreign and domestic, are up to?

PAUL: Well, you might ask a better question. Before 9/11, we were spending $40 billion a year, and the FBI was producing numerous information about people being trained on airplanes, to fly them but not land them. And they totally ignored them.

So it's the inefficiency of the bureaucracy that is the problem. So, increasing this with the Department of Homeland Security and spending more money doesn't absolve us of the problem. Yes, we have every right in the world to know something about intelligence gathering. But we have to have intelligent people interpreting this information.

(APPLAUSE)

PAUL: But you know, just going for increasing presidential powers, as has been discussed, is rather disturbing to me. This whole idea that we're supposed to sacrifice liberty for security, we're advised against that. Don't we remember that when you sacrifice liberty for security, you lose both? That's what's happening in this country today.

(APPLAUSE)

PAUL: We have -- we have a national ID card on our doorsteps, it is being implemented right now. We have FISA courts. We have warrantless searches. We've lost habeas corpus. We've had secret prisons around the world and we have torture going on.

That's un-American, and we need to use the power of the presidency to get it back in order, in order to take care of us and protect this country and our liberties.

(APPLAUSE)

HUME: Thank you, Congressman.

HUME: The U.N. Security Council has imposed some economic sanctions on Iran, but has refused to authorize the use of force against that country. In addition, the threats by Iran's leader against Israel have become more pronounced and more extreme. What do you do?

Congressman Paul?

PAUL: Well, one thing I would remember very clearly is the president doesn't have the authority to go to war.

HUME: So what...

PAUL: He goes to the Congress.

HUME: ... do you do? So what do you do?

PAUL: He goes to the Congress and finds out if there's any threat to our national security. And thinking back to the 1960s, when I was in the Air Force for five years, and there was a Cold War going on, and the Soviets had 40,000, and we stood them down, and we didn't have to have a nuclear confrontation, I would say that we should go very cautiously.

We should back off. We should be talking to Iran right now. We shouldn't be looking for the opportunity to attack them. They are at the present time, according to the IAEA, cooperating. And by the end of the year, they're supposed to be willing to reveal all that they are doing.

So instead of looking for this scenario where it is inevitable that we have to attack, I think that we ought to be talking about how to get along with some people that are deadly, like the Soviets and the Chinese and the many others. We don't have to resort to war every single time there is a confrontation.

They are not a threat to Israel. Israel has 200 or 300 nuclear missiles, and they can take care of themselves. So you shouldn't assume that we have to jump in and go to war, and we certainly shouldn't do it without the consent of the Congress.

HUME: Thank you, sir, thank you.

(APPLAUSE)

This debate resulted in a 33% victory for Paul. The next closest candidate was Huckabee at 17% with the "top teir" candidates all statistically tied in the mid-teens.

Liberal:

Obviously, Democrats are in no way "liberal", neither are Republicans for that matter.

Unfortunately, the political idiots in this country have bastardized the term to where it is used to represent the exact opposite of its real meaning. Funny thing is that those antonyms fit the representatives of both letters of the one-party system in this country.

arbitrary :

doctrinaire

peremptory

 totalitarian 

unlimited

1. Having no restrictions or controls.
2. Having or seeming to have no boundaries.

I believe, the answer to my question is, "Yes, a few. Most of whom call themselves 'conservative'" because they think believe in the traditional meaning, not the currently elected Republicans.

“Government cripples you, then hands you a crutch and says, 'See, if it wasn't for us, you couldn't walk.'”
-- Harry Browne

“The corporate State considers that private enterprise in the sphere of production is the most effective and useful instrument in the interest of the nation. In view of the fact that private organization of production is a function of national concern, the organizer of the enterprise is responsible to the State for the direction given to production. State intervention in economic production arises only when private initiative is lacking or insufficient, or when the political interests of the State are involved. This intervention may take the form of control, assistance or direct management.” (pp. 135-136)
—Benito Mussolini, 1935, Fascism: Doctrine and Institutions, Rome: 'Ardita' Publishers.

"The nationalist not only does not disapprove of atrocities committed by his own side, he has a remarkable capacity for not even hearing about them."
-George Orwell

"We have nothing to fear, but fear itself."
-- Franklin Delano Roosevelt

"If the President does it, it's not illegal."
-- Richard M. Nixon