NC Libertarian Senate candidate Chris Cole on the mortgage bail-out

When you're running on a shoestring in the margins between Libby Dole and Kay Hagan, any notice is good notice, and I can only hope that Chris Cole's piece in the Huntersville Herald gets picked up by more North Carolina media.

Not being a gold bug, I am ambivalent about Cole's belief in the gold standard, but his analysis of the current Fannie Mae/Freddie Mac bail-out is right on point:

No wonder the government no longer issues gold certificates, and no wonder our savings rate has fallen to about one-half of one percent. It is against self-interest to hold money that is worth less the longer you hold onto it.

Thus, we have the setup for our current credit and foreclosure crisis.

When money is saved, its owner intends its use in the future, and the bank uses it to make loans, which are used for tasks such as the creation of new businesses. More savings mean lower interest rates, which, in turn, send a market signal for businesses and individuals to invest for future demand. The real interest rates based on savings have been replaced by artificial signals from Federal Reserve-set interest rates, along with home- and land-ownership incentives by government. The result has been a market expectation of future increases in demand for homes and land, and thus, a real-estate price bubble. All of which was fine, as long as there was an actual demand in the future. What has happened is that demand no longer matches the fake interest signal, and the housing bubble has burst.

The solution offered by politicians, such as Republican Sen. Elizabeth Dole, is to pump Federal Reserve loans into Fannie Mae and Freddie Mac companies to finance more loans for folks who couldn't otherwise qualify for them, setting up another housing bubble and more foreclosures rather than fewer. Quick fixes can always be expected to result in long-term problems.

The long-term solutions are harder.

And I'm also in complete agreement with one of his preferred solutions:

Phase out government programs that subsidize home ownership. This must include setting a date for the revocation of the charters of Fannie Mae and Freddie Mac (I suggest four years), so that they will cease sending false market signals, without stranding current buyers and sellers.

That one's tough medicine. A lot of people will have the knee-jerk reaction that first-time home-buyers wouldn't be able to get into houses without government subsidies. But that's primarily because they have to compete with other buyers using government subsidized loan instruments.

None of that is the point, however. The point is: Chris Cole is yet another Libertarian candidate in North Carolina who is broadening the political debate. Even voters and candidates who disagree with his solutions have a better range of choices because he's there.