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In testimony before the House Committee on Financial
Services, Robert Kuttner of the American
Prospect, this week delivered a searing Philippic on
the topic of the current excesses.
Like many from his part of the political spectrum,
however, he missed the essential cause of the disease and so recommended the
wrong treatment, as the following open letter to him tries to explain:
Mr. Kuttner,
Leftists often analyse history and highlight
institutional conflicts better than purblind Rightists (after all, the whole
doctrine of the former is about the clash of class interests competing for
economic control), but they always fail at the juncture of true cause and
effective remedy.
Though nearly all of what you have to say regarding
the marrow-deep corruption of the present era is true, what you give no hint
of understanding is that government itself brought this about, not a
market which is therefore decidedly not a 'free' one.
Government allowed deposit banks to function as
"fraudulent warehouses" in the first place. Government extended
them and other corporate bodies the privileged protection of limited
liability for doing wrong. Government forced its subjects to accept its IOUs
as money. Government founded the Fed. Government went off gold. Government
favoured debt over equity (both via preferential tax treatment and perpetual
inflation). Government set up agencies to over-promote home ownership.
Government instituted the next great office of "moral hazard" with
the FDIC of which you so approve. Government routinely bails out and reinflates all failures which repeatedly shake the
gimcrack system which has been its result.
So, no, Mr Kuttner, we
will not remove all conflicts and enhance stability by a return to the
Depression-extending, soft tyranny of your beloved, Mussolini-inspired New
Deal, but only by a return to sound money and the strict and consistent rule
of law.
Banking and money are themselves the intrinsic
problem. The question of whether or not the rules and regulations of the day
are doing a good enough job of covering up the flaws inherent in banking’s anomalous legal and economic framework is
merely a post hoc diversion from a much more fundamental issue.
Taking but a few of the present evils to which you
allude, if banks were forced to obey the rules applied to all other
custodians of property – and if, additionally, money were hard and
therefore potentially subject to the same consequences of scarcity as any
other good – highly-leveraged, destabilising speculation would be well
nigh impossible (or, at worst, it would be confined to a kind of specialized,
self-contained, private gambling club); inflationary booms would be precluded,
and capital would be both unblinkingly supervised – lessening
"agency problems at source" – and scrupulously invested in
genuine enterprise, not in the kind of destructive and debauched financial
trickery you so correctly denounce.
Oh, and as hugely beneficial side effect, overweaning government – the true bane of our
existence, as well as the "bankster's"
sword and shield – would perforce become rigorously constitutional,
minutely accountable, a great deal smaller, and far less intrusive and
arrogant into the bargain!
The cause of both liberty and prosperity would be
enormously advanced as a consequence and artificial layers of cloying,
stable-door bolting "regulation" could be safely relaxed, with only
the effective oversight of a watchful and self-reliant citizenry needed to
restrict malfeasance and to see that malefactors receive their just desserts.
You never know, Mr. Kuttner,
but if enough of your fellow Americans come both to endorse your indictment
and to yet to reject your prescriptions, we might be afforded the chance to
put the above assertions to the test. I say this, for the inescapable
conclusion is that, in all good conscience, your compatriots could only then
vote for the one true alternative to the yelping pack of statist,
unimaginative, self-serving political jackals vying to secure their own four
years as Ozymandias in your upcoming Presidential
elections – namely the estimable Ron Paul.
Sean
Corrigan
Sean
Corrigan is Chief Investment Strategist at Diapason Commodities Management,
who have offices in Lausanne and London.
Information
contained herein is obtained from sources believed to be reliable, but its
accuracy cannot be guaranteed. It is not intended to constitute individual investment
advice and is not designed to meet your personal financial situation. The
opinions expressed herein are those of the author
and are subject to change without notice. The information herein may become
outdated and there is no obligation to update any such information. The author, 24hGold, entities in which they have an
interest, family and associates may from time to time have positions in the
securities or commodities discussed. No part of this publication can be
reproduced without the written consent of the author.
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