Fannie and Freddie: So Much for ‘Free Markets’
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Zimbabwe has the world’s highest inflation rate. It’s running at 2.2 million percent. And millions in the country are starving as a result.
Inflation started to spiral out of control in Zimbabwe after the the government of Robert Mugabe began nationalizing farms in 2000.
Bill Bonner says that, although we look at the likes of Zimbabwe with incredulity in the US, we are heading down a similar route with the nationalization of mortgage giants Fannie Mae (FNM) and Freddy Mac (FRE). So much for the biggest ‘free market’ in the world…
In the United States, we look at countries like Zimbabwe and shake our heads in disbelief. It seems almost like slapstick comedy to us.
As Milton Friedman once said, “If you let the government run the Sahara Desert, soon there will be a shortage of sand.” And in the U.S., we have Fannie and Freddie, who represent a huge nationalisation event in the United States.
This is a remarkable thing for the supposedly most ‘free market’ country in the world. Nationalising their biggest industry, the mortgage industry. Johnson was trying to pretty up the nation’s account, so he took Fannie and turned it into a private business.
Bill is currently attending an investment conference in Vancouver where he told 1,000 attendees:
Nationalisation is a great milestone in our economic lives. Adjusted for the price of gasoline, no one has made money in stocks for 40 years. When you adjust American wages for inflation, you’ll see that they’ve gone nowhere for the past 40 years, either. No one has been getting rich. How is this possible? You have to ask this to find out what’s going on, where it leads and what we’ll do about it.
We take for granted that economics matter. We have only been thinking of this for the last 25 years. This idea of capitalism brought to us in the 80s was fatally flawed. People got the idea that to be rich you need a free market and free trade. But really, you don’t get rich because of those things - those are just the circumstances that allow you to get rich… if you do the right thing. If you do the wrong thing, it will allow you to go broke. You can’t get rich on consumption, as Dr. Richebächer used to say. You need capital formation. Save your money and invest it in productive enterprises.
Source: Millions of Zimbabweans Face Starvation due to Nationalisation caused by Hyperinflation
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Tags: Bill Bonner, credit crisis, Downturn Strategy, Kate Incontrera, subprime crisis, US Banking, US housing crisis, US recessionAbout the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning and three best-selling books, Financial Reckoning Day: Surviving The Soft Depression of the 21st Century, Empire of Debt: The Rise of an Epic Financial Crisis and Mobs, Messiahs and Markets..
The Daily Reckoning offers a "uniquely refreshing" perspective on the global economy, investing and the ability to live well in uncertain times. You will learn what you can expect from today's markets and how to prosper in the face of uncertainty.