Chris Rossini:

“As the gambler walks out of the casino “in a panic”, JP Morgan (in 1907) and Ben Bernanke (in 2008) stuff the gambler’s pockets with loads of money. They even stuff money into the gambler’s mouth, just for good measure.

Morgan and Bernanke provide a “bailout” to save the gambler’s “system,” and they send him right back into the casino. The media declare Morgan and Bernanke to be hero’s; at least until enough time passes, and the gambler inevitably comes out again with empty pockets and “in a panic”.

Here’s one more way to think of bailouts. Ten years ago, Blockbuster Video had 9,000 locations. In the marketplace, it doesn’t matter how many locations you have. If you can no longer operate profitably, you’re toast. Resources are removed from your hands are transferred to those who are succeeding at satisfying the most urgent desires of consumers.

By early 2014, the last of the 9,000 Blockbuster stores will be closed. No “panics”. No “systemic crisis”. In fact, most people won’t even be aware of it. It’s just the market doing its thing, as usual, without much fanfare.

How crazy would it be for the taxpaying public to keep those 9,000 stores open? Americans would (I think) rise up in hysterics if someone (like Krugman) came up with an idea for a Blockbuster TARP.

Blockbuster also does not have a rent-seeking cartel, like the banks do. If they did, who knows…perhaps Blockbuster would be able to keep its “video rental system” going at everyone else’s expense.

We have just defined the prime reason for existence of The Federal Reserve…to make sure that the major banks never go under. The Fed is there to create as many paper dollars and electronic digits as possible (and at the expense of every individual in the world) to make sure that these “elite” individuals never have to close up shop.

Bernanke, during his “all-star conference” sings a different tune about the problems that face us. Both in 1907 and 2008, there weren’t enough “regulations” on the system:

“Also interesting is that the 1907 panic involved institutions–the trust companies–that faced relatively less regulation, which probably contributed to their rapid growth in the years leading up to the panic. In analogous fashion, in the recent crisis, much of the panic occurred outside the perimeter of traditional bank regulation, in the so-called shadow banking sector.”

Nonsense.

The Mercatus Center reports: “According to the Code of Federal Regulation, more than 47,000 regulations apply to the financial sector…”

Apparently, according to Bernanke, 47 thousand regulations weren’t enough. Perhaps 48,000 would do the trick? In essence, Bernanke is saying ‘get off our back’ and tries to deflect the issue. The easiest go-to excuse that every bureaucrat falls back on is “we need more regulations.”

Here’s the bottom line on the Panics of 1907 and 2008. It’s something that was not said at the “all-star conference” and will never be said in any conference in Washington DC.

The Panic of 1907 was the excuse, or the catalyst, that was used to push for the establishment of the Federal Reserve. The bankers would not risk having to rely on one man, like JP Morgan, to bail them out the next time around. The American public would provide the bailouts going forward (whether they like it or not). That can only be done with a central bank in complete control of the money supply.

Before pulling something so drastic over the American public, a huge propaganda campaign would be necessary. As EPJ readers know: Ideas rule the world.

In 1908, J.R. Duffield, Sec. of the Bankers Publishing Co. said: “It is recognized generally that before legislation can be had there must be an educational campaign carried on, first among the bankers, and later among commercial organizations, and finally among the people as a whole.”

In other words, new ideas would have to permeate society before something so extravagant could ever be pulled off. It’s also important to not that everyone wouldn’t have to adopt the new ideas, only a critical mass, only enough.

Here’s yet another key takeaway from the Panic of 1907. During financial panics, people are more open to new ideas. It’s a time that they actually search for answers. A mere 6 years after the Panic of 1907, the banker’s dream became a reality. They won that battle of ideas.

Here we are in 2013, and everyone knows (even the bankers themselves) that another crisis, or even multiple crises, are just around the corner. Fortunately, the American public that has been ripped off for 100 years have tools at their disposal that never existed before: instant communication with just about anyone in the world, and a universe of knowledge.

Millions around the world have also heard the idea of End of The Fed.”

Comment:

I heartily agree with this piece….. just so long as people remember that ideas rule in the long-term.

In the short term,  slogans rule.

In fact, that is the only way certain parts of the population ever get exposure to ideas.

But once you accept the need for slogans as an inevitability of mass communication, you have accepted that people are fundamentally too stupid to be told the truth.

They have to be “massaged” and “led.”

But when you accept that, then you get into the territory of lying to people for their own good…

which takes you into the territory of war-time propaganda and peace-time advertising….

and you are back to the managerial state…

A half-truth is a full lie, as some one said.