Sunday, June 21, 2009

Back In The U.S.S.A.

Peter Schiff's article as appeared in

Back in the U.S.S.A. (6/20/2009, [emphasis mine]

"Harry Browne, the former Libertarian Party candidate for president, used to say: “the government is great at breaking your leg, handing you a crutch, and saying ‘You see, without me you couldn’t walk.’” That maxim is clearly illustrated by the financial industry regulatory reforms proposed this week by the Obama Administration."

"In seeking to undo the damage inflicted over the past decade by misguided government policies, the new regulatory regime would ensure that the problems underlying our financial system will only get worse.... Ultimately, the structure will put the entire U.S. financial industry at a global competitive disadvantage."

Injuries will be not just to the US financial industry but also the US citizens, particularly those residing outside the U.S. (Read this article: Lloyds Bank of London already started kicking out the U.S. clients.)

"As is typical of government attempts to control economic outcomes, Obama’s plans focuses on the symptoms of the disease and not the cause. The American financial system imploded for two reasons: cheap money and moral hazard – both of which were supplied by the government. Under the proposed new regulatory structures, these toxic ingredients will be combined in ever-increasing quantities."

"Obama proposes to entrust the critical job of “systemic risk regulator” to the Federal Reserve, the very organization that has proven most adept at creating systemic risk. This is like making Keith Richards the head of the DEA."

Keith Richards as head of the DEA may work better, though. But that aside, I can sense Mr. Schiff's exasperation getting bigger and bigger in each paragraph. He ends the article with these remarks:

"Unfortunately, despite their intent, my guess is that the new regulations will most severely impact smaller firms, like my own, that never engaged in reckless behavior. This will further reward those “too big to fail” firms, whose economies of scale and cozy relationships with regulators leave them better positioned than their smaller rivals to absorb the costs of the added red tape.

"With the transition now fully under way, I propose we end the pretense and rename our country: “The United Socialist States of America.” In fact, given all the czars already in Washington, we might as well go with the Russian theme completely: appoint a Politburo, move into dilapidated housing blocks, and parade our missiles in the streets. On the bright side, there’s always the borscht."

At some point, you start to wonder: "What's their true intent?" Is it to save the system, or is it to destroy the system?

Or does the "intent" really matter? The road to hell is paved with good intentions, it is said.


Post a Comment