On Jan 5, 2009, at 12:14 PM, C. G. Estabrook wrote:
> [From the other shore. --CGE]
>
> The Financial Crisis and Business Loans: The "Credit Crunch" That
> Isn't
> Written by Richard M. Ebeling
> Monday, 05 January 2009 00:00
>
> For months, now, the news has been filled with reports of a huge
> credit crunch crushing the ability to borrow in the United States
> economy. The impression of a financial sector that has ground to a
> halt, however, is not born out by the facts. To the contrary,
> lending and borrowing have continued to grow in America, albeit at a
> lower rate of growth all through 2008.
>
> Banks have used a large portion of the Federal Reserve’s expansion
> of the monetary base (up 70 percent since July) to shore up balance
> sheets. But they have not “rebalanced” their balance sheets through
> any noticeable decrease in commercial and industrial lending...
>
> http://www.aier.org/research/commentaries/971-the-financial-crisis-and-business-loans-the-qcredit-crunchq-that-isnt
Other shore indeed. It's really odd to see leftists turning for support to real business cycle theorists and other denizens of the right. For a taste of the ideology behind AIER, see their own official history (excerpted below). Ideology doesn't have to invalidate an argument, if the argument itself is sound. But in these cases, evidence is twisted to defend ideologies - e.g., the irrelevance of finance to the real economy, the beauty of unrestrained markets, and the evils of public sector intervention.
The latest stats: since October, commercial and industrial loans are down by almost 2%, or an 11% annual rate; interbank lending is off 20%, or a 75% annual rate. The commercial paper market, after having contracted by 27% between July 2007 and October 2008, is slowly recovering; it's up 7% since October, or almost 50% at an annual rate. It's still 22% below its July 2007 peak, though.
And this dude's reporting on the Fed's loan officer survey is pretty weird. In the latest report, released in October, 84% of large banks and 75% of small reported tightening standards on C&I loans, by far the biggest numbers since the Fed started doing this survey in 1990. 98% of large banks and 92% of small were increasing their interest rate spreads on C&I loans. 58% were tightening their consumer lending standards. These surveys tend to lead the credit stats by a year or more - in part because borrowers can draw on existing lines of credit that don't get expanded or renewed.
Doug
<http://www.aier.org/aier/otherpublications/aierafter75years.pdf>
Is Socialism Dead?
All around the world, socialist policies are on the wane. Brutal experience has at last forced many advocates of socialism to concede that capitalism has been the more efficient social order. But many socialists continue to advocate centralized control of economic decisions (the essential ingredient of many “isms” besides socialism) on other grounds, such as morality or economic justice. More doctrinaire socialists deny that the actual experi- ence of socialism is a valid test of its worth; that is, they claim that genuine socialism has yet to be tried. While neither of these propositions can be disproved, they ironically are most often expressed in countries with the least experience with socialism.
Socialists have been thrown out of office in many of the industrialized democracies of the “first world,” and the policies of those who remain have become more moderate. Many of the nations of the “third world” have begun to question and change the socialist policies that led to their stagnation and bankruptcy rather than to their advancement. Even in the “second world” of centrally planned communist societies, the dogmas of Marxism have been overthrown to permit individual rewards, risks, and choices.
The Idea of Socialism
We should first attempt to understand what it is that makes a given proposal or policy “socialistic.” There are many varieties of socialism and entire libraries of gobbledygook are dedicated to the economics of social- ism. Yet only one basic notion is involved: that the allocation of resources must be guided by an elite group, who must be given the power to override the decisions of ordinary people. Although most socialists would be infu- riated by reduction of their convoluted analytic and historical arguments to this simple proposition, there really is little else that is essential to the socialists’ position.
Socialists share the assumption that allocation of economic resources by a small group is preferable, if not inevitable, with some strange bedfel- lows—monarchists, mercantilists, theocrats, and fascists, to name a few. The issues such as the ownership of the means of production, control of the distribution of goods, criteria for admission to the elite, etc., that distin- guish socialists from, say, monarchists are less economically fundamental than the belief in centralized control that they share. All such groups, in theory, share the same goals of justice and prosperity (no one advocates a particular system as a way of fostering injustice and misery, after all), and they all reject or ignore the findings of Adam Smith and other students of market processes.than the belief in centralized control that they share. All such groups, in theory, share the same goals of justice and prosperity (no one advocates a particular system as a way of fostering injustice and misery, after all), and they all reject or ignore the findings of Adam Smith and other students of market processes.
---
SOCIALISM IN THE UNITED STATES
Socialism as an international political movement never made much headway in the United States. Indeed, politicians of an interventionist bent long ago learned never to use the “S-word” in describing their policies.
Nevertheless, many, if not most, of the programs advocated by the U.S. Social- ist Party during the early decades of this century have been adopted in one form or another. Moreover, many aspects of the taxation and regulation of economic activity in the United States today employ the techniques of socialism even when they are used to advance purposes (such as sectional interests, special privilege, or “environmentalism”) that were not incorporated into traditional socialists’ goals.
Our progress toward reducing the extent of interventionism in the U.S. econo- my during recent years has been relatively minor in comparison to that in many other countries. One reason, of course, is that we have had much less to remove. For example, Margaret Thatcher had many more opportunities to “privatize” industry than Ronald Reagan, simply because large segments of British industry already were nationalized when she took office. But another factor may be that the U.S. electorate is less conditioned to recognizing intervention for what it is—the substitution of the judgment of a small, often unaccountable group, for that of the vast majority of producers and consumers in the marketplace. If the recent trajectories of change are maintained, it is possible that the U.S. economy could eventually become more socialist in practice than other coun- tries, even those that proclaim themselves to be socialist.