By Monty Pelerin, on March 11th, 2010 In a further sign of the deterioration of society, the wealthy (or formerly wealthy) believe they are entitled to be bailed out for their losses. The victims of the Madoff and Stanford scams are appealing to Congress for a bailout. Bloomberg reports:
Together, the groups hope to persuade Congress to add a requirement to the regulatory overhaul bill, now under Senate consideration, that brokerage firms pay about $4 billion in additional fees to the Securities Investor Protection Corp. fund. SIPC protects U.S. investors’ accounts against fraud or bankruptcy. The victims also want Congress to require the fund to compensate them up to $500,000 each in losses.
We all should have sympathy for the victims of these two Ponzi schemes. After all, their lives have been adversely affected, in some instances irreparably. However, to believe that the rest of the country has an obligation to make them whole is a bit outrageous.
The lobbying initiative “gives new meaning to the word chutzpah,” said James Cox, a professor at Duke University School of Law. “This is just a tax increase. It’s levied on banks but customers end up paying.”
Their effort is natural. After all, in a society that bails out banks that created the economic crisis, why would others not believe they are entitled to the same treatment? When “victimology” becomes the code, all deserve to be recompensed for anything that is bad, or even unsatisfactory. No one should lose money, even when it is their fault.
The
Continue reading The Wealthy Beg
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By Monty Pelerin, on February 23rd, 2010 According to calculations by Robert Barro, Harvard University economist, the stimulus package harmed the economy. Mr. Barro, concluded in the WSJ:
… viewed over five years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure. This is a bad deal.
The fiscal stimulus package of 2009 was a mistake. It follows that an additional stimulus package in 2010 would be another mistake.
When in a hole, government, like everyone else, should stop digging. Apparently stopping is not a viable option.
Since the 1960s, government has claimed the ability to manage the economy. Some economists were bold enough to state that the business cycle had been tamed. Keynesian economics was the key that opened the door to full employment, low inflation and general economic bliss. With these tools, we were told, prosperity was assured.
It is unclear whether our leaders believed their own propaganda. The media did, or at least became willing accomplices. Newspapers report in a manner that supports the myth of government controlling the economy. Statements along the following lines are not uncommon: Clinton “gave” us a good economy, Bush “gave” us a bad one and Obama inherited Bush’s mess.
The reality is that government cannot give us anything without first taking it. They can make things worse with bad policies, but they cannot create wealth or growth. These come from the hard work and production of the private
Continue reading What Crisis is Being Solved?
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By Monty Pelerin, on February 19th, 2010 Bill Bonner is one of the more incisive and entertaining writers. His post below ostensibly deals with Greece but has warnings that should be heeded for the rest of the Western world.
The Daily Reckoning Presents
Government Sachs
Bill Bonner
Paris, France – It’s Goldman this. And Goldman that. And Goldman rhymes with greed. But it’s “Thank you, Mr. Blankfein,” when it’s money that you need.
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Image via CrunchBase
Last week, Greek Finance Minister George Papaconstantinou slipped. He said not what he should have said, nor what he wanted to say. Unwittingly, he said something that was true: his country’s budget was “out of control.” He begged for more time to straighten it out. “We’re trying to change the course of the Titanic,” he said. The EU ministers gave him a month.
Mr. Papaconstantinou was speaking of Greece. But he described much of Europe, Britain, Japan and the US. And, in his fortunate metaphor, he prophesied. The big ships can’t be turned around. They’re going to sink.
Greece has been taking on water for many years. But this was the first time a finance minister of any country signaled to lenders that they should head for the lifeboats. Then, looking around, the press noticed that one of the lifeboats had already been launched. In it were no crying widows and no shivering orphans. Just one very satisfied Lloyd Blankfein, chief executive of Goldman Sachs. He had sold the Greeks their debt, said the papers; now he has sold it short.
Der Spiegel was
Continue reading Government Sachs
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By Monty Pelerin, on February 11th, 2010 The public is in an ugly mood regarding politics. For the country, this anger may represent a turning point. For politicians in Washington, it is just business as usual. Can they be this tone deaf? Does their arrogance prevent them from recognizing what is happening?
According to Rasmussen:
A new Rasmussen Reports national telephone survey finds that 63% of likely voters believe, generally speaking, that it would be better for the country if most incumbents in Congress were defeated this November.
Despite these signals, Washington is unable or unwilling to change direction. Proposed and enacted policies have been rejected by the public. Yet, Washington’s only response is to increase the dosage of what the public has already rejected.
What Washington appears unable to comprehend is the fact that they have lost their magic and credibility. The public sees the empire for what it is, little more than a facade. The public has rejected the myth of government as savior and replaced it with the view once expressed by Reagan — government is the problem, not the solution.
Arrogant continuation of policies not wanted by the public only reinforces the view expressed in Rasmussen’s book, In Search of Self-Governance where he describes the view of the American public as follows: “… the political system is
Continue reading Washington is Oblivious as Well as Useless
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By Monty Pelerin, on February 7th, 2010 The establishment of Social Security as a retirement program should have been so simple that a caveman could have run it. Probably, but not our political geniuses.
Once considered the government’s finest achievement, Social Security now provides a nearly perfect microcosm for government incompetence, arrogance and corruption. Formed in 1935, its original intent may have been noble, but it soon became a vote-buying scheme, a slush fund and a fraud.
The deterioration of Social Security demonstrates how politics destroys well-intentioned programs. The perversion of the program occurred solely for the benefit of the political class and included political maneuvering, fraudulent promises, demagoguery and false claims. The biggest broken promise of all is still to come – the financial collapse of the fund.
Social Security as a Ponzi Scheme
The essence of any Ponzi scheme is that the underlying program does not pay for itself and depends upon new money for its continuation. Bernie Madoff’s scheme was no different than Social Security. In Madoff’s case, he paid out returns to investors greatly in excess of his ability to earn. He sustained his fraud until his ability to attract new money fell below his level of payouts.
Social Security operates on the same model. It is likely that the original conception of the program was honest, but according to the NY Times that was also likely Madoff’s initial intent:
… it seems likely that Mr. Madoff, an investment manager since 1960, started out legitimate or semi-legitimate. People in that position sometimes foolishly think
Continue reading Social Security: So Simple A Caveman Could Run It.
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Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
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