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The Social Imperative of Sound Money
by Llewellyn H. Rockwell, Jr. / 9/13/08
This talk was delivered on September 13, 2008, at the Vancouver Mises Circle.
This past week, the government announced that it would take Freddie Mac and Fannie Mae, the mortgage giants, under conservatorship, which is a nice way of saying that they will be nationalized.
We don't use the word nationalize any more. We can try an experiment and read the new term "conservatorship" back into history. In fact, we might say that Stalin and Lenin put Russia's industries under a kind of conservatorship. Or we might say that Mao pushed a kind of land conservatorship, or that Hitler's policy was one of national conservatorship. Marx's little book could be re-titled: The Conservatorship Manifesto.
You see, the government keeps having to make up new names for these things because the old policies, which were not that different in content, failed so miserably. The old terms become discredited and new terms become necessary, in an effort to fool the public.
It's as if a restaurant served a shrimp dish that gave all the customers food poisoning, and so each night it decides to serve the same shrimp but name the dish something new: crangon cocktail, prawn pasta, scampi salad, or what have you. But no matter what they call it, it is still poison.
Such a restaurant would be out of business in a matter of days. People would not be fooled. But the government gets away with it mainly because we have no real choice about the matter, and because people are predisposed to believe the government far more than they should. It doesn't help that the media are willing to echo the government line on this, adopting every new phrase as if it were the gospel.
Hence the same is true of the word bailout, which you might consider unexceptionally descriptive of this move by the government to protect Freddie and Fannie from further losses. No, that word is not allowed either. President Bush told Fox the other day, ''I wouldn't call it a bailout. I'd call it a stabilization.''
We will soon put out a new edition of Mises's 1922 book Socialism. Maybe to keep up with the time we should call it Stabilizing Conservatorship.
What I also find striking is the way in which this move was announced. Let me read to you from the New York Times: "The Bush administration seized control of the nation’s two largest mortgage finance companies on Sunday…. It could become one of the most expensive financial bailouts in American history."
Even the most sophisticated observers of our present scene had to blink their eyes in reading such words. Without debate, without votes, without anything other than an executive fiat, the White House just decided, on its own, to seize the mortgage market. Harry Truman, who seized the steel industry, would be proud. Actually, this is an action to excuse dictators the world over, past, present, and future.
This sort of thing makes a mockery of the Constitution and the very idea of freedom and the free market, to say nothing of the idea that we have a limited government. What's more, if we can believe press reports, President Bush had very little to do with the decision. It was the work of Henry Paulson, the secretary of the Treasury and former head of Goldman Sachs, working on behalf of the nation's most well-connected financial elites. Nobody elected this guy. Most Americans don't even know his name. ...