Paging Peter Schiff, Part Deux…

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I got a couple of very informed responses to my blog post regarding the housing bubble and the story in CNNMoney.com.  Because they were so solid, and provided great additional insight, I will include them in a separate blog posting.

Writes Michael “Perfunctory Hero” Barnett:

Wilt, I liked your LRC blog post today, but I would emphasize something about people buying houses. Not only did they [the Fed] pump up the housing bubble with easy credit, but they discouraged saving and other thrifty, safer uses of money by making sure inflation way out-paced interest rates. That’s the truly sinister side of things that’s not talked about enough.  Joe Sixpack was forced to speculate with his money because it’s the only chance he had to stay ahead of its devaluation. He couldn’t leave it in his mattress or the bank. Most people don’t know enough to speculate successfully in equities or housing or art or whatever — they’re too busy working — they’ll never catch up with the people who speculate in that stuff for a living.

When you think of how much money was transferred to Wall Street by forced speculation in the dot com bubble and then how much was transferred to the home building industry and others who profited from the forced speculation in the housing bubble, you have to conclude it’s the most insidious fleecing of Americans ever.  Well, before the bailouts and TARP, etc.

Exactly!

Writes David White:

Here’s what the mainstream financial media need to see and understand — i.e., the “Option Armageddon” that is headed this way:

Option Armageddon on the Way

White continues:

These are upcoming mortgage resets that, like the subprime resets, will send millions of people into foreclosure because they won’t be able to handle the higher monthly payments. And as you see, its peak is bigger than the subprime peak, and it will be all the worse given that these borrowers had good credit ratings but often, as with subprime, got their mortgages with liars loans and little or no down payment, meaning that they will have an even bigger incentive to walk away, as they’re already upside-down on their loan-to-value ratios.

When you add to this the fact that many small businesses owners borrowed against their homes to finance their businesses amid the downturn, it’s clear that a wave of small business failures will wreak further havoc with unemployment, which in turn will exacerbate the foreclosure debacle. This in turn will further depress housing prices, creating a vicious circle that will not abate until the market has had its way with cleaning up the mess. Unfortunately, however, the government is doing everything it can to prevent the market from doing its work, thus assuring that it will be all the worse when the inevitable happens.

But that’s what you get when the government intervenes in a futile attempt to undue the damage done by its prior interventions, all of which have been funded by the decades-long Global Fiat Fraud that is collapsing, Madoff-like, as we speak.

Simply put, we’re in the endgame of the greatest financial fraud in the history of the world, and for what it’s worth, I have tried to dissect it in terms not just of the monetary positivism that lies at the root of it but the equally destructive legal positivism that attends it. You can find that dissection as part of the Libertarian Papers, entitled, “GOLD, THE GOLDEN RULE, AND GOVERNMENT: CIVIL SOCIETY AND THE END OF THE STATE.”

Of course, I recommend this paper specifically, and the Libertarian Papers generally. (In the interest of passenger safety, I also ask that you check your seat belts and tray tables.)

8:19 pm on August 19, 2009