The Ugly Side of Libertarianism: No Aid for Tornado Victims

Ron Paul's Denial of Tornado Relief

Ron Paul and the libertarians have a religious zeal for keeping the government from helping victims of natural disasters.

Ron Paul has no use for the Federal government giving aid to victims of tornadoes or any other natural disasters.

There is no god in the religion of libertarianism; I should say that there is a god of self, a worship of self as the end all and be all of existence.

Libertarianism exhibits the classic fanaticism of a cause to make everyone else believe that self interest is the true god.

Survival of the fittest, economically, becomes the reason why libertarians have no use for government helping anybody. To the libertarians, government helping citizens is stealing from the libertarians!

I strongly believe that there should be a separation of church and state. Yet I also believe that the history of government helping people comes from the tradition that was embodied in the commandments given to the people of Israel in the Old Testament. The example of governmental compassion for the sick, poor, and old is well documented in the Old Testament.

Even debt forgiveness is taught in the Old Testament. God expected the Israelites to forgive debt often. To libertarians, God is a collectivist thief!

Ron Paul, in the callous and selfish way of the libertarian fanatic said regarding disaster relief:

"There is no such thing as federal money," Paul said, on CNN’s State of the Union. "Federal money is just what they steal from the states and steal from you and me."

Of course, I have argued both on Hubpages and Business Insider that libertarianism is mean spirited, and it is mean on purpose, as being a core of this pseudo religion. Indeed, while the public campaign of the libertarians is weak, the internet campaign of these fanatics is very strong. They have come to dominate websites that have articles opposing them. They are rude, often even hostile to free speech.

This of course is because libertarians have a tradition of anarchy, of every man for himself mentality. It goes beyond the good attributes of self reliance to a fanatical hatred of all that cannot be self reliant. Ron Paul comes across as a caring, grandfatherly type, but I assure you that when it comes to compassion through government, he is no such person!

There is a big difference in promoting self reliance and hating that which is not self reliant. The superiority complex of libertarians, the us-versus-them mentality, has, in one way or another permeated the entire Republican Party. Even people like Newt Gingrich, who is for war and hostility, speaks in libertarian terms when talking about economics.

Gingrich believes in the invisible hand of self interest, which is a pillar of libertarian thought. The truth is, the deregulation of industry has created pink slime in hamburgers, the housing bubble and crash and other social injustices. Even racism is considered a civil right by libertarians. My Ebook, Libertarianism, The UK Big Bang, and How they Ruined America goes into some of the issues regarding the economics of deregulation.

Not helping victims of disasters is the ultimate logical conclusion of the economics of deregulation and libertarianism. However, it is not immoral, nor is it stealing, for government to come to the aid of citizens. Promoting the General Welfare is a foundation for American constitutional thought. The idea that selfish people like libertarians have any strong morality anyway is simply a delusion! There is no morality in worship at the feet of the god of self interest.

Republicans claim to be the party of religion and of family values. But the truth is, this party is for the survival of the fittest. It is a party dominated by libertarian values and uses religion to muster support for war (with the exception of Ron Paul) and for cutting programs for the poor, sick and elderly. The greatest hypocrites in political office are Republicans.

And truth is, the selfishness of the lady who won the lottery and a million dollars while collecting food stamps shows the evils of worship of self. Ron Paul and the libertarians have a philosophy of deriding compassion and exalting self. It is more than just bad behavior. With Ron Paul and the libertarians, it is a system of political thought and of misguided philosophical assumptions!


Beyond the Naive Libertarians: Tea Party Leaders and Their Greed

Manipulated Markets and Libertarian Penny Pinching

While markets in housing, stocks, and bonds have been manipulated by easy money, indeed, the manipulation is not the sole reason for the market levels being what they are.

Stocks have been manipulated, yet earnings per share on a global scale improved from March, 2009 to January, 2012.

So, without the improvements in real earnings, this manipulation would not have made any difference. There had to be some fundamental reason for a continued stock rise.

That is not to say that manipulation does not come with dangers. Manipulation of the housing market slowed the rate of decline, but did not prevent the decline in house prices. And the sustainability of the US economy is a concern in the face of inflationary and deflationary currents.

Perhaps the market that is most manipulated is the treasury bond market. Central banks have printed a lot of money and that money has been going into treasury bond purchases as a hedge against stock downturns. It is all about return of capital but it punishes savers.

Certainly, with market manipulation and with the printing of money, the libertarians have a legitimate concern regarding the sustainability of the recovery of the world economy. Of course their draconian solution is to plunge the world into a massive depression and see what happens on the other side of that depression.

However, we have to get real here. The cost of tornadoes in 2011 was around 20 billion dollars. This is a drop in the bucket compared to trillions of military spending and other spending by the government.

To get a tornado zone up and running quickly, it is worth the small expenditure of disaster relief to get the economies functioning again. And it is the right thing to do. Come on libertarians, have a heart!

Republicans Would Really Rather Use Disaster Aid as a Bargaining Chip to Cut Necessary Programs

Ron Paul Expects Volunteers to Help Victims of Disasters, He Uses Government Mistakes to Falsely Make His Case.

More by this Author


Comments 64 comments

Charles Hilton 4 years ago

I've always considered Libertarianism to be Conservatism on steroids. It is Ayn Rand writ large. And anyone who's read her works or is even familiar with her Objectivist philosophy knows she was a full-blown sociopath. And unfortunately, her creedo of uber-selfishness, which has been dogma in the Republican Party for decades, has made inroads into Democrat circles, as well. And it's why progressivism is in the epic struggle that it's in.

There is nothing humanitarian about Libertarian ideology---it's greed and chaos masquerading as "rational self-interest."

And your video heading, "Republicans Would Really Rather Use Disaster Aid as a Bargaining Chip to Cut Necessary Programs" brings to mind Naomi Klein's book, "Shock Doctrine: the Rise of Disaster Capitalism" in which she exposes how the World Bank and their cronies use natural disasters as an excuse to move-in and exploit those countries devastated by them.

Excellent hub, and I look forward to more.

Voted way up!


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Thanks Charles. Unrestrained capitalism, the basis of libertarian assumptions regarding the invisible hand of self interest, has done some really bad things. Really bad.

I support capitalism, but with a human face and with regulation where needed.


American Romance profile image

American Romance 4 years ago from America

your arguments are good on paper, but not real life! A person should not purchase a home he or she cannot afford insurance on! People must stop living on the promise that OTHERS will carry the burden if they should make bad choices! I am a conservative but as much as I want to collect the social security and medicare I also wish these programs would have never been started! We currently have 67 MILLION folks on welfare! 50% of Americans do not pay federal withholding! According to the IRS the top 10% pay 90% of all the bills........thats contrary to Obamas rich pay their fair share rhetoric!............to sum up, enough! I have to problem with LOANS at a good interest rate coming from FEMA or something like that, but YOU are not my responsibility! I have my own kids to put through college! I have my own doctor bills! I have my own dreams!.............and I make my own choices........sometimes in the real world we pay the consequence of those choices!


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

You evidently did not see this chart before defending the rich: http://www.cbpp.org/cms/index.cfm?fa=view&id=2908

Unless you take a good look at the chart and understand what is really going on with the redistribution of the wealth to the wealthiest among us, you simply cannot understand what is going on in the world of finance.


American Romance profile image

American Romance 4 years ago from America

bgamall, I don't need to see a chart! Why can't this be put to rest? I told you what the IRS says! Is there really a better source? Again those claiming the rich don't pay their fair share don't pay friggin taxes anyway! They get it all back at the end of the year! Do you really need more to convince you? Do you suppose the IRS lies to decieve you about where they get their income from?..............please for Gods sake, give us all a break!


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Even Donald Trump, not exactly a flaming liberal, thinks there should be a one off wealth tax. The 1 percent has accumulated an even greater percentage of wealth than of income! If you are in the one percent speak up. Otherwise what could possibly be your motive for having the position you have?


WD Curry 111 profile image

WD Curry 111 4 years ago from Space Coast

I'm an independent. I am not a Libertarian, but I know what a Libertarian is. Your over-emotional response to a problem that doesn't exist is laughable, so I checked funny. You have totally misrepresented the Libertarians. Is this from ignorance or agenda?


American Romance profile image

American Romance 4 years ago from America

bgamall, As an American you should be proud that others prove the American dream exist! You should be proud that the proof is, YOU too can become one of them! Why would you resent them?..........makes no sense!


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

WD,you are short on facts and long on criticism without the facts. I have found that libertarians often take that route. I am not sure the rank and file libertarian even understands the underlying philosophy of libertarianism.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

American, I don't think you understand libertarianism. I think you need to look at the libertarian assumptions more. Murray Rothbard was all for sending blacks back to Africa until he decided it would cost too much. Rothbard was a libertarian racist. Other libertarians believe racism should be a civil right, like Schiff. Not a racist, he says. But kind of wacko don't you think?


WD Curry 111 profile image

WD Curry 111 4 years ago from Space Coast

The facts? Libertarians aren't against tornado aid. They believe it should readily be provided by the private sector. Republicans believe the same. Why do you think Reagan let all of the mental patients loose with no support? Like he said, "It is the responsibility of the private sector, not the government."

If Republicans would put their money where their mouth is. There would be little or no no expense left for FEMA.

They fact that you attack the Libertarian position from the angle of religion is not indicative of a deep understanding. It is inflammatory propaganda. It is Fox Rhetoric.

Its your hub, I guess you can say whatever you want, but we need to get rid of the Federal Reserve Bank and their power brokers . . . end of story.


Charles Hilton 4 years ago

The "private sector"---lmao!

Yeah, right---people in emergencies should rely on total strangers who don't care about anything but money---and you think they would help people? I hope one day that you have to rely on private enterprise to rescue you out of a natural catastrophe. You would be the first to blame the government for not being there for you.

Private businesses are not charities, they exist to make money---the minimum amount of service for the maximum amount of profit---so what makes you think they would be a suitable substitute for government help?


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

The private sector. What a joke! There are some things that the self interested private sector cannot or will not provide. I can't see the private sector creating the Hoover Dam or most big things. The private sector wants to profit off of other folks' disaster. I am not for that.

I am no fan of the Fed, but neither am I a fan of Ron Paul's absurd competing currencies and currency issued by private banks. Even the constitution says congress should issue currency and not more than one!


Theeyeballkid profile image

Theeyeballkid 4 years ago

Every day people lose thier homes through no fault of thier own - whether it be accidental fire, soil erosion, act of nature etc...it is highly likely that at least some of these people wont have insurance.

Are you suggesting that the taxpayer covers the cost every time a house is accidentally destroyed? or is it just in cases which make the national news?

Seems to be a little unfair to the uninsured person in Springfield who loses their home to land subsidence and gets nothing, compared to those who built a home in Tornado Alley who get compensated by the taxpayer when the inevitable happens.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Acts of God are not covered by insurance companies. Wind is not covered. Water flooding is but wind isn't.

You libertarians are so, so asleep.



bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

I said 20 billion for the entire year. The 2 billion outbreak was unprecedented. There would have to be a lot of those to go over the 20 billion.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Not all libertarians are into Rand ,or are we all conservatarians. True Libertarians are as far from conservatives as they are liberals.

A lot of the negatives within liberty would go away if more of us embrace the unique nature of land and other government granted privileges. This is the future of the liberty movement.

http://www.progress.org/2012/philippo.htm


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Hi Mark, that link does not reflect classic libertarian positions. It wants to tax corporations and libertarians mostly oppose that.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Hi bgamall,

It actually is very classic, classical liberalism, the original libertarians. I agree, the current crop of conservatarians who call themselves libertarians may not embrace it. But those who truly understand the benefits of classical liberalism do embrace it.

It is not the tax on corporations many libertarians talk against, since most libertarians are actually against the concept of a government granted privilege and protection for artificial entities such as corporations.

We Libertarians are against taxing the fruits of ones labor. A tax on corporate privilege is not the same, it is more of a user fee.

You will find that it is conservatives who are typical pro corporations, they just mask their language with terms like liberty.

The right have done a great job linking themselves to libertarianism in order to keep the true message down. Coming from the left as I did, it took me some time to overcome.

Thanks for the feedback.

Mark


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

No classic liberalism makes the same mistakes regarding assumptions about man and greed that the current libertarians make. Libertarians do not want regulation of institutions that do harm to Americans every day.

But they want to deflate the economy massively.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Hi bgamall,

Hmm, I have been a Libertarian for over 15 years now; I don't know any who want those things. A common misunderstanding is we do not want regulations. As I said above, corporations are government creations and should be subject to the rule of law just as we individuals are. As it is now corporations, through regulations are granted special privileges and protections, above and beyond those of us individuals. We are for removing those regulations and holding the owners and executives accountable for their actions. Current regulations are just compromises in order to extract fee's, not protect anyone.

One big example is in banking. We want to remove the regulation that allows banks to loan out 10 times more money than they have in reserves. YOU and I can’t loan out (and earn interest) 10 times more than we have in the bank, why should a government protected entity be able to do that? Banks and financial institutions should have a dollar in capital for a dollar at risk, this way we would never have a banking or credit crisis.

Again, I think you are confusing the rhetoric of liberty which has been co-opted by the right and the Tea-O-Cons, with the reality of what true liberty and equality would bring.

We want peace and abundance for the many, not power and profits for the few.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Sorry, Ron Paul, while originally voting against the repeal of Glass-Steagall is now against Volcker and any reinstatement of Glass-Steagall. You have to at least support Volcker if you want any control of the banks.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Republican Ron Paul? Yes, that may be true. We are talking about Libertarians, not conservatives.

If we eliminated the regulations protecting banks, we would not need Glass Steagall. Even with it, we would have had banks loaning money they did not have, to people who could not pay and selling off the loans to government agencies. They had and do not have any risk or liability in our system. Bankers need to be at risk and they won’t be, they know they will be bailed out. The take on risk they cannot cover, collect their bonuses, building up profits and when it crashes they go with their hands out to the government. It happens every few years because no one in banking loses their bonuses, their freedom or their companies money, only ours is lost.

Bringing back risk to those in finance is the answer; patchwork feel good regulations won’t do the trick.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

So you don't think that Ron Paul is a libertarian? You must be on the fringe of the movement as most libertarians count him as a libertarian.

If you allow the banking system to fail all at once you will destroy the 30 year mortgage. If you are good with that then you are consistent. But you will further destroy the US economy.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Paul is part of the broader libertarian movement but he does promote a few things which aren’t pure liberty such as state rights. He is good at being a champion against the current system though. I have friends in the Democratic Party promoting liberty also, the Democratic Freedom Caucus.

Yes, our current private bank controlled banking system would destroy a lot, that is the way the rigged it. One Libertarian candidate is proposing we basically nationalize the Federal Reserve, turn over the issuance of currency back to the Treasury, pay off all national debt with debt free government issued currency and eliminate fractional reserve banking.

http://www.youtube.com/watch?v=4VaSh8MMo34


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

I am for nationalization of the Federal Reserve. However that is a real stretch for libertarians who believe in the invisible hand of self interest fixing everything!


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Again, you are mixing up free individuals voluntarily trading with each other (Markets aka invisible hand) and government privileged entities controlling our use of money.

The constitution calls for the treasury to coin our money. They set an even playing field for us to freely associate with each other. That is liberty.

Debt free currency, legal tender gold and silver, and legal competing currency.

Tax on government granted and protected privilege.

Markets based on the non-aggression principle.

This is true liberty.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Yes, but the traditional libertarian view is to ban the Fed, and allow competing currencies and all the other things that would destabilize America and destroy the 30 year fixed mortgage.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Yes, that is the view of many, not necessarily consistent with the constitution though.

The reason we need 30 year mortgages is because of the land issue, had we followed the classical liberal path, housing would be inexpensive and plentifull.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

But we need them, and classic libertarianism would end that. My issue is that the Fed should be given charge to stop bubbles and legal restraints on allowing them!

Or just reinstating Glass-Steagall would be the best, but the financial centers won't allow it.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

But they only make the problems worse. The Fed creates bubbles, that was their design. Having privately created debt based currency will always do that, no amount of legislation will do a thing.

Debt is THE problem.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

The Fed creates bubbles and it was their design. But don't you think a wild west banking system could create bubbles and crashes? There were more recessions before the Fed came into existence than after. The Fed pays most of the interest it earns back to the treasury. However, the Fed could do better stopping bubbles if it were mandated by law.

Debt can be a problem if an economy cannot grow. But cutting spending can be a massive problem because it can increase debt like in Greece. As of now we have poorer paying private jobs replacing good paying government jobs. Not good.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

There were many factors for the recessions of the 19th century; many were still related to the quantity of money issues. After Lincoln was killed the government quickly passed the contraction act which helped to take our money supply down by about 60% over the next 2 decades.

This helped those with gold and the banks. We had two private central banks, the last one killed by Jackson. Each time we go from debt based private central bank currency back to gold based, we create problems. It is all a quantity issue.

Plus look at the Great Depression, it was the largest collapse of all, under a central bank. It created many of the wealthiest families we had for half a century.

I know the fed pays some of their interest back but we really don’t know how much is kept. The problem is they create debt WE must pay for, it doesn’t help us. We could have all the money we need if we ended the fed and fractional reserve banking and issued directly w/o debt.

I know the documentary is long but it is the best of the bunch, it is well sourced and explains the history of money very well. We don’t need the false choice of austerity or tax increases, we have the available money.

This is well worth your time. http://guides.ign.com/guides/14354736/page_31.html


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Gold is simply not viable for countries in a global society. In balance of payment issues treasuries would be drained with no way out except war.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Exactly, this is why much of the video is against the gold standard. It shows how the switch between private central bank currency and gold backed currency has been the problem. It is not what back s a currency but who controls the quantity.

We are already seeing the elite at the IMF and other institutions talking about a global gold standard. Not good, but considering that about 30% of all gold mined in history is in the hands of private banks and governments, it is not a surprise.

This is why paying off ALL national debt with debt free, government issued currency is the way to go.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

So you aren't a libertarian after all. You subscribe to the Ellen Brown model which Mish and other libertarians abhor. Just don't say you are a libertarian and confuse people, Mark!


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Libertarian for 17 years now. Mish seems to be more of propertyarian, nothing wrong with that, just not my focus. I am big on the rights of individuals and bringing about an abundant society for all.

Brown is good, there are more Libertarians than you would think who like her stuff. Bill Still is running for Pres as a libertarian and he is making a lot of converts.

He is a little different, he want treasury issued currency, legal tender G&S and legal competing currency. But no fractional reserves. Many libs will accept this because they have options.

There are a lot of us libertarians who come from the left and promote true liberty a little differently.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

I wish you would not confuse the issue by saying you are libertarian. You are actually diametrically opposed to libertarianism as we know it. Order my ebook, "Libertarianism, the UK Big Bang, and How They Ruined America" and I will refund your cost through paypal.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

I understand why you say that, I don't sound conservative or argue the "one true way" to liberty. Nothing I promote or advocate goes against the concept of individual liberty or the non-aggression principle.

I can't think of one thing in the past 30 years that we have done in the U.S. That is remotely close to advancing individual liberty and non-aggression.

We have done tons of things like give banks and corporations more government protections and privileges but those things are the opposite of individual liberty, even if the promoters call them libertarianism. My friend has written a book called Tea-O-Conned, the neo-con hijacking of liberty, it explains the issue well.

Libertarianism as we know it is not libertarianism, it is neo-con conservative corporatism wrapped in libertarian rhetoric.

Just so you know I was the Vice Chair of one of the largest county LP chapters, elected as a central committee member twice, I won 2 national awards for libertarian candidate commercials, I am on the executive committee of a state LP party. You don't do that by being the opposite of libertarianism.

What is an example of a libertarian policy we did in the US that has ruined the country?


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Neocon libertarians like Gingrich do muddle the philosophy of libertarianism. But one libertarian policy was the repeal of Glass-Steagall. That allowed a massive housing bubble.

Also, the government had to stop bank runs. They could not stand by and let every major institution melt down. I believe banks should be taken down one at a time, but not the whole system together. i guess you wanting the entire system to collapse all at once is your tie to libertarianism on the right. Right?


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

I still say this is the issue; you are confusing the rhetoric of neo-con conservatives with the actual philosophy of non-aggression and a removal of concentrations of privilege and power. There is nothing Gingrich advocates that could be remotely associated with the above.

Glass-Stiegel has nothing to do with the above either; it was just another regulation within a system that had nothing to do with liberty. Having government protected private banks control our currency is the opposite of liberty. Allowing financial firms and banks to not have liability in their creation of money either through fractional reserves or derivatives is the opposite of liberty. Shifting the rules within that game has nothing to do with libertarianism at all, no matter what the mouthpieces from the right or left say.

Wanting a robust system is libertarian, tinkering with a fragile system is the opposite. In a “Libertarian” world we would have never seen banks or finance companies have enough government granted concentrations of power where they would need to be saved or collapsed. The companies and players in the game should be liable for their actions, which is libertarianism.

Bill Still Libertarian candidate for President would have used debt free dollars to wind down the crisis, slowly putting bad banks under and transitioning from a debt based to a debt free currency.

Ok, how about another “Libertarian” policy did we do in the past 30 years?


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

You are incredibly confused, Mark Glass-Steagall stopped the speculation that is driving up world commodity prices. Glass-Steagall made a housing bubble like the one last decade impossible. What are you talking about?

I know neocons speak like libertarians regarding economics. Then they want to control the world.

The repeal of Glass-Steagall was the beginning of the end for main street and the middle class.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

You said: "Glass-Stiegel has nothing to do with the above either; it was just another regulation within a system that had nothing to do with liberty."

This is why I believe libertarians have a screw loose. They are insane. And Mark if that applies to you then deal with it.

Frankly, I don't even want to carry on this discussion with you because you have the blindness of all libertarians.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Here is my other reply BTW.

No, not confused at all, I have been in the financial business for 23 years, so I know a little about this stuff. There are a lot of myths regarding the Repeal of “Glass-Steagall”. It was actually a new law which changed 2 of the 4 GS provisions.

It is much too simple to blame “deregulation”, since we did not deregulate a thing, we re-regulated, meaning we still did not do anything that would hold people liable for their actions. Had we kept GS, we would have still had a financial crisis; it would have just taken on other forms. Look at the two worst culprits, Lehman and Bear, both stayed investment banks and did not take advantage of the reregulations.

This article does a great job fact checking both sides on the crisis. http://factcheck.org/2008/10/who-caused-the-econom...

It still goes back to responsibility. Here is what FDR warned back in 1932. “It would lead to laxity in bank management and carelessness on the part of both banker and depositor. I believe that it would be an impossible drain on the Federal Treasury to make good any such guarantee. For a number of reasons of sound government finance, such plan would be quite dangerous.” He was talking about the FDIC, which he was against and the GOP was for.

Be that as it may, nothing about this has anything to do with libertarianism, it is all corporatism.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

You just don't get it Mark. Factcheck is not accurately telling the truth. It isn't about Republican/Democrat. I wrote about the vote being 90 to 8 years ago regarding the repealing of Glass-Steagall.

But here is the fault of your argument: the Glass-Steagall law prevented the merging of INSURANCE with commercial and investment banking. Without the credit default swaps to offset risky mortgage bets, there would have been no housing bubble. It was the derivatives swaps that destroyed housing. People were able to package crap loans and offset the risk by betting against the success of the loans.

And even more, the merger of investment and commercial banks allowed the banks to lend more easy money, as the commercial bank deposits were used to gamble in the risky mortgage markets. Commercial banks were the wholesale lenders to the shadow banks involved in risky lending. This also could not have happened without the help of the investment banks to take the risky mortgages out of the system.

Back to the first point, all weapons of mass destruction, derivatives, had their origin in the UK square mile, a betting financial center that never was restrained by Glass-Steagall.

I thought you were going to give me an article that destroyed my view of the importance of Glass-Steagall, but that Factcheck article wasn't even concerned with the importance of Glass-Steagall. People who don't believe that the repeal of Glass-Steagall along with the set up of Commodities Futures Modernization act through Phil Gramm's wife, did nothing to destroy our banking system, and allow massive easy money to come in from the UK, is nuts.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Mark, here is an email I sent to Fact Check:

Dear editor,

Please withdraw this article: http://factcheck.org/2008/10/who-caused-the-econom...

The problem is that the combination of the repeal of Glass-Steagall and the establishment of the Commodities Futures Modernization Act allowed insurance swaps to be deregulated and written by commercial banks. Turns out they were the foundation of risk management of bogus mortgage loans that were packaged into the CDO's that we see became failures. The Swaps brought down AIG. The Swaps had no business being allowed to be deregulated. The Swaps allowed all kinds of bad risk management, and it was, IMO, fraud from the beginning of Basel 2. Thanks to Glass-Steagall, we did not worry about commercial banks writing insurance. Yes, AIG was not a bank, but the banks have trillions of dollars of counterparty derivatives swaps on their books they cannot get rid of. These banks are still tecnically, most likely insolvent, as there is no mark to market on any of their risk.

So, while I agree with the article as to who was to blame, (both parties bought off by the banksters), I totally disagree that the TBTF banks with all these derivatives are somehow not to blame for the massive easy money lending that was justified by these swaps to offset the lending to main street.

Gary Anderson

Reno, NV


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

I totally agree with you regarding derivatives, they are creations which allow people to create money without liability.

Demographics drove the boom, derivatives was the fuel. Keeping GS and similar rules would have changed to game but it would not have stopped the problem (no liability). Europe didn’t have those rules so I am sure we would have had the crooks here find ways around the rules. CDS were around since the mid 90’s.

As long as we don’t hold corporations and their executives liable for their actions, we will have similar crisis, no matter how many “regulations” AKA compromises, we create.

Get ready for credit crisis 2.0.

I agree with your post to Factcheck also, great points.

So how does any of this relate to libertarianism?


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

Crisis 2.0

Here is what I wrote about in January.

So why has the market been so worried about Europe if the debt is “insured”? According to the Bank of International Settles (BIS)ii, (the group that creates unified CDS contracts) Two thirds of the CDS’s written on the government, bank and corporate debt (for the nations of Greece, Ireland, Spain, Portugal and Italy), are covered by a handful of US Banks. Those banks are JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. Currently, this means US banks are at risk for $518 BILLION if these entities default, not counting the $181 Billion in direct lending to these countries.

When confronted with these figures, the banks will counter the argument that they are not at a big risk because they purchased CDS’s to cover their own risk. The reality is, five banks, (JPMorgan, Morgan Stanley, Goldman Sachs, Bank of America Corp. and Citigroup Inc.) write 97% of all credit-default swaps in the U.S. This means they are all insuring each other on the same underlying risk. While they say their net exposure is “only” $45 Billion, it is not comforting. As a bond nears default, those writing the insurance are required to post collateral to those who own the CDS. This is when we start to hear the term “a liquidity event”.

This is exactly what happened to AIG in 2008. AIG had to post collateral at such a rapid pace that they were not able to raise the cash. Hence you and I, through the government, had to take on the risk. This is why some of these large banks, despite massive profits, have dropped between 50% and 70% in stock value over the past year. No one knows who will be the next AIG or Bear Sterns to receive a bailout or who will be the next Lehman brothers (who were allowed to fail). This is assuming that we would bail out any bank again in the future.

This is one of the problems with derivatives. They are subject to what is called “feedback loops”, where system failure in the underlying model causes “feedback” or the other party’s selling into a falling market. If everything trades as those who created these entities intends for them to trade, all is well. If we start having issues that aren’t accounted for in the VAR (Value at risk) models, we could be in a world of hurt.

All of this talk about billions of dollars is worrisome. “Billions” may seem like a very large sum. However, let’s talk some real money. How about Trillions or Quadrillions!

In order to understand the full scope of derivatives such as the CDS, we need to understand the terms a little better. When looking at derivatives we need to look at “Cash” value and “notional” value. If we have a CDS that would ultimately pay off $1 billion in the case of the default of a bond, the notional value is $1 billion. However, the actual trading or cash value might only be $1 million.

According to the BIS iii the cash value of all derivatives worldwide is about $10-12 Trillion. Considering that the total world economy is about $60 trillion, having 20% of our assets in the form of derivatives is a substantial number.

The notional value or total dollar amount that would be on the hook is over $708 TRILLION, if you count derivatives not tracked by the BIS, the total is assumed to be closer to $1.2 Quadrillion (just when we thought a trillion was a big number.). The majority of this is either owned by or insured by a very small pool of companies.

Many of us have to ask, “How did this happen”? For one, considering that it is almost impossible to understand, it is difficult to regulate. With a fractional reserve banking system, our total monetary system is based on having large amounts of money in the system, created out of debt, with little in reserves.

Another reason is that those who profit off of the creation and selling of derivatives have no risk once they are sold into the system. Their pay and bonus checks clear, so they move on to the next deal.

As you can see, with all of these pie plates spinning, Wall Street is not taking long term positions. They are merely trading while they wait and see what happens in Europe. I don’t see this ending for 2012. However, with it being an election year, there will be a lot of central banks helping to try and keep it afloat.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

But this all could have been avoided had the laws regulating the swaps and insurance/bank merging been kept in place. There was a reason Glass-Steagall was overturned by Gramm, Leach, Bliley. There was a reason that the Commodity Futures Modernization Act was put in place.

Which makes my case, Mark, that regulation can stop bankers, and taking away that regulation in the name of "liberty", can create mass havoc in the world.

Without the swaps, no bank would have made so many bad loans or bought so many bad mortgage loans from the shadow banks that made them.


Mark Hilgenberg profile image

Mark Hilgenberg 4 years ago

I can understand thinking that but all we have to go one is what happened, we have no idea what direction the crooks would have taken. Many early CDOs were created by shadow banks. As long as there was no liability or risk, they would have found a way, just as they did in Europe where they never had GS.

Add back risk and liability, we don’t need to worry about corporatist created compromises.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

No, the laws were repealed FOR A REASON. Without the repeals they would not have been able to mix banking and insurance. Citibank had a waiver of Glass-Steagall to buy Travelers insurance company in 1997. But judges could have stopped the wholesale mixing of insurance and banking had the law remained on the books.


ctbrown7 4 years ago

It isn't the role of government to give charity; it never has been. Charity and service should be the role of individuals and the communities they make up.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Sorry, old Israel in the old testament was charged with the role of giving charity. God commanded the Israelites to set aside part of their fields for charity. It was not voluntary.

While I support separation of church and state we have an example there of how governments should promote the general welfare.


Charles Hilton 4 years ago

bgamall...

You make an excellent point about Old Testament charity, and I even find myself reminding conservatives of that very same thing. In Old Testament Israel, God was the government. Therefore, God's commands were the government's commands, and God's charity was government's charity.

And according to conservatives, we're supposed to follow God's example---except in charity, apparently.


ctbrown7 4 years ago

Bgamall, there is a key phrase in your statement: "God commanded"--guess what, I don't think the senators and congressmen and women are hearing the voice of God, especially in the chaotic way they are running up this country's debt in the name of charity. So there is a difference. God commanded the Israelites, but He is not commanding the idiots in Washington to do what they are doing.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Republicans are hypocrites...in so many ways it is impossible to mention them all here.


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

They don't have to hear the voice of God. They are responsible for the general welfare of the people. That is their charge. No one is suggesting a fusion of church and state, just a little compassion from those who claim they are righteous but are not, you know, the Republicans.


Kitk33 profile image

Kitk33 4 years ago from Iowa

Charity comes from the heart of the Individual. It is to be a mutual benefit from giver to givee, but if it is forced upon someone, it causes resentment and division; this leads to hatred and destruction. This is what Ron Paul was talking about. How is that a dirty thing or selfish; sounds like his words taken out of context, again, and a huge hit piece on any who share his philosophy. No one has the right to force their will upon another. This whole thing about 'government' swooping in to 'help out' is another way to cinch those in power who claim the 'right to rule.'

I happen to live in an area that gets hit by tornadoes quite often and it is the people in the surrounding locales who make the difference. There was also, a huge flood in 2008. A major city was just about totally under water. Many people I work with lost their homes and personal property; FEMA supposedly helped them, then, they have to pay it back in some other form. The Individuals in an area can get together and help others rebuild; this used to happen years ago. Government seems to only screw things up and cause resentment, as I already spoke about.

Later,

Kit33


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

Well, Ron Paul is stupid isn't he? Government has the right to force it's will on people all the time. Grow up little boy.


Charles Hilton 4 years ago

I, for one, don't want to leave myself and my loved ones at the whim of the charity of strangers. Government help in emergencies is much more reliable than the help of strangers---except when Republicans are in charge. Then neither government nor strangers can be relied upon.

Nor do I remember the government ever "forcing" its charity on anyone. And those who accept government help are not likely to resent it. So, what are you talking about, Kitk33?


bgamall profile image

bgamall 4 years ago from Las Vegas, Nevada Author

He is a libertarian. I personally believe they have a screw loose as a group. It is just my personal opinion. Or they are brainwashed by the ones that do have their bolts ajar.


big spoon 3 years ago

If you eat healthy, get enough sleep and exerise you are acting in your own self-interest.


bgamall profile image

bgamall 2 years ago from Las Vegas, Nevada Author

Spoon, that self interest is different, and ok. It is not the same as financial self interest that requires deregulation and manipulation of laws.

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