If you read my first post you know capitalism and the free market have nothing to do with greed. Greed is a derogatory term used to undermine self interest. Everyone pursues their own self interest, even the bleeding heart liberal who shouts compassion from the roof tops. True compassion comes from the person who earns and then voluntarily gives up part of their earnings to help another. Compassion is not sacrificing your fellow man for your belief in your own, false altruism. Milton doesn’t argue the word greed, but he pretty much shuts Phil Donahue down.

Being a huge UFC fan, this analogy has to be my favorite of all time.

I’ll borrow an analogy from Peter Schiff. Imagine if you will a victim at the unfortunate end of a Brock Lesnar knuckle sandwich. The blow has knocked him out cold and the medics try to revive him. The best suggestion they can come up with is to have Lesnar pound the man’s head even harder with his fists. When the man has seizures from the repeated pounding, a medic (coincidently named Bernanke) screams gleefully “Hurray, he’s moving.”

Sadly, such is the response to our present crisis by the policy makers in Washington, DC. To solve a problem caused by malinvestments resulting from easy credit at 1 percent interest rates, the Fed is supplying even more easy money at 0.25 percent. None of the malinvestments have been allowed to be liquidated.

Housing prices have been propped up, banks and auto companies have been bailed out, regulations have been increased, debt covenants have been violated, unemployment insurance has been extended. In addition, there’s the cap-and-trade bill, the healthcare bill, and a “czar” around every corner.

All of these increase the already-humongous burden on wealth creators. In short, the problems that caused the Great Recession have been compounded. Real output must then necessarily decline. How can anyone logically assert that we are in the beginning of a recovery?

via A Path To Runaway US Inflation – Ganesh Rathnam – Mises Institute.

Just found this video on YouTube. YouTube just rocks. As I like to say, THANK GOD FOR THE FREE MARKET. YouTube would have never been developed by socialists.

Fannie Mae announced a new “deed for lease” program, where they will take your deed and rent your house back to  you if you don’t qualify for a loan modification and can prove you can’t pay your mortgage. They will sign a one year lease with the current owners. They are hoping they can then sell off the houses a year from now, when they assume the housing market will be better and the value of the homes will be higher. This is some pretty optimistic thinking from a now government owned institution.

What would make them think the housing market is going to pick up that much over the next year. So far, unemployment continues to rise. The Fed has been busy at the printing press, and the government is taking debt levels into unknown waters. More than likely if the economy begins to pick backup, we are going to have massive inflation. That will lead to two scenarios. Either we’ll have hyperinflation that makes the 70s look like child’s play, or we’ll have a Fed induced recession to bring inflation under control. Neither scenario paints a pretty picture for a booming housing market.

Fannie Mae and Freddie Mac (Freddie is already doing something similar) are only delaying the inevitable. The market is much smarter than the government is. It will take into account that these government institutions have a ton of inventory being hidden from the market, what analyst call “shadow” inventory. If the housing market begins to pick up, it will be driven back down with this excess inventory. Instead, Fannie should take the short term pain and end it quick.

Because of Fannie’s mistakes it is asking the government (me and you) for another $15 billion after a quarterly loss of $18.9 billion. In total, it’s estimated that we will have wasted $200 billion on both Fannie and Freddie by the time this mess is over. Then again, we know how reliable government estimates are. So far we have handed over $61 billion to Fannie, and estimates are that Fannie is sitting on inventory around 65,000 homes.

Instead of becoming landlords, why doesn’t Fannie and Freddie sell of packages of houses as investment bundles. This would get the houses off their books, and it would bring them back into the free market where they can begin to stabilize the market. Investors will buy theses homes, and guess what they’ll have to do? They have to pay taxes on their profits, which ultimately will help with the government losses that will occur with the sale. With the investors holding properties, they will want to drive prices up. They’ll either rent them out, which investors are better at than the government, or they will fix up the homes and put them back on the market. Investors will not shoot themselves in the foot by flooding the market. They will slowly bring the houses onto the market to maximize sale prices and make the most profit. Whether renting or selling, the investor will be paying taxes on his capital gains.

The government should just take the short term pain of selling them off now? This may hurt the housing market, but it will be over and stabilization can begin. Instead, the government is prolonging this crisis and making it worse, and who’s going to eat this mess? We are.

By way of Mises.org, here is another great examples of the free market delivering a plethora of choices for consumers. Take note of the mention of the government forced recycling programs and why they started them.

Also, image what it would be like if the beverage industry was heavily regulated like health care. Think you’d have all these options. Inversely, if government would get out of health care, you’d see a plethora of options in that industry as well.

Thanks again to HotAir. I always pick up good info there.

Are you shocked? If you’ve been following my blog, you’re not. Everything the government touches is an abysmal failure. Why would our President be any different?

The Wall Street Journal  has an op-ed today by Charles Gasparino, a CNBC on air-editor and author, in which he explains why the government encourages the risk that led to our current crisis.

We’ll never know if LTCM’s demise would have tanked the financial system or simply tanked a couple of firms that bet wrong. But one thing is certain: A valuable lesson in risk-taking was lost. By 2007, the years of excessive risk-taking, aided and abetted by the belief that the government was ready to paper over mistakes, had taken their toll.

With so much easy money, with the government always ready to ease their pain, Wall Street developed new and even more innovative ways to make money through risk-taking. The old mortgage bonds created by Messrs. Fink and Ranieri as simple securitized pools had morphed into the so-called collateralized debt obligations (CDOs), complex structures that allowed Wall Street banks as well as quasi-governmental agencies Fannie Mae and Freddie Mac to securitize ever riskier mortgages.

Mr. O’Neal, the man considered most responsible for Merrill’s disastrous foray into risk-taking, told me in an interview last year that in the fall of 2007, when he saw that the firm’s problems were insurmountable, he had a deal to sell Merrill to Bank of America for around $90 a share. But Merrill’s board rejected it, believing he would be selling out cheaply. The CDOs would eventually recover, they argued, as the Fed pumped life into the markets.

Likewise, nearly to the minute he was forced to file for bankruptcy, former Lehman CEO Dick Fuld believed the government wouldn’t let Lehman die. After all, government largess had always been there in the past.

All of which brings me back to Mr. Fortsmann’s comment about policy makers helping turn a cold into cancer. What if the Fed hadn’t eased Wall Street’s pain in the late 1980s, and again after the 1994 bond-market collapse? What if policy makers in 1998 had allowed the markets to feel the consequences of risk—allowing LTCM to fail, and letting Lehman Brothers and possibly Merrill Lynch die as well?

There would have been pain—lots of it—for Wall Street and even for Main Street, but a lot less than what we’re experiencing today. Wall Street would have learned a valuable lesson: There are consequences to risk.

via Charles Gasparino: Three Decades of Subsidized Risk – WSJ.com.

This is another case of where we think government behavior can get different outcomes than we get in our personal lives. The results are the same. How many of you know a parent that constantly bails their child our of trouble? Does it lead to less trouble? How about someone who gives money to a drug or alcohol addict? How about someone who always gives or lends money to that one person who always seem to be broke? In our personal lives, we call these people enablers. They are not helping the person in question. They are enabling them to continue the bad habits they are claiming to help.

This is no different when the government does it. Are we to believe that executives and banks will not be more cautious if they know that the government will not bail them out? Of course they would be. The problem is mommy government has always bailed out and enabled her baby Wall Street. The behavior will continue as long as Washington continues enabling. Don’t fall for the excuses. Mommies always have what they believe are good reasons for bailing out their children, but the problem is they aren’t letting their children learn their lessons.

Via Wall Street Journal

As I have said many times, the free market allocates resources based on their highest and best use. It is fine tuned by millions of decisions and transactions of individuals. This is why the market is so efficient, and meets the needs of society. On the other hand, government allocates resources based on politics. It has nothing to do with real needs, other than the need of a politician to get re-elected. The Wall Street Journal has  an article on how the Democrats are trying to please all their members with pay offs in order to get their votes. So how is paying off all members with pork for their state supposed to lower cost?

LAFAYETTE, La. — Democratic Sen. Mary Landrieu says she generally backs President Barack Obama’s health-care overhaul efforts. But she’d like to see a few items in the bill before voting for it, including bigger federal Medicaid payments for her home state of Louisiana, extended health coverage for her pet cause of foster children, and help for teaching hospitals in her state.

While pushing more spending in those areas, Ms. Landrieu also wants the plan to cut the overall amount the nation spends on health care.

via Democrats Pose Health Bill Hurdle – WSJ.com.