The National Credit Union Administration has packaged $50 billion of distressed securities for sale as $35 billion in government guaranteed bonds in order to bail-out the non-profit sector of the banking industry. Bloomberg reports, “Credit unions in the U.S. may absorb as much as $9.2 billion in losses over the next decade as the industry strives to recover from sour investments in real estate and consumer loans, U.S. regulators said today.”
[From Anything That’s Peaceful: The Case for the Free Market, 1964]
As I sat contemplating the miraculous make-up of an ordinary lead pencil, the thought flashed in mind: I’ll bet there isn’t a person on earth who knows how to make even so simple a thing as a pencil.
[Excerpted from chapter 10 of Theory and History.]
As historicism sees it, the essential error of economics consists in its assumption that man is invariably egoistic and aims exclusively at material well-being.
[Excerpted from an edited transcript of “Ideology and Theories of History,” the first in a series of six lectures, given in 1986, on the history of economic thought.]
The orthodox historiography of economic thought starts as follows: There were a bunch of mercantilists running around, talking about specific things like sugar. Should the government keep bullion in the realm? Should we have tariffs?
Congress will hold hearings tomorrow where Congressman Weiner plans to grill Goldline executives over their gold business. Specifically Weiner thinks they are charging too high a markup on the gold coins they sell, charging an average 90% markup on the coins they sell. Unfortunately, a quick check of the Goldline website and a few of their competitors shows that Goldline’s markup is higher than its competitors but nothing along the lines of a 90% difference.
Not aggressively enough, it seems. Barry Ritholtz says at his blog that the only way the banks will ever learn is if they lose big judgments in court – a notion that seems to be borne out by another aspect of the Schroit debacle. but this isn’t true, the big banks will learn when the government stops bailing them out. If the market were actually allowed to function, B of A, which received 45 billion of taxpayer moneys, would have had to severely contract to deal with its financial problems. But instead it got bailed out. Why should it be competent or efficient?
Thomas Sowell is fond of asking whether reality is optional. As I tell my students, the economic way of thinking helps identify and define the non-negotiable constraints on social reality. Economics isn’t “one way of looking at things.” If you’re advocating a higher minimum wage or protesting free trade while taking no need of the laws of demand or comparative advantage, you aren’t being compassionate. You’re being irresponsible.
