The case of IndyMac, the largest regulated thrift institution to fail in U.S. history, shows just how fundamentally unsound our government supported banking system is. The fractional reserve banking swindle can only continue so long and I hope the IndyMac failure will open some people's eyes.
Of course Murray Rothbard wrote it best in his article "Anatomy of the Bank Run": "But in what sense is a bank "sound" when one whisper of doom, one faltering of public confidence, should quickly bring the bank down? In what other industry does a mere rumor or hint of doubt swiftly bring down a mighty and seemingly solid firm? What is there about banking that public confidence should play such a decisive and overwhelmingly important role?"
Unfortunately, government bureaucrats are playing the same tune now, blaming Sen. Chuck Schumer for the run on IndyMac. He wrote a letter that "expressed concerns about IndyMac's viability." Schumer is correct to deny that he had any part in this, for as Rothbard noted, how can any business be sound if a mere rumor sparks a total collapse?
But Schumer is wrong to blame this on IndyMac and those "greedy capitalists." The fault lies with the government; without the Federal Reserve and the FDIC the fractional reserve banking scheme couldn't continue. We will only see sound banking and real money when the Fed, the FDIC and all those other bureaucracies are abolished.
Subscribe to:
Post Comments (Atom)
2 comments:
I'm surprised how few people are aware or even understand the concept of Fiat. I remember (this is way back in 1989) an Economics Prof of mine explaining that the gold standard was archaic. "We have come to realize in recent decades that that system is not required" How Keynsian of him. The most amazing thing I have seen is how the media has basically portrayed Ron Paul as a nut and minimalized him during his run for President. He was given a total of 50 words in the entire Republican debate at the Reagan Library. I thought a "so called" maverick like CNN's Anderson Cooper (who crusaded for news coverage of New Orleans failure to be rebuilt) would have at least given Paul's ideas a bit of airtime. Ron Paul's words are becoming more prophetic day by day as financial institutions continue to fail. The gold standard is basically a non starter in the election campaign. Everybody thinks the government is going to somehow save the situation. Does that make sense? When has the government ever got anything right? Let the markets correct this mess. If that means houses dropping to $100,000, than so be it. Who is really being protected here? The mortgage holder (who can walk away from the mortgage) or the banks? The sad truth is we need a political mind the equivalent of Hamilton or Jefferson today, and the current crop of pork barrel pols can't even spell bimetallic standard.
You should read The Case for Gold by Ron Paul and Lewis Lehrman. Made me want to punch our government in the face.
Post a Comment