The Federal Home Loan Banks to the Rescue!

For those who have been speculating on how the government might bail out participants in the collapsing US subprime mortgage market, John Paul Koning writes that an unlikely savior has stepped forward: the Federal Home Loan Banks (FHLB), established in the midst of the Great Depression to provide a stable source of funding for member thrifts, otherwise known as savings & loan associations. The FHLB system is hardly fair. Those with privileges — the member banks — get to borrow at rates below what the market would pay. Customers of these member banks are also privileged in that they can take out low-rate mortgages. This privilege is not free, though; it comes at the expense of all other taxpayers. Should the system experience some sort of setback, the implicit federal-government guarantee suggests that taxpayers will foot the bill — a select few bureaucrats, lenders, and house buyers benefiting at their expense. The FHL Banks do not put themselves at risk by stepping in and lending to iffy members. They put FDIC at risk. And as we know from FSLIC’s demise in the 1980s, any failure of FDIC would probably be funded by taxpayers to the tune of billions.

Mining, Risk, and Profit

On November 2, 2007 the US House passed a new mining law that mandates a 4% gross royalty on existing mines and an 8% royalty on future mines on public lands. The royalty, if imposed, represents expropriation over and above the corporate income tax mining companies presently have to pay. It also represents the common view that the proceeds from mining — or any other endeavor for that matter — if carried out on public lands are the property of the general population. In other words if a miner goes to the effort of looking for, finding, developing, and producing copper in Utah, everyone in Florida is entitled to the fruits of his labor just because people in Florida happen to live within a political area that also encompasses the mine. This argument sounds awfully like slavery. Making prospecting in the United States unprofitable reduces the portion of the earth prospectors have to work with, thereby raising the costs of living for all people, regardless of where they live. The only beneficiaries of such a royalty would be the state and the privileged groups to whom it decides to dispense the proceeds.

The Specter of Stagflation

If mainstream economists and market analysts’ predictions (wishes?) come true, and the US Federal Reserve lowers rates several times in the next few months, contrary to popular belief, things in the medium and long term will unequivocally get worse, writes David Saied. The upcoming events and the current Fed seem to be reminiscent of the early 1970s, where the Fed continuously “inflated” the money supply to fend off recession, therefore creating stagflation.

The Michigan State Government’s 24-Hour ATM

The Michigan government has secured a new, 24-hour ATM machine: the taxpayers. A Michigan government shutdown was averted in the middle of the night when the bozos in the legislature decided to pass a 6% service tax. Governor Granholm says she will “consider a repeal only if other new tax revenue is found to avoid cuts to education, public safety, and health care.” Where have we heard that before?

Subscribe to