Comments (18)

• Dennis

  "The TV pragmatists probably forget that Karl Marx and Friedrich Engels wrote in The Communist Manifesto that creating 'a centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly' should be near the top of any communist's agenda."

  Along the lines of former President Nixon's comment, we are all socialist now. Terrible, but nonetheless true for all but a handful of us.
  

  Published: November 13, 2008 9:35 AM

• William Rader

  But the level of economic knowledge displayed in main-street print or on TV has dropped lower than the Dow Jones Industrial Average.

  I would certainly agree.I don't believe that I have read or heard anything (outside of entries on tax analyst or tax attorney sites) about the changes that were recently made to IRC Section 382 ("Loss Limitation" rules) at the same time as the bailout. Regarding paragraph (h), one client alert page states: "...in Notice 2008-83 (Sept. 30, 2008), the IRS announced that acquirers of financial institutions will be allowed to deduct built-in losses and bad debts of an acquired bank (as defined in IRC § 581) regardless of whether IRC § 382(h) would otherwise limit or prevent such deductions." I believe that Wells Fargo Bank pushed for these changes prior to its acquisition of Wachovia Bank. Of course, the primary reason Wells Fargo acquired Wachovia was to have a presence on both the East and West Coasts. I know this sounds somewhat recondite, but I am speculating that American Express, GE Capital, and other lenders that may be expecting large net operating losses may want to take advantage of changes in the Corporate Loss Limitation Rules. I would be interested in hearing what other, more knowledgeable readers on this site think.

  Published: November 13, 2008 10:37 AM

• Greg B

  For 35 of my 45 years, I have always wondered about what happened in the early 1970s when inflation shot sky high and I saw my family's middle class prosperity falter only never to return.

  My dad's explanation was "that Nixon sold too much wheat to the damn Russians." But that's about all he knew, since the mainstream media, even back then, provided news absent of any true substance or meaning.

  So, fast forward today, and I stumble across this lively article written in the early 1970s.

  http://www.fee.org/Publications/the-Freeman/article.asp?aid=6196&print_view=true

  And, lo and behold, the very issue that prompted the 1970s runaway inflation is the exact same issue that is giving us our financial fits today.

  Finally, some real answers--after only 35 years.

  This excellent article only adds another brick to my new wall of understanding. Visit and study at mises.org and fee.org for this and many more answers and explanations pertaining to our current and future woes.
  

  Published: November 13, 2008 11:40 AM

• Fephisto

  It's like all the screaming heads I hear talking about "The De-regulation of the Bush Era".

  What de-regulation? What laws have been throw out from the previous two centuries by the Bush Administration that has superceded the effects of Sarbanes-Oxley?

  The fact that the media can blatantly say this with no other evidence infuriates me.

  Makes me want to get a 'citation needed' board...

  Published: November 13, 2008 11:40 AM

• prettyskin

  One group thinkers opposing other group thinkers. Circles of concentrated knowledge that can't agree on what's before them and on what's ahead of them. History is his story and depending on who's telling the story the rendition can be drivel.

  Facts are to be found in most historical accounts. The spin and political rhetoric of Alexander Hamilton's legacy can not discredit his accomplished ambition to orchestrate the nation's financial system.

  Since that financial system is with us today, concentrated credit, economists have failed to advise convincingly the powers over our long history of such a system.

  When will the ceasing of dragging letters behind names be insufficient for advising? Being shallow and faddish with a disposition to group think does not help the American people remove this unjust financial system.

  Published: November 13, 2008 11:53 AM

• William Rader

  Doug French,

  Thank you for quoting from Gabriel Kolko. Kolko was required reading in several of the courses that I took in the early 1970s. His works are timeless and highly enlightening. Had I not read Gabriel Kolko, I would not have understood the position that Austrian economics takes vis-a-vis the Federal Reserve System and "corporatism."

  Published: November 13, 2008 1:10 PM

• Dick Fox

  Once again we have someone attacking Alexander Hamilton without quoting one word he wrote. Hamilton may be the most prolific writer of all the Founders and yet these ad hominem attacks contain not one word from Hamilton.

  Sadly it appears that "the level of economic knowledge displayed in" some articles here "has dropped lower than the Dow Jones Industrial Average" Not to mention historical truth.

  If you get the obvious wrong no one will listen when you speak the truth. The obvious is that when Alexander Hamilton became Secretary of the Treasury he single-handedly return the US to the gold standard.

  
  

  Published: November 13, 2008 2:33 PM

• William Rader

  I found a discussion of IRC Section 382 with regard to the bailout at the following site: http://bednarski.us/danny/2008/11/13/revenue-code-section-382-in-the-face-of-a-financial-crisis/. I assume there will be more analysis in the days to come.

  Published: November 13, 2008 3:55 PM

• Inquisitor

  "The spin and political rhetoric of Alexander Hamilton's legacy can not discredit his accomplished ambition to orchestrate the nation's financial system."

  Why can't it?

  Published: November 13, 2008 7:11 PM

• Ralph Fucetola JD

  The actual freemarketeers were warning people, and being scoffed at --

  http://www.youtube.com/watch?v=2I0QN-FYkpw

  for a brilliant series of juxtapositions showing Peter Schiff vs the Talking Heads.

  Published: November 13, 2008 10:24 PM

• Peter

  BTW, fiat does not mean "out of nothing".

  Published: November 13, 2008 11:50 PM

• Gil

  Yep. 'fiat' is a synonym for 'decree'. But I wonder if people want to play wordgames - how does 'fiat money' mean 'unbacked paper money by decree from government'? It could be said that when the U.S. government pegged the dollar in that $20 equals one ounce of gold is that not 'fiat' because government decreed $20 = 1 ounce rather than by some natural equalisation? Even if the government said that only fine gold and silver coins are henceforth now the only legal money, even if people wished to use platinum or copper as money, would that not be a 'decree' hence 'fiat' money? Just wondering.

  Published: November 14, 2008 5:04 AM

• Dick Fox

  Gil,

  The world "fiat" is related to Genesis 1:1 saying that when God spoke creation happened. Fiat is something, currency, a judge's order, or other pronouncement backed by authority only.

  Speaking of currency if you define it in terms of a commodity or of credit or some other foundation this is not fiat. It does not come into being solely becuase of decree or pronouncement but is dependent on something other than the word of the authority.

  Today the dollar is a fiat currency because it has not foundation and can not be legally exchanged for anything other than itself. You might say that it can pay taxes but that does not give the dollar value only a use for example it can be used for toilet paper but that does not make it fiat though it might make it more valuable.

  Published: November 14, 2008 6:22 AM

• andy

  "FIat Lux!"

  Let there be light!

  Published: November 14, 2008 8:47 AM

• Keith

  Quote from Gil: "It could be said that when the U.S. government pegged the dollar in that $20 equals one ounce of gold is that not 'fiat' because government decreed $20 = 1 ounce rather than by some natural equalisation?"

  No. The key fact is the ounce of gold, not the $20. Under the gold standard, I could take my $20 and retrieve my ounce of gold, as could everybody else in the world that wanted to, even simultaneously. As long as the printed money supply didn't exceed the 20 to 1 ratio to gold, we could all go back and re-exchange our gold for dollars without worrying about inflation.

  If the government began printing up more money than the 20 to 1 exchange rate, I would still have my ounce of gold and I would probably demand more than $20 if I exchanged it again. So while the value of the dollar had gone down, my ounce of gold still weighed an ounce.
  

  Published: November 14, 2008 9:52 AM

• Dennis

  Peter,

  My Webster's II New College Dictionary defines "fiat " as: (1) an arbitrary decree. (2) Authorization or sanction.

  Published: November 14, 2008 10:39 AM

• Dick Fox

  So that I an not guilty of the same error as Douglas French and others who have posted here with ad hominem attacks on Hamilton see the following quotes from his Report on Public Credits presented to congress January 9, 1790.

  "And let all sums of continental money now in the treasuries of the respective ststes, which shall be paid into the treasury of the United States, be credited at specie value."

  This means full redemption in gold.

  But Hamilton has also been criticized because he recommended a National Bank. Let's look at a quote from his Report on the National Bank presented to congress December 13, 1790.

  “… the emitting of paper money by the authority of government is wisely prohibited to the individual states by the national constitution. And the spirit of that prohibition ought not to be disregarded by the government of the United States.”

  Wait a minute! You mean that Alexander Hamilton told congress that it should not issue paper money. What about all these folks on Mises.com who have been saying he destroyed the currency? Sorry to inform you, but they were wrong.

  Hamilton was not perfect but trashing his name in ad hominem attacks and distorting his ideas simply cannot stand.

  Published: November 14, 2008 1:21 PM

• Phil

  I guess chartering the First Bank of the United States is not enough proof for Mr Fox - despite its transmogrification into the controlling bank of the federal reserve.

  Published: January 6, 2009 11:52 PM