The Californicrisis and Bank Nationalization
ByWhen an economy undergoes a contraction, governments collect less revenue simply because less is happening and less is being bought. Consumer cutbacks are a good and healthy occurrence – individuals reduce consumption in favor of saving, and the economy can resume a sustainable growth pattern. The loss of revenue, however, is obviously despised by government bureaucracy. This is, in fact, why the Federal Government always prefers an inflationary economy and does its best to justify the existence of such with other measures. The fact that government wants inflation to occur as the rule should immediately give a libertarian or any Christian pause, even if he does not know the economic arguments for establishing sound money and abolishing central banking.
The Californicrisis
Now, where am I going with this? Consider what has been happening in California over the last few days. The economic pullback has thrown the state apparatus into complete turmoil. On one side, you have lawmakers demanding cutbacks in the budget and refusing to take out new loans or raise taxes. On the other side, you have lawmakers who do not want to cut the jobs in the massive California bureaucracy.
And thus the problem of socialism has hit them square in the face. They cannot do what they want to do without continuing on the path of first economic enslavement and then economic destruction. Some of their proposals include a sales tax increase of 1% and an additional gas tax of 12 cents per gallon. California already has an above-the-USA-average gas tax, but this will rank them in the top 5 highest gas taxes in the nation.
Schwarzenegger said to the press that lawmakers “need a great hero in the state Capitol” to provide them with inspiration. I suggest he put forward a new face in line with the iconography of the Glorious Leader, and I recommend the picture on the right as a start. Good luck with that.
“As California goes, so goes the nation,” or so they say. Watch how Arnie and the California laboratory of democratic stupidity handle this and how your state reacts to the changes.
Republicans call for bank nationalization
Over the course of the bailouts, the Federal Government has essentially taken equity stakes in all the nationally recognized banks, such as Citibank or Bank of America. The financial industry is becoming marked by even more regulation and bureaucracy, yet it is rarely recognized that the regulations and monetary policies that were issued in the first place bear the bulk responsibility for facilitating the financial crisis. But it isn’t over – now even Republicans are gunning for the complete nationalization of the banking industry via the “Swedish Model.” Obama, of course, is supportive of the idea.
Nationalisation, long regarded in Washington as a folly of Europeans, is gaining rapid ground among US opinion-formers. Stranger still, many of those talking about federal ownership of banks are Republicans…
Policymakers acknowledge that, if this is so, it will be difficult for those with the largest shortfalls to raise the required equity from the markets; in which case the government would probably have to take temporary control. Moreover, while nationalisation remains taboo in some political circles it is increasingly openly discussed among economic policymakers of all leanings…
The Obama administration remains officially opposed to control. Mr Geithner last week said: “Governments are terrible managers of bad assets.”
The government believes that they and they alone have the capacity to pull us out, and then they expect us to believe that they will willingly give up this incredible power they are taking. When was the last time you saw the US government give up power unconstitutionally taken by Congress and the President? Rather, as Robert Higgs has so elegantly presented in his books Crisis and Leviathan and Against Leviathan, government uses crises to instill fear and to abscond with power over its subjects.
If the Constitution were actually followed, all of this would be grounds for impeachment. Instead, we get enslavement and potential economic ruin. Don’t fall for the same old lines.
“Who is the more foolish: the fool, or the fool who follows him?”
UPDATE: California has officially passed their budget on Thursday, Feb. 19,2009.
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Tags: economics, nationalization
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Great Obamicon Dude! Rofl!
And thanks for the reminder on the Higgs books.
“And thus the problem of socialism has hit them square in the face.”
This is a complete non sequitor. Taxes have nothing to do with socialism.
“individuals reduce consumption in favor of saving, and the economy can resume a sustainable growth pattern.”
This is wrong, when people save more growth shrinks, or the economy contracts. It might be a good thing for an individual to save, but when everyone does it, its bad for the economic system as a whole.
I don’t know what your point was about government policy favoring inflation. Was the point that it stimulates economic activity (and therefore creates more tax revenue)? How do you see this as a bad thing, and why should anyone be a alarmed if the government isn’t agnostic on the issue of inflation/deflation? Inflation/deflation has an enormous affect on the economy, so I would be alarmed by a state that didn’t do anything to affect it.
@Miner: Really? Taxes have NOTHING to do with socialism? This is news to me.
You are completely incorrect about patterns of economic growth. You cannot spend your way into prosperity. Saving must take place in order for capital to be built up over time. And to do so, one must reduce consumption. The balance of spending & saving is maintained via the market interest rate — what people expect to receive as a return on their savings being held and invested.
A government that has the ability to manipulate the currency would OF COURSE prefer to create an inflationary economy so that they can reap the first benefits of newly created money before price increases take place. It is, as Ron Paul said, the great “hidden tax” upon the people.
I think you need to read some Mises, Rothbard, and Hayek to understand how an economy grows and why it crashes. For that matter, just go listen to Ron Paul or Peter Schiff for a while.
“cannot spend your way into prosperity.”
Why do businesses take out loans? They use loans to invest thereby creating growth, and they can make profit- even after all loans are paid with interest. Governments do the same. This is basic economics, even liberal or classical economists would agree with the concept of spending money to make money.
Saving money and reducing consumption may be wise for an individual human being to do, but at the corporal/national/global level reducing consumption contracts the economy, slashing growth.
If the economy continues to grow, and it will given enough consumption, growth will vastly outpace inflation. This is a historical fact. For example, 80 years ago a car might have cost something around $600 (roughly), and an average car today might be about $20,000. However, the number of hours the average worker would have to work is far less today than 80 years ago. In a perfect world we wouldn’t have inflation, but if you want to talk about the real world, inflation is a fact of life.