Monday, April 1, 2013
David Stockman: We've Been Lied To, Robbed, and Misled
http://www.theburningplatform.com/?p=51922
Due 8 April 2013. (David Stockman is an Michigan State Univ graduate!!!!) Notice that all these articles refer back to the problems in 1907--when we did not have a Federal Reserve system. How does the 1907 solution compare to the solutions the FED is offering today? Why has Nixon's (Tricky Dick) move in 1971 to close the gold window put us even further in debt? Why does Stockman claim we have been lied to, robbed and misled?
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The 1907 solution was to let the markets self-correct themselves. Meaning, let these institutions that were, back then, deemed "too big to fail" fail. The Fed today finds it necessary to bail out these banks that are going under because they fear it will cause economic collapse, however Stockman argues that their demise will simply cause them to fracture into several smaller banks and smaller entities. Stockman argues that even if they were to go completely belly-under, it would provide a lesson to others not to invest in these toxic mortgages and other "hot-money short-term funding" endeavors. Tricky Dick's 1971 closing of the gold window devalued the dollar value which at that time was nearly the same as gold. The Bretton-woods agreement allowed foreign banks to redeem their US dollars for gold, but when Nixon reduced the foreign central bank's holding of dollars, he essentially defaulted on the US' obligations and destroyed the value of the dollar, inadvertently preparing us for the debt we have today. Stockman claims we have been "lied to, robbed and misled" because "we have devolved from a free market economy into a managed one that operates for the benefit of a privileged few. And when trouble arises, these few are bailed out at the expense of the public good."
ReplyDeleteIn 1907, the "big" companies were able to fail and become smaller representatives. While the smaller companies, would be able to rebuild themselves up. Today the Fed bails out the "too big to fail" companies for the sake of the economy. Because of how big these companies are the financial system can't survive without them. Because of Nixon's close in the gold window, the gold was devalued from the value of the money. The Fed didn't need gold to back up the money, instead they just printed the money which created more debt. Stockman says "We have been lied to, robbed, and misled" because of the big companies being bailed out at the expense of the public good.
ReplyDeleteCompared to the events of 1907, the FED has chosen to save these firms and institutions that pushed the world economy to the brink of total failure, under the guise that these banks are "to big to fail", whereas in 1907 the idea was to let these "to big" institutions fail. Trick Dicks move to shut down the gold window in 1971 had catapulted us into the massive amount of debt that we now posses, becasuse it enabled the government to print vast quantities of money without it being back by gold. STockman makes this claim because he argues that this common mainstream idea that these instituions were to big to fail, and that the only way to save our economy was to save them, is complete bunk. In his view, this is not the case. But due to this belief, it lead to the bailout of these banked backed by the US population, who as whole has yet to recover from the mess that the banks themselves have made, while said bank are enjoying more prosperity than ever before in their existence.
ReplyDeleteIn 1907, large companies could fail and only bounce back into smaller companies. Small companies would be able to build themselves back up again. Now the Fed Reserve and congress have to bail out companies that are too big to fail. Our economy couldn't survive if we let these corporations fail. Because of Nixon's close in the gold window, the gold was devalued from original value. We were off the gold standard, instead they just printed the money which created more debt. Stockman says "We have been lied to, robbed, and misled" because of the big companies being bailed out at the expense of the public good.
ReplyDeleteThe 1907 solution did not include the Fed. These big companies were able to fail and divide into smaller divisions. Today, however, these companies are too big to fail and are saved by the Fed. These companies do not learn their lesson and would continue doing what they want because in the end they will be saved. Nixon put us more into debt when he closed the gold windows. Because of that, there was no limit on how much money we can print. We have been lied to and misled according to Stockman because these big companies are getting bailed out for their bad doings at the expense of our good.
ReplyDeleteIn 1907 the Federal Reserve was not involved in what happened. Back then the companies could fail and then go back into smaller companies so they wouldn't go bankrupt. In today's economy the banks and companies are too big to fail and if they do that will effect the world economy. The Fed saves them and then they continue on their Economic-Hurting ways and don't even care because they know the Fed is going to bail them out.
ReplyDeleteIn 1907, companies were allowed to fail to teach banks a lesson and to keep occurrences from re-happening. Now, the Fed bails everyone out as part of a "too big to fail" ideology. In 1907, the companies would bounce back into fragmented, smaller companies unlike today. Nixon's closing of the gold window plunged us more into debt because it got rid of the limit on how much money can be printed. Now the money isn't backed in gold and we were knee-high in debt.
ReplyDeleteThe solution in 1907 was meant to let the markets correct themselves. They wanted to let the huge corporations fail. The Fed bails failing banks because they think it will hurt the economy if they don't. Stockman says that when they fall, they will create smaller banks. He says if they were to fail, it would show others not to invest in these toxic assets, etc. In 1971, when the gold window was closed, it devalued the dollar. When Nixon lowered the foreign central bank's dollar hold, he destroyed the value of the dollar. This lead to the debt we have today. Stockman claims we have been "lied to, robbed and misled." I'm starting to agree.
ReplyDeleteThe solution of 1907 was to allow the markets to correct themselves on their own. They were in favor of allowing large corporations to fail, and failing banks are bailed because the Fed believes it will hurt the economy if they fail. Hence "too big to fail". When Nixon lowered the foreign central bank's dollar hold, he lowered the value of the US dollar. This lead to the debt we have today. Stockman claims banks "lied to, robbed and misled" us.
ReplyDeleteThe Tricky Dick move in 1971 put is in debt because by closing the gold window, the American dollar could not be backed by gold, which devalued it. Once this happened, paper money was being printed limitlessly sending us into a debt which we now see. Back in 1907, the solution was to let all the markets self correct themselves. Whenever a bank would fail, it would divide into smaller divisions. Nowadays, the Fed bails the banks that are too big too fail because they believe it will hurt the economy if these banks fail.
ReplyDeleteIn 1907, a lot of the banks that were deemed “too big to fail” went belly-up with no intervention from the Federal Reserve. The solution was simply to let those banks correct themselves like the laissez-faire philosophy on which our country has grown. However, in the 2007 crisis, the Federal Reserve intervened and bailed out the failing banks because they feared an economic catastrophe. Stockman argues that this action is where Capitalism today has gone wrong. He proclaims that the banks are being saved to benefit a “privileged few” at a major cost to the public. In 1971, Nixon closed the gold window which, in turn, devalued the value of the US dollar which at the time was at the same value as gold. The Bretton Woods agreement allowed foreign banks to redeem their US dollars for gold, but when Nixon reduced the foreign central bank’s holding of dollars, he essentially defaulted on the US’ obligations and destroyed the value of the dollar, in turn, putting us in an exponentially growing debt.
ReplyDeleteIn 1907, the companies which were deemed too big to fail were allowed to fail under the belief that they would break up into smaller firms, while today, the FED is not allowing these companies to fail, under the belief that any one could drag down the rest of the economy along with it. Nixon's act of closing the gold window has helped put us in debt because by removing the necessity of having gold to back each dollar, we've been able to go in a never ending cycle of more and more debt. Stockman feels we've been lied to because he believes that our economy revolves around just a few privileged people at the expense of everyone else.
ReplyDeleteIn comparision to 1907 the FED reacted extremely different to how they did now. Then, they let the companies that they thought were too big to fail, fail. Now, they were actually too big to fail so they bailed them out for the sake of the country's economy and the world's economy. The gold window was shut down in 1971 due to Dick Tricks move which is basically why our economy is in the whole we're in. We justnprint money with nothing to back it up, this devalues our dollar. Stockman makes this claim because he is convinced that we have been lied to and mislead with much reason, because we have. The fed is bailing out these "too big to fail" companies even though there is no integrity in their work, it is basically at our expense.
ReplyDeleteThe solution in the 1907 was in many ways different from the solution they have today. Back in 1907 when the market crashed the FED had said Let them crash under the circumstances that moral hazard might occur. The FED believed that if they had bailed out companies the rest of the companies would think ohh if we go under the government will bail us out. The way the FED are reacting today is they are afraid that if they let one bank go under the whole stock market will crash like when they had let Bear Sterns crash. The move that Nixon made when he closed the gold window devalued the value of the US dollar which in turn but us into debt because we no longer had a strong enough dollar to pay off the amount of gold we held.
ReplyDeleteWithout the Fed in 1907, there was no government intervention with the financial market, and crises were expected to be corrected by themselves. The companies that were "too big to fail" ended up failing, and dividing into smaller companies. This was not nearly as big of an issue as today. The Fed's solution to today's issues are to intervene and give these companies some financial support because of the fear of an economic collapse. Nixon's decision to take the US off the gold standard caused banks to loan a huge amount of money that they didn't have. This caused us to acquire a substantial amount of debt because of the unrestricted borrowing.
ReplyDeleteIn 1907, large companies could fail and only bounce back into smaller companies. Small companies would be able to build themselves back up again. Now the Fed Reserve and congress have to bail out companies that are too big to fail. Our economy couldn't survive if we let these corporations fail. Because of Nixon's close in the gold window, the gold was devalued from original value. We were off the gold standard, instead they just printed the money which created more debt. Stockman says "We have been lied to, robbed, and misled" because of the big companies being bailed out at the expense of the public good.
ReplyDeleteJacob HOchman