[Jason Vines]

I'm now reading Economics in One Lesson by Henry Hazlitt. It first debuted in 1946, and the version I'm reading now is the 1988 50th anniversary edition.



I'm 54 pages into the book, and so far I'm finding it a brilliant encapsulation of economics into terms anyone can understand. I'll write a full review of the book later, but I must now share a passage that has impressed me especially greatly:

Quote

The case against government-guaranteed loans and mortgages to private businesses and persons is almost as strong as, though less obvious than, the case against direct government loans and mortgages. The advocates of government-guaranteed mortgages also forget that what is being lent is ultimately real capital, which is limited in supply, and that they are helping identified B at the expense of some unidentified A. Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to "buy" houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment.

Hazlitt's description bears remarkable similarity to the crisis that has befallen today's housing market. Fannie Mae and Freddie Mac's subsidies of mortgages encouraged banks' heedless profligacy regarding them. The Community Reinvestment Act, though it played only a minor direct role in the crisis, indirectly jumpstarted a culture of exuberant risk-taking in the financial industry.

Many people blame the current financial turmoil on a lack of effective government regulation of the financial industry. That's only half the picture, though: Government shielding of financial institutions from the consequences of risky behavior, as Hazlitt points out, likely crippled the normal checks the market might have applied to such shenanigans. The real story isn't that government refrained from exerting reasonable limits on the banking industry, but that government removed natural market limitations that would have existed but for its interference.

[tomba1701]

That's odd. I could have sworn I responded to this yesterday. Must have previewed and not submitted.

Anyway, good to "see" you. Sounds like an interesting read, I might have to pick it up.

Now that it is law of the land that Keynesianism is the only true form of economics, I wonder how long before this book gets banned as hate speech?

[Jason Vines]

tomba1701, on Mar 13 2009, 12:17 PM, said:

Anyway, good to "see" you. Sounds like an interesting read, I might have to pick it up.

Now that it is law of the land that Keynesianism is the only true form of economics, I wonder how long before this book gets banned as hate speech?

Nice to see you as well. I'm knee-deep in a redesign of the main Hypersyllogistic site at the moment. It will feature a brand-new, from-scratch theme and the Drupal content management system, which will make possible a much more robust site with much easier updates to boot. After that's done, I'll be posting both on the forums and on the site a lot more often.

By the way, regarding the so-called Keynesian consensus, have you seen this web page of the Cato Institute, Fiscal Reality Central?

[tomba1701]

I have taken a look at the articles on Cato periodically. Just added your link to my bookmarks. Their coverage of the response to the financial "crisis" has been good stuff. Too bad we don't have enough journalists that are willing to llok at this so-called Keynsian consensus objectively and give play to the scores of serious economists and former policy makers who have compelling reservations about the road we're headed down (a good chunk of which started while Bush was still steering the ship, but has accelerated into the New Deal on steroids since then).

Not sure if any pundit or blogger has explored this angle, but I really look at the whole stimulus bill (and the son-of-stimuls spending bill from last week) as part and parcel with the Patriot Act and all the reservations people had about how it was passed and the lack of any serious discussion or due diligence around it.

- Thousand page bill, written behind closed doors - check

- Vast majority of Congress admitting they didn't have time to read it - check

- Upon reflection and review, bloggers and opposition party find numerous unrelated and frigthening expansions of government power and/or curtailment of individual freedoms - check

- White House / Majority Party using bully pulpit and fear-laced rhetoric on why we "must pass the bill" and "there is no time to wait" - check

When we are dealing with th econsequences down the road, this will be remembered as Patriot II. And I think the downside for the country is actually much, much worse.

This post has been edited by tomba1701: 16 March 2009 - 03:12 PM

[Jason Vines]

tomba1701, on Mar 16 2009, 04:11 PM, said:

Not sure if any pundit or blogger has explored this angle, but I really look at the whole stimulus bill (and the son-of-stimuls spending bill from last week) as part and parcel with the Patriot Act and all the reservations people had about how it was passed and the lack of any serious discussion or due diligence around it.

That has been blogged about:

• Stimulus Package = The Dems’ PATRIOT Act

On a related topic, you might have interest in David Boaz's writings about the left's embrace of the "Shock Doctrine."

[tomba1701]

Glad that others have picked up on this as well. The comparisons to the events surrounding Gulf of Tonkin and the Iraq War resolution are frightening.

And now, my sympathies towards the popular outrage aside, we've got Congress getting involved in deciding which employment compensation contracts (all signed pre-bailouts) are enforceable and which they will invalidate by government fiat or 100% tax rates. We've moved well beyond the initial parameters of the bailouts, where they would only be limiting top executive's comp, into government wage controls over a broad sector of the economy.

The chilling effect that this is having beyond the "fat cats in the boardrooms" and into the broader economy is astounding. I know a number of people in the financial sector (none of whom are fat cat high fliers) who are now having their compensation and bonus payments scrutinized along with the big dogs. And these are people who rely on the bonus element of their compensation to make a living wage in the tri-state area. To say nothing of the knock-on effects on restaraunts, bars, hotels, airlines, etc. Not because people are being frugal with cash, but because mid level managers are terrified to even take a client or their team out to lunch or out for a round of drinks at the end of a project, lest Washington decide that this behavior is also untoward and must be stopped via more central planning.

The only silver lining I can see to any of this is that there is enough popular outrage from all corners of the electorate that could potentially enable the emergence of a truly viable third party movement in 2010 and the possibility of an insurgent presidential campaign in 2012. The R's and D's have both sold out their core principles over the last 9 months and while they will continue to battle it out with their scripted talking points on cable news and in the politi-blogs, the rest of the country is going to demand results.

As crazy as he turned out to be in the end and his protectionist leanings aside, I think Ross Perot arrived on the scene 17 years too early. Someone needs to dust of his Reform party playbook and update it for what we're in the middle of right now.

This post has been edited by tomba1701: 18 March 2009 - 03:08 PM