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In-credit-able!
Forbes.com ^ | 12/12/09 | Steve Forbes

Posted on 12/11/2009 11:01:19 PM PST by SupplySider

Even if the Federal Reserve gets around to strengthening the dollar--which would do wonders to get the economy really moving again--we still face a mammoth and growing problem: the government's increasing domination and distortion of the capital markets. It's not only the need to finance Uncle Sam's deficits that crowds out other credit seekers in the marketplace. It's also the proliferation of government entities (think Fannie Mae and Freddie Mac), government loan guarantees, tax credits and the government's growing sway over the banking sector. Even if Washington's red ink were back to the levels of a couple of years ago, these trends would be disturbing.

Look at what's happened to the credit markets. Government-sponsored enterprises Fannie Mae and Freddie Mac, with their implicit government guarantees, were able to totally dominate the mortgage market. They could borrow cheaply and leverage up on a scale no private company could. When they went bingeing on subprime mortgages, they ended up twisting and then destroying the housing market. The private sector was quite capable of generating players that could have performed Fannie's and Freddie's roles. And because they wouldn't have had Uncle Sam's moral-hazard safety net, they would have been infinitely more cautious, even with the Fed creating floods of liquidity and the credit rating agencies forgetting their raison d'être. Yet Congress is determined to keep these beasts alive and under government sway. Washington is also taking over the student loan market.

(Excerpt) Read more at forbes.com ...


TOPICS: Business/Economy; Government; News/Current Events; Politics/Elections
KEYWORDS: creditmarket; economy; fanniemae; federalreserve; forbes; freddiemac; markets; regulations; steveforbes
A brilliant explication of the Democrats use of credit market regulation to expand their political control of the economy.

Steve Forbes may be the clearest policy thinker in America today.

1 posted on 12/11/2009 11:01:20 PM PST by SupplySider
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To: SupplySider
The Federal Reserve doesn't strengthen the dollar. Markets decide what dollars are worth. Once again, we have the idiotic combination of omnipotence ascribed to a hum drum institition at the same time its powerlessness is advocated. Why does anyone buy this drivel?
2 posted on 12/12/2009 12:23:11 AM PST by JasonC
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To: SupplySider
Even if the Federal Reserve gets around to strengthening the dollar...

Laminate it. /sarcasm

3 posted on 12/12/2009 2:23:38 AM PST by PGalt
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To: SupplySider
Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed. - Ayn Rand
4 posted on 12/12/2009 2:44:08 AM PST by PGalt
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To: SupplySider
Trust is dwindling as the Fed and .gov financial regulators continue to ignore and flout the law.

The spiraling lack of trust is destroying the credit system. The M1 multiplier (see Fed reserve site) is at .81 and continues to plunge.

The Fed is finding to its dismay that the real currency is Trust, not the dollar.

5 posted on 12/12/2009 4:55:52 AM PST by Vet_6780 ("I see debt people")
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To: Vet_6780

That’s a key point. America historically attracted capital and investment because of that trust - safety, in the form of an established legal system, rule of law, respect for property rights and enforced equitably, etc. Mom, Dad, Apple Pie and Chevrolet. Money always and ever goes to where it’s treated best. I don’t think politicians can ultimately change that.


6 posted on 12/12/2009 5:56:39 AM PST by Freedom4US
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To: SupplySider

What? Everytime the DX (dollar index) shows weakness, the market goes up.


7 posted on 12/12/2009 7:33:34 AM PST by Freedom4US
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To: JasonC
Markets decide what dollars are worth.

Certainly true. When the Fed prints too many, the markets devalue them.

8 posted on 12/13/2009 2:07:14 AM PST by SupplySider
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To: PGalt
Laminate it. /sarcasm

A full size laminated buck might be worth something on eBay one day. In the Weimar inflation they printed so many marks they had to use tiny pieces of paper and with ink on only one side.

9 posted on 12/13/2009 2:10:50 AM PST by SupplySider
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To: Vet_6780
Trust is dwindling as the Fed and .gov financial regulators continue to ignore and flout the law. The spiraling lack of trust is destroying the credit system. The M1 multiplier (see Fed reserve site) is at .81 and continues to plunge. The Fed is finding to its dismay that the real currency is Trust, not the dollar.

Great point. For all their command and control schemes, they cannot force the world to hold dollars.

10 posted on 12/13/2009 2:13:40 AM PST by SupplySider
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To: Freedom4US
What? Everytime the DX (dollar index) shows weakness, the market goes up.

I can't claim to know what moves markets, but I read that a weaker dollar makes our exports cheaper to foreigners, thereby boosting the stock prices of export related companies.

11 posted on 12/13/2009 2:17:44 AM PST by SupplySider
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To: SupplySider
After decimating the housing market, it looks like Washington is now doing the same to credit markets generally. Next stop, other capital markets, starting with the evil securities trading transactions tax.

Correct me if I'm wrong, but oppressive government control of business by way of political regulation is called fascism.

12 posted on 12/13/2009 2:38:57 AM PST by SupplySider
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To: SupplySider
And when it prints just enough, prices remain broadly stable. Which is exactly what happened last fall. In the year since, it hasn't printed any. (Also, literally speaking it doesn't print them; private banks extend their loans or don't, voluntarily...)
13 posted on 12/13/2009 1:00:29 PM PST by JasonC
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To: SupplySider
Um, the corporate bond market has returned plus 45% since this time last year. If that is "decimating" the credit market, what's a bull market?
14 posted on 12/13/2009 1:01:29 PM PST by JasonC
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To: Vet_6780; dennisw; All

The Fed is finding to its dismay that the real currency is Trust, not the dollar.

GRRRREAT post, Vet_6780!

Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed. - Ayn Rand

Have you seen this thread?...(thanks dennisw)...

In letting the derivatives market grow to the size it did with little tracking or transparency, De Soto says, Americans breached a law so fundamental that it is unwritten. In the West, ever since feudalism collapsed, “the market made an effort to record everything so that paper meant something,” he notes. This happened without the mandate of any central government. “If I asked you, where is the ministry of property in the U.S.? You’d say we have no ministry of property. Sometimes you don’t need it.”Yet title to every house, car, mortgage, bank account and patent had always been reliably documented. “It’s not a fundamental law written into your constitution but an unwritten law that you have not respected, which is that paper means something,” he says.

Much, much more...here...

http://www.freerepublic.com/focus/f-news/2406524/posts


15 posted on 12/13/2009 7:18:33 PM PST by PGalt
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To: JasonC
Um, the corporate bond market has returned plus 45% since this time last year. If that is "decimating" the credit market, what's a bull market?

Well, the ferocious rally just got us back to where we were before the crash.

In any case, I don't think Forbes was talking just about market prices, but the deforming of the market itself, which will damage capital formation in the future as the overegulation takes effect.

16 posted on 12/13/2009 11:54:46 PM PST by SupplySider
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To: Vet_6780; SupplySider; All

To dovetail your comment...

In the link I gave you (above)...if you go to that thread...click on post #11 - which takes you to zero hedge...

...then, click on 02. Flawed Economic Model

Look at the 17:22 (De Soto’s opening comment) minute mark just past the 20:00 minute mark (the end of De Soto’s opening comment...”paper fails to represent assets”)

Enjoy


17 posted on 12/14/2009 7:09:50 AM PST by PGalt
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