Horace Walpole on thinking and emotions

This world is a comedy to those that think, a tragedy to those that feel.

~ Horace Walpole, 18th century British art historian, writer, antiquarian and politician in a letter to Anne, Countess of Ossory

H.L. Mencken on democracy

I do not believe in democracy, but I am perfectly willing to admit that it provides the only really amusing form of government ever endured by mankind.

~ H.L. Mencken, Notes on Democracy

Sheldon Richman on greed, moral hazard, and financial regulation

Greedy people by definition want more not less. So they will be as concerned to hold on to what they have as they will be to increase their wealth. Risky investment is a way to get more but also a way to end up with less. Greed, therefore, will tend to restrain recklessness if people know their profits and losses belong to them. The corollary is that the restraints on recklessness will be weakened to the extent that people expect the losses to be absorbed by others. Market discipline is the key.

... As Gerald P. O’Driscoll Jr.writes, “Deposit insurance, access to the Fed’s lending, and the implicit (now explicit) government guarantee for banks ‘too big to fail’ all constituted a system of financial corporatism.” What these interventions have in common is the potential to shift losses forcibly from those who should be responsible for them to someone else—making reckless behavior and losses more likely than they would be. That’s the definition of moral hazard.

Greed is an easy target. But blaming greed gets us nowhere. As Lawrence White says, it’s like blaming gravity for a plane crash. It certainly doesn’t suggest any sensible policy response. The religion professor said we need more regulation. But if people are greedy, how do more regulators promise to improve matters? They are people too.

If we can’t trust people with freedom, how can we trust them with power?

~ Sheldon Richman, "The Goal Is Freedom: All About Greed ," Foundation For Economic Education, February 27, 2009

Ludwig von Mises on social reform

From time to time I entertained the hope that my writings would bear practical fruit and point policy in the right direction. I have always looked for evidence of a change in ideology. But I never actually deceived myself; my theories explain, but cannot slow the decline of a great civilization. I set out to be a reformer, but only became a historian of decline.

~ Ludwig von Mises, autobiography

Spinoza on truth

Truth is its own standard. (veritas norma sui et falsi est)

~ Spinoza

Virgil on fighting evil

Do not give in to evil, but proceed ever more boldly against it. (Tu ne cede malis, sed contra audentior ito.)

~ Virgil

Bill Bonner on capitalism

What is capitalism, after all? It is not a system…not a plan…not a program. It was not decreed by any half-wit tyrant…nor written into law by any earnest assembly. It has no constitution…and no boundaries. It is merely a recognition of basic principles. “Thou shalt not steal,” it says in the Bible. Capitalism recognizes other peoples’ property. The baker has a right to his oven. The farmer has a right to his land. The capitalist has a right to his money. What they do with these things is up to them.

Will they make mistakes? Of course they will. Will they do evil and obnoxious things? No doubt about it. Will they occasionally lose their heads and overprice their assets…or run the whole economy into too much debt…or blow themselves up in a bubble? You bet.

As Adam Smith described, they will also bumble along to create the wealth of nations.

But larceny wasn’t invented in the 21st century either. Naturally, people want what the capitalists have. Everywhere and always, the thieves will find reasons why they should be able to take it from them. They will respect the environment better, they say. They will invest in “socially responsible” projects, they claim. They will heal the lame and make the blind see. If only they get their hands on your money!

We don’t particularly like capitalism or capitalists. We just don’t like anyone telling us what to do. So, doing unto others as we would have them do unto us, we make no effort to tell others what to do with their money. If they want to give it to Bernie Madoff or to Barack Obama, so be it – just count us out. If they want to invest in CDOs and MBDs…well, good luck to them; but don’t look to us to bail them out.

~ Bill Bonner, "A Broken Down Stock Market," LewRockwell.com, February 26, 2008

Bill Bonner on evolution

There are two parts to Darwinism as it is popularly understood. One part is based on observation – at which Darwin was a master. The other is extrapolation – not so much on Darwin’s part, but his followers. The problem is that the part that is probably correct is child-like and obvious. And the part that is more grown up is nothing more than empty guesswork. He notes that some animals are better suited to their environments than others. If a polar bear were suddenly born to a hog here in Nicaragua, it probably wouldn’t last long. On the other hand, if a mutation produced a naked polar bear at the North Pole, it wouldn’t stand much of a chance either. Both would probably perish, leaving no heirs or assigns…and thus removing from the gene pool whatever crazy aberration that created them. Some things survive and reproduce; some don’t. The essence of Darwinism is nothing more than that simple-minded observation, as near as we can tell.

But the application of this notion far and wide is a threat to the intellectual eco-system. Because of it, people think they know a lot more than they actually know. To the question, why is the polar bear white, rather than black, they have a ready answer: because evolution made him white. But this is no answer at all…it just postpones thinking until the next question: why did evolution make him that way?

Then, the guesses begin: because he can blend into the snowy background and sneak up on seals. Oh. They tell us, for example, that he covers his nose – which is black – with his paw, so he can get closer without being spotted.

Smart bear. But you’d think if evolution could turn his whole body black it could whitewash his nose too. And what about the seals? Are they morons? You’d think those that couldn’t tell the difference between a bear with his paw over his nose and an iceberg would have been weeded out by now. Besides, why aren’t seals white?

Of course, the biologists and know-it-alls have their answers, but they are just putting 2 and 2 together in the clumsiest way. They really don’t know why polar bears are white. All they know is that nature hasn’t exterminated the white polar bears – yet.

Many of these deep thinkers also believe that Darwin proved that God didn’t create man. Instead, man arose by the process of evolution, they say, one accidental step at a time. Man is the product of pure chance, they claim. As if God couldn’t make it look like an accident, if He wanted!

~ Bill Bonner, "A Broken Down Stock Market," LewRockwell.com, February 26, 2008

Barney Frank on the GSEs: "We see entities that are fundamentally sound financially" (2003)

The more people, in my judgment, exaggerate an issue of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury - which I do not see - I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. And even if there were a problem the federal government doesn't bail them out, but the more pressure there is there, then the less I think we see in terms of affordable housing.

~ Representative Barney Frank (D-MA), September 10, 2003

Charles Schumer on Fannie Mae and Freddie Mac (2005)

... I think Fannie and Freddie over the years have done an incredibly good job and are an intrinsic part of making America the best-housed people in the world... if you look at the last 20 or whatever years, they've done a very, very good job.

~ Senator Charles Schumer (D-NY), Senate Banking Committe Hearing, April 6, 2005

Hans Sennholz on fiat money

The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register.

~ Hans F. Sennholz

Peter Schiff on investing in Europe and in the euro

Europe certainly has its share of problems, but, unlike the United States, at least it lives within its diminished means. For all its socialism, at least the European Union enjoys a trade surplus and its people still manage to save. As a result the euro will likely be a principal beneficiary of the dollar's demise. That could give Europe a huge boost, helping to contain interest rates and consumer prices on the continent. As a result, the euro zone is definitely an area where we want to invest. Of course, we also want to invest money outside the euro zone, such as in Switzerland, the UK, and Scandinavia, which will also benefit from a strong Europe.

In the long run, the euro as a fiat currency may very well fail like the U.S. dollar. But being the largest nondollar currency issued by a major creditor, it appears certain to thrive in the short term.

~ Peter Schiff, Crash Proof, pp. 179-180

Peter Schiff in the coming boom in China and Asia

Once China allows the dollar to collapse, its domestic purchasing power will surge and its economy will quickly overtake the U.S. economy as the world’s largest. Free from the burden of subsidizing America, the rest of Asia will boom as well.

As it now stands, the United States is the beneficiary of a reverse Marshall Plan, which costs Asian economies a fortune to fund. When they pull the plug, the U.S. economy will go down the drain, and Asian economies will see explosive growth and prosperity. Asia is where the real fortunes will be made. That is why I suggest growth-oriented investments be targeted to Asia. Investing there now is like investing in America in the late nineteenth century.

~ Peter Schiff, Crash Proof, p. 179

Peter Schiff on the inflation vs. deflation debate (2007)

Among those rational enough to perceive the looming economic downturn, a heated debate has arisen that centers on whether the slowdown will be accompanied by inflation or deflation.

Those in the deflation camp believe that money supply will collapse as a natural consequence of the implosion of the biggest credit bubble in U.S. history. As loans go bad, assets, which collateralize these loans, will be sold at fire sale prices to satisfy creditors. It is also argued that a recession will reduce consumer discretionary spending, causing retailers to slash prices to move their bloated inventories. This is the way the situation played out in the 1930's and this is how many expect it to happen today.

However there are several key differences between then and now, which argue against the classic deflationary scenario. In particular, the Fed's ability to pump liquidity into the market in the 1930's was limited by the gold backing requirements on U.S. currency. No such limitations exist today. This distinction is critical. When credit was destroyed after the Crash of 1929, the Fed was not able to simply replace it out of thin air. Today however, the Fed will likely print as much money as necessary to prevent nominal prices from collapsing. In fact, in the infamous speech that spawned his "helicopter" sobriquet, Ben Bernanke explained how the printing press can be used to stop deflation dead in its tracks.

~ Peter Schiff, "Not Your Father's Deflation," Safe Haven, December 21, 2007

Ben Stein apologizes to Peter Schiff

Next, here’s a lesson I learned in a 12-step program and should have learned better: avoid contempt prior to investigation. When the financial stock meltdown started, I was on a television show with Peter Schiff of Euro Pacific Capital, who warned that Merrill Lynch could be in very bad shape. I glibly said that I thought that its problems were limited and that the stock was a buy. Mr. Schiff was completely right and I was wrong. I had no idea that Mother Merrill, where I have been a happy stockholder for years, had been turned into a such a wild house of high-stakes gambling. I apologize to Mr. Schiff for my dismissal of his views, which turned out to be far superior to mine in this area. (I could do without his acolytes sending me endless hate mail, though.)

~ Ben Stein, "Lessons From the Pits of Travel and Investment," The New York Times, December 9, 2008

Time on "the committee to save the world" (1999)

Greenspan has a theory about what holds them together: "In analytical people self-esteem relies on the analysis and not on the conclusions." That must be it. The three men have a mania for analysis that has bred a rigorous, unique intellectual honesty. In the Reagan Administration economic policymaking was guided not by analysis but by conclusions--specifically a belief in so-called supply-side economics. No matter what the data showed, the results among Reagan-era economists like Arthur Laffer were always the same: tax cuts and less regulation were the solution. Rubin, Greenspan and Summers have outgrown ideology. Their faith is in the markets and in their own ability to analyze them. "It's unusual," Greenspan says. "In Washington usually you come to the table, and everyone meets, and no one changes their mind. But with us, you have something else."

This pragmatism is a faith that recalls nothing so much as the objectivist philosophy of the novelist and social critic Ayn Rand (The Fountainhead, Atlas Shrugged), which Greenspan has studied intently. During long nights at Rand's apartment and through her articles and letters, Greenspan found in objectivism a sense that markets are an expression of the deepest truths about human nature and that, as a result, they will ultimately be correct.

~ Time, "The Committee to Save the World," (a.k.a. "The Three Marketeers"), February 15, 1999, by Joshua Cooper Ramo

Jeff Tucker on bailouts, moral hazard, and LTCM

The idea is simple. If you are continually willing to protect people from the consequences of their own errors, your benevolence will be factored into the future decisions of the persons rescued. In the long run, they will make even more errors. The principle exists at all levels. The teacher who changes grades when students plead hardship isn't helping in the long run. The teacher is rewarding and thereby encouraging poor study habits. He is creating moral hazard.

So it is in banking and finance. How was it that the hedge fund Long-Term Capital Management, bailed out on pressure from the Fed, believed they could be leveraged 50-100 to 1 in some of the riskiest financial instruments in the world? True, the fund employed people who were said to be the smartest guys on Wall Street, plus two winners of the Nobel Prize in economics, and that gave the firm credibility the town-fair magician can't get. True, also, that returns of 40 percent in 1995 and 1996 reinforced the appearance of superhuman intelligence.

More fundamentally, however, moral hazard was there from the very beginning. Credit has been generally loose in the mid and late nineties. The firm's money was being loaned by banks backed by deposit insurance and an implicit too-big-to-fail doctrine on the Fed. The firm's preferred investment targets (like Russian bonds) were backed by a bailout promise as well. The risk spiraled onwards and upwards until one day it unraveled, and the fund itself was bailed out.

~ Jeffrey Tucker, "Mr. Moral Hazard," The Free Market, December 1998

Peter Schiff on the bargains in Asian stocks

You have a fire sale going on around the world, especially in Asia. There are stocks that are at half the value they were 10 years ago.

~ Peter Schiff, who helps oversee $1 billion at Darien, Connecticut-based Euro Pacific Capital, "Japan Stock Futures Rise; Panasonic, Cnooc Gain in U.S. Trading," Bloomberg, October 29, 2008

Peter Schiff on the free market's ability to self-regulate and moral hazard created by government attempts to limit risk

The free markets regulate themselves. Everybody is greedy, right? But everybody is afraid of losing. There's always risk and there's a tradeoff. And in the free market the risk of loss always counter-balances the greed for profit, and they check each other. But what happens is the government enters into the equation and tries to remove the element of risk. They create a moral hazard, whether it's by Freddie and Fannie guaranteeing mortgages. And now loans are going to be made then in a free market wouldn't be made - because the borrower isn't creditworthy. But when the government steps in and guarantees the loan all the sudden there's no reason to worry about the risk of loss. And when the Federal Reserve makes borrowing money very inexpensive, borrowing is cheap, so the speculation on leverage is a lot cheaper. And so it encourages more of it. And so government's come in and they remove the barriers that would exist in a free market. And then there's all these problems that get created and now the government is about to blame the free market. They're able to say, "well, there wasn't enough regulation," which is nonsense!

~ Peter Schiff, podcast with Lew Rockwell, Nobember 20, 2008

Peter Schiff on short selling

It’s not everybody’s cup of tea, but an investor of above-average sophistication might reasonably ask, "If the U.S. stock market is a train wreck waiting to happen, why not just sell it short?"…

Here’s why I would recommend against doing this.

Retail brokers normally require investors to hold any short-sale proceeds in U.S. dollars usually earning no interest. The dollar, seen through my famously jaundiced eye, could lose more purchasing power than the security you sold short lost value…

I’ve got a much better idea, which is to borrow dollars and spend them to acquire foreign income-producing assets, using the income to pay the interest. Short selling accomplishes the opposite, as you end up borrowing assets, which will probably have some intrinsic value, and acquiring dollars, which may have none.

~ Peter Schiff, Crash Proof: How to Profit from the Coming Economic Collapse, pp. 112–113

Kevin Duffy on lingering optimism over commodities (2008)

Such optimism indicates the bear market in commodities is likely still in the early innings. We find the arguments of the minority skeptics much more convincing, particularly a) real commodity prices decline over time due to human ingenuity and b) a global recession will sap demand already weakened by high prices.

~ Kevin Duffy, Bearing Asset Management, Azimuth blog, August 28, 2008

Bruce Bartlett on the root cause of the Great Depression: sharp contraction of the money supply

As economists Milton Friedman and Anna Schwartz proved to the satisfaction of most economists, the core economic problem in the early 1930s was a contraction of the money supply by a third. This caused the general price level to fall by about 25%.

Deflation caused real wages to rise, forcing employers to lay off workers to reduce labor costs; it forced businesses to go bankrupt because they had to sell goods for less than they cost to produce; it magnified the burden of debts as borrowers had to repay loans in dollars worth more than those they were lent; and it increased real interest rates and the real burden of taxation.

~ Bruce Bartlett, "The Real Lesson of the New Deal," Forbes.com, February 13, 2009

Bruce Bartlett on the New Deal: FDR did not spend enough

One reason why Republicans strenuously oppose the Obama administration's fiscal stimulus plan is because it repeats the errors of Franklin D. Roosevelt. To them, the New Deal was mainly about vastly expanding government spending and deficits, which Republicans believe made the Great Depression worse rather than better. Therefore, doing so again in the present downturn will also lead to failure.

The true New Deal legacy, however, is more complicated. Serious mistakes were indeed made. In particular, the National Industrial Recovery Act was fundamentally ill-conceived and retarded economic recovery. But in terms of fiscal policy, Roosevelt's error wasn't that he spent too much, but that he didn't spend nearly enough.

~ Bruce Bartlett, "The Real Lesson of the New Deal," Forbes.com, February 13, 2009

Peter Schiff on competing with Asians

It has to do with government. You know, we used to kick their asses - when we had small government, sound money, and less intervention. The reason they're beating us is because we have more government than they do. We have a bigger obstacle to overcome.

~ Peter Schiff, Interview on The Glenn Beck Show, September 29, 2008

Peter Schiff on the decoupling theory

I think the solution - the world needs to recognise that America is not the engine of the global economy. We are the caboose. Anybody can consume. Little children can consume. The key is to produce. The key is to save, not to borrow. And if America stops consuming and stopped borrowing, that's not going to hurt the global economy, that's going to help the global economy. The rest of the world has been living beneath their means so we can live beyond ours.

~ Peter Schiff, "Schiff, Keen on dateline," News Kontent, September 12, 2008

Professor Steven Keen debating Peter Schiff about the decoupling theory

I wish Peter [Schiff] were right that the rest of the world had its act in order. The rest of the OECD doesn't. It isn't just America that been borrowing more money than it's been earning - the whole of the OECD bar one country, which has France, has been having an increase in ratio of its debt to GDP for the last 30 years. So we're all in the borrowing game. We've all made the mistake of confusing money generated by real production with money you can borrow from a bank. And that's kept on going for so long that it's reached the point now where that game is over. If you like, it's the old "greater fool" philosophy. You make money if you find a greater fool who borrows more money than you did to buy the same asset off you and you get away rich and they end up with even more.

~ Professor Steven Keen, "Schiff, Keen on dateline," News Kontent, September 12, 2008

James West on what it's like living on planet leverage

Living on planet Earth right now is like sailing on the Titanic and knowing we're going too fast and we're bound to hit an iceberg. As a mere passenger, the suggestion that we change course and slow down will be met with derision and antagonism. The captains of the boat, who have been sailing for years and have the epaulets to prove it, know far better than we.

~ James West, "Rethinking Fractional Banking," Seeking Alpha, February 17, 2009

Bethany McLean on the futility of financial regulation

A couple of years ago, if people were to point at who was going to bring down this system they would have chosen hedge funds. Lightly regulated vehicles, who knows how they're operating, they're going to be the cause of the next financial collapse. Lo and behold, hedge funds, for whatever problems they have, have actually not been in the center of this. They're one of the few groups not in Washington asking for a bailout. Citigroup, one of the world's most heavily regulated institutions, is. So that to me is the perfect example of why regulation is not a cure-all. (10:45 of interview)

Real transparency would be a great step forward, but I am always a skeptic about the ability of new regulation to really address problems. You look in the wake of Enron: Congress passed Sarbanes-Oxley which was supposed to fix all of the problems in the marketplace. And lo and behold, what happened this time around had absolutely nothing to do with Sarbanes-Oxley. It was irrelevant to the current crisis. (7:45 of interview)

~ Bethany McLean, Interview on PBS NOW, January 31, 2009

Bethany McLean on the artificial Wall Street boom

Over the last bunch of years Wall Street justified the extravagent amounts that people were paid by saying, "look at the profits we're producing." And now if you look at the writeoffs that firms have taken, most of those profits turned out to be completely illusury, because the profits had been decimated by the writeoffs. In other words, the profits weren't real in the first place. So people have already collected millions of dollars that, in a strictly speaking economic sense, they weren't really entitled to.

~ Bethany McLean, Interview on PBS NOW, January 31, 2009

The Constitution on states rights and republican government

The United States shall guarantee to every State in this Union a Republican Form of Government.

~ U.S. Constitution, Article IV, Section IV

The States Ratify the Constitution
1788-1938

John Templeton on the sentiment of bull markets

Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.

~ John Templeton

James Paulsen on the health of the consumer (2006)

It seems like we've been predicting the death of the consumer every year this decade. They have record-setting net worth and 2 ½ million jobs have been created. I think they're in good shape.

~ James Paulsen, Wells Capital Management, as appeared on CNBC, early 2006

Ludwig von Mises on credit expansion

Credit expansion is the government’s foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everyone prosperous.

~ Ludwig von Mises, Human Action

Barack Obama on economic stimulus for the "public good"

All of us in Washington must remember that we’re here to work for the American people. And if we drag our feet and fail to act, this crisis will turn into a catastrophe.

~ President Barack Obama, February 6, 2009

Ian Shepherdson on the paradox of thrift and need for the public sector to expand

The public sector needs to act. It needs to prevent an endless spiral of attempts to increase saving, leading to reduced spending, leading to reduced incomes, leading to further attempts to raise savings, and so on.

We remain firmly of the view that the package now in Congress is the bare minimum required to slow the shrinkage of the economy over the next year.

~ Ian Shepherdson, chief North American economist for High Frequency Economics, "Economy Shed 598,000 Jobs in January," The New York Times, February 6, 2009

Mark Zandi on the need for economic stimulus

Businesses are panicked and fighting for survival and slashing their payrolls. I think we’re trapped in a very adverse, self-reinforcing cycle. The downturn is intensifying, and likely to intensify further unless policy makers respond aggressively.

~ Mark Zandi, chief economist at Moody’s Economy.com, "Economy Shed 598,000 Jobs in January," The New York Times, February 6, 2009

The New York Times on voters rejecting Republican principles of limited government

Unhappily, there are many Republicans who have not learned the lesson of this last campaign — that Americans rejected their arguments that government is the enemy and tax cuts answer all economic questions.

It would be highly irresponsible for Congress to accept the Republicans’ wrongheaded calls to cut back on the stimulus portions of the economic package, and shortchange longer-term spending on health care, schools and infrastructure. We applauded Mr. Obama when he said, “The time for action is now because we know that if we do not act, a bad situation will become dramatically worse. Crisis could turn into catastrophe.”

The president must explain to Americans that a strong economic stimulus is essential for their economic recovery. If Senate Republicans still want to filibuster, Mr. Reid should call them on it. No filibuster on this urgent a bill could withstand the certain public outrage.

~ The New York Times, "Getting Tough in Washington," February 5, 2009, by NYT editors (op-ed)

Tom DiLorenzo on the drive to expand homeownership that helped foment the housing bubble

Let us briefly review some of the more notorious behavior of the federal government in recent years that has spawned the current economic crisis. First, every law and government agency having anything to do with housing policy, from HUD to the Fed, FDIC, Comptroller of the Currrency, Office of Thrift Supervision, enforcers of equal-lending laws, Fannie Mae and Freddie Mac, the Community Reinvestment Act, Congress, and more, did everything possible to force or bribe mortgage lenders into making trillions of dollars of bad loans to unqualified "subprime" borrowers. Among the various rationales that were given for this monumentally stupid policy were "discrimination," which the Fed admitted there was no evidence of when confronted by Forbes journalists Peter Brimelow and Leslie Spencer in the 1990s. Banks and mortgage lenders made trillions of dollars of bad loans as the Fed assured them that the risk could be swept away when Fannie and Freddie "securitized" the loans and sold them. And there was always an implicit (wink, wink) promise of a bailout if worse came to worse (as it did).

HUD announced in the early 1990s that its top policy priority was to sharply increase the percentage of Americans who owned their own homes, whether they could afford to own a home or not. The home building and mortgage finance industries applauded and supported this brand of egalitarianism run amok. The real culprit, however, was the Greenspan Fed, which flooded the markets with cheap credit, creating the housing market bubble which of course has now burst. Has anyone seen or heard from Alan Greenspan in the past eighteen months, by the way?

~ Thomas J. DiLorenzo, "Why Did This Happen?," LewRockwell.com, February 5, 2009

Bloomberg: 8 TARP recipients blow $845 million on stadium deals

Citigroup, Inc., targeted by lawmakers for paying $400 million to put its name on the New York Mets’ new ballpark, and seven other banks that received government funds may face questioning by Congress for spending $845 million on stadium sponsorships.

Bank of America Corp., which like Citigroup received $45 billion in government funds, is paying $140 million to have its name on football’s Carolina Panthers stadium. JPMorgan Chase & Co., which received $25 billion from the Troubled Asset Relief Program, is spending $66 million for branding Chase Field in Phoenix, home to baseball’s Arizona Diamondbacks.

The eight banks received a total of $153.4 billion from the $700 billion U.S. bailout and are spending a combined $845 million for naming rights. U.S. banks have had $745 billion in losses and writedowns since the subprime mortgage crisis began in 2007.

~ Bloomberg, "Citigroup, Seven U.S. Banks Spend on Stadium Deals ," February 5, 2009

Associated Press on the trouble with saving

Americans are hunkering down and saving more. For a recession-battered economy, it couldn't be happening at a worse time.

Economists call it the "paradox of thrift." What's good for individuals -- spending less, saving more -- is bad for the economy when everyone does it.

~ Associated Press, "Rise in savings hurting economy," February 2, 2009, by Martin Crutsinger

Alan Blinder on the expected waste from Obama's economic stimulus package

Advocates of more spending should also worry more about the quality of the projects and the government's ability to manage them effectively. The numbers are huge. For reference, total appropriated federal spending (excluding entitlements) is now running just under $1 trillion per year, and well over half of that is for national security. Thus, a $300 billion increase in annual civilian spending would boost that part of the budget by about 70%.

What government, or what company for that matter, can manage a rapid 70% budget increase without some waste, fraud and abuse? With legions of journalists waiting to write about exactly that, I worry that their stories might give the very idea of stimulus a bad name.

~ Alan S. Blinder, professor of economics and public affairs at Princeton University and former vice chairman of the Federal Reserve Board, "My Economic Wish List," WSJ, February 4, 2009

Harry Markopolos on Bernard Madoff ponzi

Madoff's math never made sense, his performance charts were clearly deceiving, and his return stream never resembled any known financial instrument or strategy... to believe in Madoff was to believe in the impossible. The biggest, most glaring tip-off that this had to be a fraud was that Madoff only reported three down months out of 87 months whereas the S&P 500 was down 28 months during that time period. No money manager is only down 3.4% of the time. That would be equivalent to a major league baseball player batting .966, and no one suspecting that this player was cheating.


~ Harry Markopolis testimony to Congress, Bloomberg, February 4, 2009

James Bovard on George W. Bush cloaking his foreign policy in "freedom"

Perhaps no American president has praised freedom as often as George W. Bush. From his declarations that the United States was attacked because of freedom, to the names “Operation Enduring Freedom” and “Operation Iraqi Freedom,” to his proclamations of a “calling” from history to defend freedom, freedom quickly became the cloak draping all of Bush’s actions after 9/11.

This past July 24, President Bush celebrated “Captive Nations Week” by giving a speech on advancing his “freedom agenda.” The captive audience at the federal Ronald Reagan Building and International Trade Center was chock full of bureaucrats, so no hoots were heard and no dead cats were thrown on stage, despite the president’s absurdities. The bureaucrats were buttressed by many limousine loads of foreign diplomats, to add tone to the event.

~ James Bovard, "More Bush Freedom Hokum," LewRockwell.com, January 29, 2009

Harold Evans on John Thain's bonus and spending sprees at Merrill Lynch

In the few days in December while he was still in charge, Mr Thain reportedly spent nearly $4bn on staff bonuses. That's peanuts on Wall St. In 2007 Mr Thain himself received $83m.

But a week ago, CNBC's Charles Gasparino, in a detailed scoop on the Daily Beast website revealed that during the time Mr Thain was busy cost-cutting, he spent $1.1m doing up his office - $86,000 for a rug, $35,000 for something called a commode on legs.

Readers bayed for blood, posting comments such as: "Oh how I wish this was Revolutionary France and we peasants could storm the offices…"

~ Harold Evans, "Banker + gangster = bankster," BBC, January 30, 2009

Harold Evans: JP Morgan's influence on Calvin Coolidge

The great banking house of JP Morgan had the president [Calvin Coolidge] on a "preferred list" by which the bank's influential friends were given a chance to buy stock at half price. Shall we say, they made out like bandits?

~ Harold Evans, "Banker + gangster = bankster," BBC, January 30, 2009