Well, the eagerly awaited and much anticipated results of the Supervisory Capital Assessment Program or the so-called “Stress Tests” have finally been made public. This is the exercise by the Treasury to review the books of the 19 largest US banks and determine whether they are adequately capitalized to withstand some assumptions about the deepening of the economic recession. A quick survey of the media reporting reveals comments such as the following regarding the impact of the “Stress Tests”:
“…bring relief to markets.”
“…show 10 Banks need $75 billion more in capital.”
“…lift cloud of uncertainty.”
Pure baloney! The deception is all but complete. This entire exercise represents the typical sort of nonsense pursued by the interventionist state. (I am making the distinction that Jay Nock made between government and state, where the latter has essentially moved beyond being a servant of the people and has become the master.) It perpetuates the fraud that state bureaucrats possess some sort of special knowledge about economic and business matters. They don’t. These are after all the same clowns who did such a bang-up job of detecting the housing “bubble,” which was essentially the result of state economic policies, and which led to the “subprime” mortgage crisis, the shaky foundation upon which the house of cards was constructed. They may not be the same individuals, but they wear the same official state clown suits. The political managers of these clowns, the state ringmasters and most of the media in the grandstands have created the illusion that the free-market highwire act collapsed into the state safety net.
So these geniuses from Treasury have found that if the 19 largest banks were subject to a deeply worsening recession some of them may need more capital to survive. Guess what! So would some of the other 8,000 banks in the United States, not to mention the “losers” in state corporatism, the politically unconnected mostly living well outside the DC beltway. Who is going to address their capital requirements? They are themselves going to do it. They are trying to save their money right now so there will be a source for capital and investment in the future. Meanwhile, the stupid Keynesians are encouraging them to spend, spend and spend some more to get the economy moving. Since they have not shown much inclination to fall for that particular fraud, the Keynesian penchant for “… exercising directive intelligence through some appropriate organ of action” will do it for them. So the state continues to spend, borrow, tax and inflate thereby destroying capital by showing a preference for consumption over saving. “Money for nothing.”
The state has regulated the US banking system since the founding. Controlling the banking system is the most effective way of controlling the people. As all statists eventually figure out, by controlling the currency as well they can eventually, silently and gradually take all wealth from the productive. With a preference for current consumption and a limited life span the political elite in such an economy reveal practical contempt for morality. They don’t really care about thinking long-range.
Most people cannot even conceive of a private banking system in which banks issue their own currency, set their own capital requirements and reserves, establish branches wherever they deem necessary and make their own clearing arrangements. Yet something close to that did exist historically, though not in the United States. The Canadian banking system was originally far less regulated than that of the US. It speaks volumes that while thousands of banks failed during the Great Depression in the US not a single bank failure occurred in Canada. Even today, the Canadian banks, though much more heavily regulated now than they once were, still exhibit far more of the much vaunted “stability” that the Keynesian inspired regulators seek to impose on the “unstable” free market.
Copyright 2009 Edward Podritske