The Freedom Factory

The shackles of serfdom are being silently fastened to America. Every dollar Congress spends beyond its budget, every Federal Reserve Note printed, every tax, regulation, and government intrusion into our lives renders us less free. Ever wonder why it feels like it’s increasingly difficult to make ends meet? Remember the days when one spouse could work, the other raise the kids, and still save for a comfortable retirement? Those days are gone, but why? What’s next? The 5 Steps to Freedom: How To Cut Your Dependence On Institutions And Escape Financial Slavery, by Jeff Nabers explains what happened to our once prosperous society and how we can all take definite steps to escape what is to come. Continue Reading

This article is dedicated to the growing segment of American society that is awakening to the ideas that we are increasingly overworked and overtaxed. My goal is to determine an effective tax burden on the average middle-class American. I will leave it to the reader to judge relative severity of the burden as measured against associated “benefits” to which he is “entitled” from the system. Continue Reading

Former Federal Reserve Chairman, Alan Greenspan, published an editorial in the Wall Street Journal today that absolves himself of any wrong-doing in the housing bubble and its subsequent destructive aftermath. Latching onto a weak argument that circa 2002 long-term mortgage and short-term federal funds rates had statistically diverged in correlation, he suggests that the overcapitalization of housing resulting from cheap credit was not his fault. Many critics have pointed the finger at Greenspan for setting short-term rates too low for too long. Access to cheap credit, according to critics, sparked “irrational exuberance” in the housing market, flooding the sector with unprecedented capital and driving prices to ridiculous levels.

Rather, Greenspan blames global trade in boosting foreign savings rates and leaving the U.S. with large current account imbalances that were subsidized by our trading partners. The current account cash flows went almost exclusively into housing, driving long-term mortgage rates to unprecedented lows and encouraging speculation.

Hilariously, in his editorial Greenspan cites famous economist Milton Friedman as saying that during Greenspan’s tenure from 1985-2005, “There is no other period of comparable length in which the Federal Reserve System has performed so well. It is more than a difference of degree; it approaches a difference of kind.”

Friedman did not live to see the aftermath of Greenspan’s policies. Short-term federal funds and long-term mortgage rates did diverge in correlation, but they did so precisely because of Fed and other governmental policies. The structural distortions in our economy leading to sustained trade imbalances were caused by irresponsible monetary and fiscal policies. Congress legislated the creation of the secondary mortgage market, mandated that it funnel capital to subprime borrowers, and taxed away America’s industrial base. Couple this with a sustained period of negative real interest rates orchistrated by Greenspan, and the U.S. economy grew ridiculously distorted over time, channeling the world’s savings towards our consumption, leaving the country bereft of productive capacity. Housing is not productive, but consumptive.

Global trade is not the problem. Current account and trade deficits, of themselves, are not the problem. Artificial interest rate manipulation, social engineering legislation that drives consumption over production, and inflationary monetary policy that drives perpetual inflation and currency debasement are the issues.

Mr. Greenspan accuses his detractors of rewriting history, but that is precisely what he is attempting to do.

I read an article today that brought up two great points: Housing bubbles are worse in localities with high land use regulations, and federal housing policies geared towards subsidizing low-income homebuyers encourage folks who can’t afford to buy to do so anyway. Tag on ridiculously low federal funds interest rates for way too long and you have a recipe for disaster. Continue Reading

On June 14th, the Financial Times reported that finance ministers from the world’s biggest economies (G8) disagreed with each other on the role of “speculators” in driving politically unacceptable energy prices. Today, the Associated Press adds Saudi Arabia to the list of country’s blaming financial markets for rising prices. The U.S. Energy Secretary declared that insufficient production was to blame for high oil prices, not the popular scapegoat, “speculators.” Perhaps both are right to some extent, but only if you properly define “speculator” to be our very own central bank!

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Just this last month, the Senate Judiciary Committee debased the integrity of our government and insulted the American people by harassing executives from some of the world’s largest oil companies. The premise of the hearings was that oil and petrol prices are high because of a global corporate conspiracy. Today, the Financial Times reports that a similar scapegoating effort is being directed by world leaders towards oil “speculators.”  Politicians are constantly on the hunt for quick answers to dumb questions, so let’s clarify a few things about the role of “speculators” in markets… Continue Reading