GayPatriot

The Internet home for American gay conservatives.

Left-wing economists: They’re that stupid

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Zero Hedge remembers how the Great Housing Bubble of 2003-7 was something Paul Krugman had called for:

Before you say “But that was in 2002!”, consider more recent examples of Krugman stupidity, like his calling in 2012 for the government to boost (supposedly) the economy by faking an invasion of space aliens. The Krugtron quote from Time’s account:

“If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” Krugman says…

A second instance, from PuffHo’s account:

“So if we could get something that could cause the government to say, ‘Oh, never mind those budget things; let’s just spend and do a bunch of stuff.’ So my fake threat from space aliens is the other route,” Krugman said before a laughing crowd. “I’ve been proposing that.”

So he said it more than once; only half-joking at best. The man loves his malinvestment.*

(*Borrow-and-spend that creates market bubbles, overbuilding, leaf-raking, wars or other activity that is economically inefficient, or useless, or even destructive.)

Related: It struck me that one way you can tell a left-liberal is: government spending always sounds like a good idea, to them. Should government spend, to stimulate the economy? Check. Spend more on education, so people will (supposedly) be more educated? You betcha. It never occurs to the left-liberal that government just might be incompetent at most things. So that the proposed spending would do nothing at all – or would even make things worse, as it only subsidizes incompetence. For example: Subsidizing an incompetent system of educators. The possibility just doesn’t cross a liberal’s mind.

S&P fights back

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Several months ago, I posted on the government’s lawsuit against Standard & Poor’s. See the post for details. In brief: S&P was singled out for punishment over some of their actions back during the housing bubble.

Why were they singled out? Many have speculated that it was because in August 2011, S&P downgraded U.S. government bonds, touching off a political firestorm and raising the ire of the government, including the Obama administration.

It seems that S&P agrees:

Standard & Poor’s said on Tuesday the U.S. government filed a $5 billion fraud lawsuit against it in “retaliation” for its 2011 decision to strip the country of its “AAA” credit rating…[S&P] was the only major credit rating agency to take away the United States’ top rating, and the only one sued by the U.S. Department of Justice…

It said the government’s “impermissibly selective, punitive and meritless” lawsuit was brought “in retaliation for defendants’ exercise of their free speech rights with respect to the creditworthiness of the United States of America.”…

Good for them! Via Zero Hedge.

Obama, Market Manipulator

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Via HotAir and others, we had the news last week that:

The Justice Department sued Standard & Poor’s Ratings Services late Monday, alleging the firm ignored its own standards to rate mortgage bonds that imploded in the financial crisis and cost investors billions. The government was seeking penalties of more than $1 billion…which would be the biggest sanction imposed on a firm related for its actions in the crisis.

This is market manipulation at its dirtiest. I’ll explain.

During the housing bubble, the government’s mortgage finance agencies, FNMA (Fannie Mae) and FHLMC (Freddie Mac), securitized scads of mortgages. That means they re-packaged them as securities – in this case, as bonds – which could be traded on Wall Street. And that helped the bubble along, because it made a lot more money available for people’s mortgages, especially sub-prime mortgages.

All three of the major U.S. bond ratings agencies – S&P, Moody’s and Fitch – gave the ‘securitized mortgage’ bonds the safest rating, AAA, which helped keep the housing bubble going. And that was what almost everyone wanted at the time, including the government.

Later, when the housing bubble burst, it was clear that these bonds did not deserve an AAA rating, and probably never had. The ratings agencies had been wrong, along with everyone else.

One question to ask is: why is S&P the first ratings agency, and so far the only one, to be punished after all this time? What distinguishes S&P? The answer seems fairly obvious: In August 2011, S&P downgraded the U.S. government’s own bonds, which remains a huge blow to Obama’s reputation.

Reports indicate that the government may also sue Moody’s. But they haven’t yet; any efforts there “are in the early stages, largely because state and federal authorities have dedicated more resources to the S&P lawsuit.” Golly, ya think?

So far, then, the moral of the story is: Don’t criticize Obama. Nice business you got there; would be a shame if anything happened to it.

But there is a deeper story: how market manipulation by the government causes bad outcomes; for which politicians (and other supporters of Big Government) always blame the market’s players, rather than themselves.

It was government which created Fannie and Freddie and had them massively support the sub-prime mortgage market. (For which GayPatriot has criticized Barney Frank’s involvement; see here, here, here, here, here, here, here and here.)

Moreover, as Peter Schiff reminds us, it was government which established the Big 3 ratings agencies in positions free from ‘consumer’ pressure, where they would descend into a culture of complacent groupthink that favored, not the small investor, but the big players: [Read more…]