On the TARP salary cap and other things

While I was not in favor of the TARP bail out, (nor am I in favor of the current "stimulus" package) I find the outrage over the proposed salary cap and conditions to be placed on recipients of the TARP money very interesting. I can't say that I have actually heard Sean Hannity or Limbaugh say it, but I have heard "conservatives" complaining for years about welfare/food stamp recipients buying t-bone steaks or living lavishly on the dole. It seems they'd rather make sure that a poor person doesn't misspend a few hundred dollars of "my tax money" before they'd put limits on the misspending of millions of dollars of the same tax money.

Speaking of "my tax money," I don't think much can be said in favor of this so called stimulus package. It is entirely deficit spending and will only delay the inevitable. There is no way around it, we are going to have to down grade our lifestyles. This is not some hate America tirade, it is simply the facts. We, as a people, have lived beyond our means for many years. Certainly all of my adult life, 20 years, credit has been readily available. And more than available: it has been shoved down our throats. By this I mean the constant "buy! buy! buy!" mantra. From the time we we're toddlers we are taught to consume more than we we are taught to create.

and now a quote from Alan Greenspan:

When banks loan money to finance profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay, bankers find their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually through higher interest rates... Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth.

...prior to WWI, the banking system in the US was based on gold, and even though governments intervened occasionally, banking was more free than controlled. Periodically banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went in to sharp, but short-lived recession. It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post- WWI type of disaster...
But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline- argued economic interventionists- why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely- it was claimed- there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of 12 regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported...Now, in addition to gold, credit extended by the Federal Reserve banks( "paper" reserves) could serve as legal tender to pay depositors...

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form -- from a growing number of welfare-state advocates -- was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale...

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which -- through a complex series of steps -- the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets.

And Ayn Rand:

A system in which the government does not nationalize the means of production, but assumes total control over the economy is fascism.

I found both of these quotes in the book Capitalism: the Unknown Ideal

Thanks to Rich Brilliant for the copy. although I'm not sire if I just never gave it back or it was a gift.