The morning after the election, the disappointment will begin to settle upon the Obama crowd. Defeat — by now unthinkable to the devotees — will bring heartbreak. Victory will steadily deliver the sobering verdict that our troubles won’t be solved by a leader’s magic.

There is something odd — and dare I say novel — in American politics about the crowds that have been greeting Barack Obama on his campaign trail. Hitherto, crowds have not been a prominent feature of American politics. We associate them with the temper of Third World societies. We think of places like Argentina and Egypt and Iran, of multitudes brought together by their zeal for a Peron or a Nasser or a Khomeini. In these kinds of societies, the crowd comes forth to affirm its faith in a redeemer: a man who would set the world right.

Martin Kozlowski

As the late Nobel laureate Elias Canetti observes in his great book, “Crowds and Power” (first published in 1960), the crowd is based on an illusion of equality: Its quest is for that moment when “distinctions are thrown off and all become equal. It is for the sake of this blessed moment, when no one is greater or better than another, that people become a crowd.” These crowds, in the tens of thousands, who have been turning out for the Democratic standard-bearer in St. Louis and Denver and Portland, are a measure of American distress.

On the face of it, there is nothing overwhelmingly stirring about Sen. Obama. There is a cerebral quality to him, and an air of detachment. He has eloquence, but within bounds. After nearly two years on the trail, the audience can pretty much anticipate and recite his lines. The political genius of the man is that he is a blank slate. The devotees can project onto him what they wish. The coalition that has propelled his quest — African-Americans and affluent white liberals — has no economic coherence. But for the moment, there is the illusion of a common undertaking — Canetti’s feeling of equality within the crowd. The day after, the crowd will of course discover its own fissures. The affluent will have to pay for the programs promised the poor. The redistribution agenda that runs through Mr. Obama’s vision is anathema to the Silicon Valley entrepreneurs and the hedge-fund managers now smitten with him. Their ethos is one of competition and the justice of the rewards that come with risk and effort. All this is shelved, as the devotees sustain the candidacy of a man whose public career has been a steady advocacy of reining in the market and organizing those who believe in entitlement and redistribution.

A creature of universities and churches and nonprofit institutions, the Illinois senator, with the blessing and acquiescence of his upscale supporters, has glided past these hard distinctions. On the face of it, it must be surmised that his affluent devotees are ready to foot the bill for the new order, or are convinced that after victory the old ways will endure, and that Mr. Obama will govern from the center. Ambiguity has been a powerful weapon of this gifted candidate: He has been different things to different people, and he was under no obligation to tell this coalition of a thousand discontents, and a thousand visions, the details of his political programs: redistribution for the poor, post racial absolution and “modernity” for the upper end of the scale.

It was no accident that the white working class was >>>> Read the Full Article

The new group at the Fed is not equal to the problem that faces it…They need to speak frankly to the market and acknowledge how bad the problems are, and acknowledge their won failures in letting this happen. This is what is needed to restore confidence…There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for.”

Professor Schwartz and the late Milton Friedman revolutionized thinking on the causes of the Great Depression in 1965 with their bombshell publication convincingly persuading Americans high and low that it was not the much maligned free-market system that had failed in the 1930’s but instead that it was “incompetent government bureaucrats at the Fed” who bore responsibility for the financial crisis. In the second article referenced above Evans-Pritchard hypothisis along the lines of what Free Capitalist radio listeners have been hearing for over a year now, that the present “crisis may make 1929 look like a walk in the park.”

Key Points:

• It took Friedman and Schwartz, 30 years later, to unmask the real culprit that caused the Great Depression (incompetent bureaucrats).
• The false theory advocated by the bureaucrats and politicians was that it was the “free market, unscrupulous capitalists, and speculating investors” that caused the Depression.
• Despite Friedman and Schwarts seminal work, the false theory is still advanced, taught and believed by American BOC culture today. This has made Americas vulnerable.
• Today’s bureaucrats and politicians are up to the same old tricks, blaming freedom, entrepreneurs and investors. See Yaron Brook’s “The Morality of Moneylending: A Short History”
• When a speculative home borrower loses a home to foreclosure, that is the “punishment” from the marketplace. Losing liberty is far more subtle.
• Laws that make “lenders” more responsible for borrowers decisions cannot increase productivity and therefore credit extensions will tighten and the market worsen

Lawmakers have recently started down the path to make it illegal for lenders to make loans where the borrower does not have “the reasonable ability to repay the loan.” However, this puts the lender in a sticky situation. Who decides, for the borrower, if he has the reasonable ability to repay the loan. Without defining key “terms” like this legislation contemplates the formula sets the stage for bureaucrats to decide arbitrarily and this makes the lenders more cautious. Credit tightens. However, the Fed is pumping more money into the market. So, excess supply of money (means cheap dollars), no or substantially less new lending means lower velocity of money (lower productivity).

Conclusion:

Alert and educated citizens should be aware of the storyline endlessly defended by bureaucrats and politicians and be on the lookout for attempts to blame our economic problems on everyone except those who were elected and those who were hired to manage the affairs of the government. Productivity not legislation or bureaucratic involvement is how America will recover from potentially the worse economic crisis in modern history. Those who keep their efforts focused on productivity will be well situated, those who do not will be consigned to telling victim stories.

Action Steps:

1. Read Yaron Brook’s “Morality of Money Lending” essay.
2. Read current Fed Chairman Ben S. Bernake’s address at Milton Friedman’s Ninetieth Birthday conference where he openly agrees with Freidman that the Fed caused the Great Depression.
3. Have a family council discussion about productivity. Openly brainstorm how your family can focus on productive, revenue creating activity.
4. Speak openly, even write letters to the editor or post online in opposition to government based solutions that seek to soften the impact of unwise borrowing.
5. Contact your Congressman or Senator’s office and make your position known about government intervention and incompetent bureaucrats being entrusted with more power.
6. Research & identify private capital alternatives as sources for items such as home purchases, car purchases, student loans, etc.
7. Consider alternatives to holding “cash” based long term investments, seek advice from a competent financial professional who understands proven principles of wealth and productivity.
8. Avoid speculation, avoid fear mongering, avoid panic -by staying informed and actively engaging in the marketplace in sound, principle based investments that are creating value for those who have been unwise in the easy money market of the late ’90s and early 2000s.
9. Commodities, gold, commodities, silver, commodities, commodities, commodities. Did I say commodities?

Resource(s):

Date: Friday March 14, 2008
Source: Telegraph.co.uk – Anna Schwartz blames Fed for sub-prime crisis
- Crisis may make 1929 look like a ‘walk in the park’
Author: Ambrose Evans-Pritchard
MRFC Principles: (2, 3, 4, 9, 10, 12)