The Government Doesn’t
Want You to
Read This Article About the Financial Crisis
Editor’s Note: This article has
been excerpted from a free issue of Robert Prechter’s monthly market letter,
The Elliott Wave Theorist.
The full 10-page market letter,
Be One of the Few The Government Hasn’t Fooled, can be downloaded
free from Elliott Wave International.
By Robert Prechter, CMT
“Who Will Benefit From The
This question is an actual headline
from a national daily paper. The real answer is: mortgage lending corporations,
developers, real estate agents, speculators and politicians. The government is
also pledging tax money to providers of “financial counseling” and grants for
speculators who want to “buy and renovate foreclosed housing”; in other words,
it will hand tax money to charlatans and unfunded wheeler-dealers. But a far
better headline would have been, “Whom Will the Housing Act Hurt?” The answer to
that question is: (1) prudent people, i.e. savers, earners, renters and people
who have waited to buy a house at a reasonable price; and (2) innocent people,
Government action (unless it is
aimed at destruction) always causes the opposite of its stated effect. If
taxpayers ultimately have to shoulder the burden for all the bad mortgage debt,
those who are on the edge of being able to make their mortgage payments will be
forced over the edge, causing more missed mortgage payments and more
There is never any need for a law
granting privilege except when the goal is to reward the undeserving and to
punish the innocent. If the goal were otherwise, there would be no need for a
statutory law, because the natural laws of economics, when unencumbered, serve
to reward the deserving and punish the imprudent and the guilty. Populists
loudly challenge this idea, but they are wrong.
I thought the Fed was
created to “help manage the economy.”
After a secret meeting on Jekyll
Island (GA), Congress and a handful of bankers created the Federal Reserve
System for two purposes. The first one was to allow the government to
counterfeit money, thereby letting it steal value from savers through inflation.
The second was to allow bankers to make profits through debt creation, also at
the expense of savers. Any other claim is a smokescreen.
So shouldn’t we blame the
Fed for the country’s financial problems?
That’s like blaming the collapse of
your house on the biggest termite. The Fed is only one of the monsters that
Congress has created. In the financial realm, others include Fannie Mae, Freddie
Mac, Ginnie Mae, Sallie Mae, the FDIC, the FHA, the FHLBs and the income tax.
But there are also a hundred other havoc-wreaking agencies of the federal
government. Congress is to blame for ruining America. The Fed is only one of the
mechanisms it created along the way. It’s a big one, and it’s fine to campaign
against it, but to blame it for everything is to give its creator a free pass.
This is an important distinction,
because many people seem to think that abolishing the Fed will cure America’s
money woes. They seem to think that once the Fed is abolished, Congress will
behave responsibly. One website even calls for abolishing the Fed in favor of
giving money-printing power directly to the federal government! Abolishing the
Fed is a worthy goal, but Congress will work tirelessly to create one disastrous
institution after another, because that’s what campaign donors pay for.
For more information on the
government’s role in the financial crisis, download Robert Prechter’s free
10-page market letter,
Be One of the Few the Government Hasn’t Fooled.
Robert Prechter, Certified
Market Technician, is the founder and CEO of Elliott Wave International, author
of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and
editor of The Elliott Wave Theorist monthly market letter since 1979.