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Keynesian Political Economy Is Theft – Monty Pelerin's World : Monty Pelerin's World

Keynesian Political Economy Is Theft – Monty Pelerin’s World : Monty Pelerin’s World.

FEBRUARY 28, 2014

keyneshayekimages (2)The plague of our time is Keynesian economics. It has destroyed the economics profession and enabled the political class to obtain powers never intended.

Keynesian economics provided the intellectual cover for the criminal class we politely call “government” to plunder its citizenry. In the beginning, clear-thinking, independent economists (not dependent on government largess) expressed objections to this “new economics.” There was little new in Keynes’ work and many errors that had been debunked decades before Keynes was even born. Bastiat’s parable of the “broken window” in 1850 is probably the best-known refutation, although similar arguments preceded Bastiat by a century or more.

In the 1930s leaders were desperate and willing to try anything. Keynes General Theory was published in 1936, during the middle of the greatest depression the world had ever experienced. Politicians, more so than economists, welcomed his ideas as a new approach.

The Austrian economists  represented by Mises and Hayek saw the fallacies in this new approach immediately. Some of the Chicago School (Knight, Simons, Viner) did also. Ludwig von Mises, never one to mince words, described Keynesian economics in the following manner:

What he really did was to write an apology for the prevailing policies of governments.

Mises likely was one of the few who saw the full ramifications of what Keynesian economics would provide for government. Most early criticisms were in terms of the economic unsoundness of the theory.

To contrast the blatant differences between proper economics and Keynesian prescriptions, the following two prescriptions were offered early in this century:

austriankeynesian

It was proper that one of these men should have won the Nobel Prize in economics. It just happened to be the wrong one.

buchananeconomy-1986-1

JAMES BUCHANAN, NOBEL LAUREATE

In 1977 James M. Buchanan and Richard E. Wagner wrote “Democracy In Deficit — The Political Legacy of Lord Keynes” (available online). It was the first comprehensive attempt to apply public-choice theory to macroeconomic theory and policy. According to Robert D. Tollison:

The central purpose of the book was to examine the simple precepts of Keynesian economics through the lens of public-choice theory. The basic discovery was that Keynesian economics had a bias toward deficits in terms of political self-interest.

From Buchanan and Wagner came this judgment regarding Keynesian economics:

The message of Keynesianism might be summarized as: What is folly in the conduct of a private family may be prudence in the conduct of the affairs of a great nation. (p. 3)

This fundamental confusion was responsible for the political acceptance of Keynesian economics. Politicians saw the potential for themselves in this new doctrine which advocated central control of the economy and fiscal irresponsibility as a necessary and patriotic thing. Giving them this gift was like providing matches and gasoline to an arsonist. (“I don’t want to spend money, but I have to otherwise the economy will tank.”)

Once government took control of the economy, they needed economists to provide the analysis and justifications for their new policies. Many in the economics profession were procured in similar fashion used with prostitutes. Money and power were heady incentives for a profession that had rightly been consigned to a section in their own ivory tower.

Justifying what government wanted to do and was doing was the only requisite. But, in order to qualify, it became necessary to convert to Keynesianism. Other branches of economics condemned government policies, at least on economic grounds.

Economists more than most understand incentives. When the payoffs increase, some men in any profession find it easy to modify ethics and integrity.

Buchanan and Wagner knew the damage that Keynesian economics had already inflicted and knew its potential was much greater. Thirty-seven years ago they commented:

What happened? Why does Camelot lay in ruin? Viet Nam and Watergate cannot explain everything forever. Intellectual error of monumental proportion has been made, and not exclusively by the ordinary politicians. Error also lies squarely with the economists. (p. 4)

They answered their own question:

The academic scribbler of the past who must bear substantial responsibility is Lord Keynes himself, whose ideas were uncritically accepted by American establishment economists. The mounting historical evidence of the effects of these ideas cannot continue to be ignored. Keynesian economics has turned the politicians loose, it has destroyed the effective constraint on politicians’ ordinary appetites. Armed with the Keynesian message, politicians can spend and spend without the apparent necessity to tax. “Democracy in deficit” is descriptive, both of our economic plight and of the subject matter for this book. (p.4)

Now, thirty-five plus years later, one may judge the merit in this book. Prescience, while not limited to them alone, was amazing.

One must also marvel at the continuation and acceleration of the ruinous policies. Whether Buchanan and Wagner imagined things could go on for so long and to such an extent is not known. However, to appreciate these changes, this graph from Zerohedge shows the effects of Keynesianism and what it has done to governments around the world:

keynesian legacy

The deterioration in fiscal discipline was astounding and in line what they predicted.

As this false economic theology known as Keynesianism runs its course, the following conclusions are probable:

  • Regardless of whether this generation escapes or not, we have impoverished our children and grandchildren.
  • Politicians now control most of the economy, including what passes for acceptable economics.
  • No honest economist can work for government; nor would one want to.
  • The tipping point for reversing this condition has long past.
  • Politicians have no incentive to stop the process underway.
  • Markets (and perhaps societies and governments) will eventually collapse, ending this terrible period of economic madness.

When this flawed paradigm is finally exhausted, the world may enter a better place in terms of economics and limited government. Without this shift, poverty and misery will grow along with wars used as political diversions.

One can only hope that the world avoids an Economic Dark Age when the collapse occurs.

Keynesian Political Economy Is Theft – Monty Pelerin’s World : Monty Pelerin’s World

Keynesian Political Economy Is Theft – Monty Pelerin’s World : Monty Pelerin’s World.

FEBRUARY 28, 2014

keyneshayekimages (2)The plague of our time is Keynesian economics. It has destroyed the economics profession and enabled the political class to obtain powers never intended.

Keynesian economics provided the intellectual cover for the criminal class we politely call “government” to plunder its citizenry. In the beginning, clear-thinking, independent economists (not dependent on government largess) expressed objections to this “new economics.” There was little new in Keynes’ work and many errors that had been debunked decades before Keynes was even born. Bastiat’s parable of the “broken window” in 1850 is probably the best-known refutation, although similar arguments preceded Bastiat by a century or more.

In the 1930s leaders were desperate and willing to try anything. Keynes General Theory was published in 1936, during the middle of the greatest depression the world had ever experienced. Politicians, more so than economists, welcomed his ideas as a new approach.

The Austrian economists  represented by Mises and Hayek saw the fallacies in this new approach immediately. Some of the Chicago School (Knight, Simons, Viner) did also. Ludwig von Mises, never one to mince words, described Keynesian economics in the following manner:

What he really did was to write an apology for the prevailing policies of governments.

Mises likely was one of the few who saw the full ramifications of what Keynesian economics would provide for government. Most early criticisms were in terms of the economic unsoundness of the theory.

To contrast the blatant differences between proper economics and Keynesian prescriptions, the following two prescriptions were offered early in this century:

austriankeynesian

It was proper that one of these men should have won the Nobel Prize in economics. It just happened to be the wrong one.

buchananeconomy-1986-1

JAMES BUCHANAN, NOBEL LAUREATE

In 1977 James M. Buchanan and Richard E. Wagner wrote “Democracy In Deficit — The Political Legacy of Lord Keynes” (available online). It was the first comprehensive attempt to apply public-choice theory to macroeconomic theory and policy. According to Robert D. Tollison:

The central purpose of the book was to examine the simple precepts of Keynesian economics through the lens of public-choice theory. The basic discovery was that Keynesian economics had a bias toward deficits in terms of political self-interest.

From Buchanan and Wagner came this judgment regarding Keynesian economics:

The message of Keynesianism might be summarized as: What is folly in the conduct of a private family may be prudence in the conduct of the affairs of a great nation. (p. 3)

This fundamental confusion was responsible for the political acceptance of Keynesian economics. Politicians saw the potential for themselves in this new doctrine which advocated central control of the economy and fiscal irresponsibility as a necessary and patriotic thing. Giving them this gift was like providing matches and gasoline to an arsonist. (“I don’t want to spend money, but I have to otherwise the economy will tank.”)

Once government took control of the economy, they needed economists to provide the analysis and justifications for their new policies. Many in the economics profession were procured in similar fashion used with prostitutes. Money and power were heady incentives for a profession that had rightly been consigned to a section in their own ivory tower.

Justifying what government wanted to do and was doing was the only requisite. But, in order to qualify, it became necessary to convert to Keynesianism. Other branches of economics condemned government policies, at least on economic grounds.

Economists more than most understand incentives. When the payoffs increase, some men in any profession find it easy to modify ethics and integrity.

Buchanan and Wagner knew the damage that Keynesian economics had already inflicted and knew its potential was much greater. Thirty-seven years ago they commented:

What happened? Why does Camelot lay in ruin? Viet Nam and Watergate cannot explain everything forever. Intellectual error of monumental proportion has been made, and not exclusively by the ordinary politicians. Error also lies squarely with the economists. (p. 4)

They answered their own question:

The academic scribbler of the past who must bear substantial responsibility is Lord Keynes himself, whose ideas were uncritically accepted by American establishment economists. The mounting historical evidence of the effects of these ideas cannot continue to be ignored. Keynesian economics has turned the politicians loose, it has destroyed the effective constraint on politicians’ ordinary appetites. Armed with the Keynesian message, politicians can spend and spend without the apparent necessity to tax. “Democracy in deficit” is descriptive, both of our economic plight and of the subject matter for this book. (p.4)

Now, thirty-five plus years later, one may judge the merit in this book. Prescience, while not limited to them alone, was amazing.

One must also marvel at the continuation and acceleration of the ruinous policies. Whether Buchanan and Wagner imagined things could go on for so long and to such an extent is not known. However, to appreciate these changes, this graph from Zerohedge shows the effects of Keynesianism and what it has done to governments around the world:

keynesian legacy

The deterioration in fiscal discipline was astounding and in line what they predicted.

As this false economic theology known as Keynesianism runs its course, the following conclusions are probable:

  • Regardless of whether this generation escapes or not, we have impoverished our children and grandchildren.
  • Politicians now control most of the economy, including what passes for acceptable economics.
  • No honest economist can work for government; nor would one want to.
  • The tipping point for reversing this condition has long past.
  • Politicians have no incentive to stop the process underway.
  • Markets (and perhaps societies and governments) will eventually collapse, ending this terrible period of economic madness.

When this flawed paradigm is finally exhausted, the world may enter a better place in terms of economics and limited government. Without this shift, poverty and misery will grow along with wars used as political diversions.

One can only hope that the world avoids an Economic Dark Age when the collapse occurs.

Keynes and Copernicus: the debasement of money overthrows the social order and governments » The Cobden Centre

Keynes and Copernicus: the debasement of money overthrows the social order and governments » The Cobden Centre.

Keynes and Copernicus: the debasement of money overthrows the social order and governments

By Ralph Benko, on 28 December 13

The United States Senate moves toward the confirmation of Janet Yellen, now posited for next January 6th, as chair of the Federal Reserve System. Let us in this moment of recess reflect on eerily similar observations by two of history’s most transformational figures:  John Maynard Keynes and Nicolas Copernicus.

One of Keynes’s most often-cited observations, from his 1919 The Economic Consequences of the Peace, chapter VI, contains an indictment of policies very like those which the Federal Reserve System has been implementing for the past dozen, and more, years.  These policies in slow motion are, in the opinion of this columnist, at the root of  the very political, social, and cultural dysphoria — uneasiness or generalized dissatisfaction — predicted by Keynes:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

An almost identical point was made almost four centuries before Keynes by iconic savant and polymath Nicolas Copernicus.

Copernicus commenced a study composed for the Prussian and Polish governments around 1525,On the Minting of Money, with these words:

ALTHOUGH THERE ARE COUNTLESS MALADIES that are forever causing the decline of kingdoms, princedoms, and republics, the following four (in my judgment) are the most serious: civil discord, a high death rate, sterility of the soil, and the debasement of coinage. The first three are so obvious that everybody recognizes the damage they cause; but the fourth one, which has to do with money, is noticed by only a few very thoughtful people, since it does not operate all at once and at a single blow, but gradually overthrows governments, and in a hidden, insidious way.

This does not imply plagiarism by Keynes.  The coincidence between Keynes’s “[To debauch the currency] engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose” and Copernicus’s “[The debasement of coinage] … is noticed by only a few very thoughtful people, since it does not operate all at once and at a single blow, but gradually overthrows governments, and in a hidden, insidious way” is, however, striking.

Keynes, like Copernicus a paradigm-shifter, was himself extraordinarily erudite.  It is not impossible the young Keynes came across Copernicus’s work (which reportedly was first actually published in 1826).   The question as to whether Copernicus’s Essay may have inspired Keynes’s observation must be left to authentic scholars such as Lord Skidelsky.

The similarity may be merely that of “great minds working alike.”  This columnist has found but one direct reference by Keynes to Copernicus.

Keynes (whose thinking was mostly, although not exclusively, opposed to the gold standard) was fascinated by one of Copernicus’s most accomplished scientific successors, Sir Isaac Newton.  Newton, also, achieved iconic status, both for his contributions to physics and, as Master of the Mint of Great Britain, as the architect of the modern classical gold standard. Newton’s gold standard was designed along Copernican principles of close correlation toward nominal and intrinsic value.  It served the world very well for almost 200 years.

Keynes was to have addressed the Royal Society of London’s gathering to celebrate the tercentenary of Newton’s birth, an event delayed by the war.  Keynes died a few months before he could present his remarks.  Maynard’s remarks, Newton, the Man, were presented by his brother Geoffrey (and thus might even be characterized as Keynes’s last words).  A brief excerpt:

Why do I call [Newton] a magician? Because he looked on the whole universe and all that is in it as a riddle, as a secret which could be read by applying pure thought to certain evidence, certain mystic clues which God had laid about the world to allow a sort of philosopher’s treasure hunt to the esoteric brotherhood.

[H]e became one of the greatest and most efficient of our civil servants. He was a very successful investor of funds, surmounting the crisis of the South Sea Bubble, and died a rich man. He possessed in exceptional degree almost every kind of intellectual aptitude – lawyer, historian, theologian, not less than mathematician, physicist, astronomer.

As one broods over these queer collections [of Newton’s alchemical writings, which Keynes collected], it seems easier to understand – with an understanding which is not, I hope, distorted in the other direction – this strange spirit, who was tempted by the Devil to believe at the time when within these walls he was solving so much, that he could reach all the secrets of God and Nature by the pure power of mind Copernicus and Faustus in one.

As for Copernicus, On the Minting of Money has been translated into English several times yet those translations remained difficult to obtain for students of the monetary arts and sciences.  It has remained mostly the property of elite historians.  Scant and intriguing references were limited to all-too-brief articles such as “Treatise On the Minting of Coin and Copernicus views on economics” by Leszek Zygner of  Nicolaus Copernicus University.

The full text of Copernicus’s fascinating and invaluable essay remained elusive, that is, until last month.

Laissez Faire Books published a meticulous and fresh English translation from the Latin, with prefatory remarks, bibliography, and invaluable critical apparatus by classicist Prof. Gerald Malsbary. (The volume was co-edited by this columnist and by his  fellow Forbes.com columnist Charles Kadlec, with a foreword by Reagan Gold Commissioner Lewis E. Lehrman, whose eponymous Institute this columnist professionally serves).

From Prof. Malsbary’s Prefatory Remarks to Copernicus’s Essay on Money:

NICOLAS COPERNICUS the astronomer embodies the modern scientific ideal: the revolutionary revealer of a new, verifiable scientific theory that shocks our conventional perceptions. However, it is not very widely known, outside of Eastern Europe at least, that Copernicus also spent about twenty years working on economic theory. His treatise On the Minting of Money (Monetae Cudendae Ratio), was first printed in 1826, three hundred years after its composition in 1525–1526. At the time, the semi-autonomous ecclesiastical region between Poland and Prussia where he lived (Varmia) was undergoing a political and economic metamorphosis, and his judgment and expertise (a fruit of the best late Scholastic and Humanist learning) was summoned by the Prussian and Polish governments to help stabilize an inflated currency. Was his insight into monetary matters as revolutionary as his astronomy?

Keynes: “The process [of debauching the currency] engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”  Copernicus: “[The debasement of coinage] … is noticed by only a few very thoughtful people, since it does not operate all at once and at a single blow, but gradually overthrows governments, and in a hidden, insidious way.”

Malsbary: “Was [Copernicus’s] insight into monetary matters as revolutionary as his astronomy?” In a word, yes.

Madame Yellen?  Whether one follows Keynes or Copernicus … it is time to return to the principle of meticulous monetary integrity — as exemplified by the classical gold standard — to restore legitimacy both to to the social order and to government.

This article was previously published at Forbes.com.

 

Pipeline Decisions Based on Short-Term Payoffs Are Dangerously Irrational | David R. Miller

Pipeline Decisions Based on Short-Term Payoffs Are Dangerously Irrational | David R. Miller.

Last week, Lorraine Mitchelmore, the top Canadian executive for Royal Dutch Shell, broke with industry narrative, stating that “the argument for environmentalism is not an emotional argument. It is just as rational as the argument for growing our energy industry.”

There is an important underlying realization in Mitchelmore’s statement that some conservative pundits, as well as our own government, seem to willfully miss. Sustainability — smart environmental decision-making — has everything to do with prosperity. It has everything to do with people’s jobs and their quality of life, with the opportunities they want for their kids. It is, in fact, the rational decision to carefully steward, protect, and invest in the natural capital on which our communities and future livelihoods depend.

What is dangerously irrational is making decisions based on short-term economic pay-offs that we know will undermine our future prosperity, perhaps catastrophically.

This is exactly what the proposed Northern Gateway pipeline threatens to do. Our government is apparently determined to move unprocessed diluted bitumen by tanker through the Great Bear Sea, which by Environment Canada’s own assessment, is one of the most treacherous sea passages in the world. No one can guarantee that there will not be an accident. Indeed, given the extremely dangerous waters of the Hecate Strait, it is rational to argue that an accident is simply a matter of time. And as two recent reports point out — one commissioned by the Province of B.C. and the other by the Federal government — Canada is woefully ill-prepared to deal with an oil spill in these waters.

What is at risk is very clear. Just talk to the people who live in this region, and they will tell you. It’s their jobs — the fishing and tourism industries — and their cultural identity. And it’s the spectacular ecosystem upon which all of that depends. A place that is as unique a global treasure as the Great Barrier Reef or the Amazon rainforest. It is no wonder that so many Canadians exercised their democratic rights by participating in the review process for this project. More than 9,500 people wrote to the Joint Review Panel, 96 per cent against the pipeline. The overwhelming majority of the 1,000+ people who provided oral testimony were also opposed. There is no question that the concerns raised by this project are the legitimate concerns of Canadians who value their livelihoods.

The real question is why we would take such a huge risk in such a special place.

If the answer is “to defend jobs”, it is misguided and misleading. More jobs will be destroyed by an oil spill than will be created by Enbridge’s proposed Northern Gateway pipeline. Coastal First Nations’ traditional territories and coastal communities depend economically on the Great Bear Sea. Marine-dependent activities in these territories represent significant economic value. B.C. seafood and tidal recreational fishing generate $2.5 billion per year – and support more than 30,000 jobs. Exporting raw, unprocessed bitumen creates far more jobs outside Canada than it does here.

It is also irrational to repeat mistakes that we now have the knowledge and ability to avoid.

A generation ago, the Exxon Valdez ran aground and foundered, off the coast of Alaska. The resulting oil spill was an ecological, economic and social disaster that crippled coastal communities and deprived a generation of its livelihoods. The loss of the herring fishery alone cost the economy $400 million. Many communities have not yet fully recovered. In fact, some never will.

It’s a fate that we have the power to prevent in the Great Bear region, by pragmatically acknowledging that the risks of this proposed oil pipeline outweigh the benefits.

Yes, the argument for environmentalism is a rational one. For the people whose lives would be destroyed by an oil spill, it is also an emotional one. And for Canada, particularly at this moment, it is the one that will determine our future as global leader or laggard.

This article originally appeared in the Financial Post on Dec. 17, 2013

 

Krugman Blowing Bubbles – Ludwig von Mises Institute Canada

Krugman Blowing Bubbles – Ludwig von Mises Institute Canada.

Sunday, December 15th, 2013 by  posted in CapitalismEconomicsHistory.

krugman

The perennial question of modern economics is simple: how are market downturns best combated? It’s a good question, if you are trying to deduce truth in matters. It also makes for good fodder to appease career-granting benefactors, i.e. the government. It was not always this way however. Economists, if true to their craft, do not make for barrels of optimism. They are supposed to be a splash of cold water on wishful thinkers.

The unholy alliance between the state and the economic profession would never last if dismal science practitioners were gadflies who swatted down every harebrained scheme that festered in the dreams of central planners. This was one of the problems encountered by classical economists. Being market-friendly, it was tough appealing to monarchs or government leaders who wanted a quick fix to economic doldrums. No head of the public wants to tell his citizens, “Sorry, I cannot help you today. You must help yourself.”

Eventually John Maynard Keynes would come along and give the economic vocation the crony justification it needed to become respectable in the eyes of the state. His The General Theory of Employment, Interest and Money was a how-to guide for pols looking to spend other people’s money. At last they had an excuse: to boost unemployment by paying laid-off workers to dig holes aimlessly.

Our friend Paul Krugman is Keynes’s most vocal disciple, and never tires of reinvoking his intellectual master’s teachings of mo’ money, mo’ debt, and no mo’ problems. In a recentinterview with the forever exhausted-looking Joe Weisenthal of Business Insider, Kruggy is perplexed by the Federal Reserve’s inability to inflate out of the ongoing economic slowdown. He snakes out a position between naysayer Larry Summers, who thinks the economy can only grow with artificial bubbles, and someone who is more optimistic about the future. On necessary bubbles, Krugman tells us:

“If we look at the evidence…and it kind of looks like…we need bubbles to grow. We’ve had one bubble after another. Long-term rise in debt, with no inflation…the economy is looking like it’s just barely managing to keep its above water with all those bubbles so…that’s the observation.”

Krugman blames the news status quo on slowing technological innovation and lower population growth. As for the United States, the Nobel Laureate is convinced the trade deficit is largely at fault. Lastly, he concedes that no one really knows why the economy must be goosed by a shot of exuberance.

That’s all true, if you forget the fact that some folks do actually understand why Krugman and his like-minded colleagues are scratching their heads over bubbles.

That the past few decades have witnessed financial bubble after financial bubble is not proof positive of a great need for them. Krugman’s assumption is that had the Fed not interfered in the marketplace to boost particular assets, the whole economy would have imploded. It’s a false assumption, but totally in line with Keynesian theory.

From the stagflation in the late 1970s to the stock market crash of 1987, forward to the failure of Long Term Capital Management in 1998, the popping of the dot-com bubble years later, and finally culminating in the housing crisis of 2007-2008, Krugman and Summers appear to have a point. All of these cases of faux prosperity were caused by the Fed’s meddling with the money supply, pushing interest rates down below their natural level. The headache after each instance was cured with the hair of the dog – meaning more inflation, more stimulus, and more central bank liquidity. The roller coaster ride of money printing has left the economy distorted and unable to find true balance again.

For the life of him, Krugman can’t seem to find any evidence of market stability without the animal spirits being thrown a liquidity bone. And yet, his go-to example of angelic prosperity – the 1950s – has all the markings of a relatively calm period of prosperity absent of central bank interference. As former Office of Management and Budget Director David Stockman points out, the heads of the Federal Reserve following World War II were less-than-enthusiastic about ginning up growth via the printing press. This was when William McChesney Martin was at the helm and President Eisenhower was reluctant to keep up the hog wild spending of his predecessor. In an interview with the American Mises Institute, Stockman comments:

Although central banking does cause moral hazards and lends itself to abuses, there have been periods in which monetary and fiscal discipline have been employed. Fed Chairman William McChesney Martin, for example, really did take the punch bowl away when the party got started because he took monetary discipline seriously. Fiscal discipline under Eisenhower and the gold standard behind Bretton Woods helped put off the day of reckoning for quite a long time.

After wartime price controls were relaxed in the late 1940s, capitalists and private investors were freed of government burden and began investing in the country yet again. Washington’s budget was cut significantly, including hundreds of billions removed from the Pentagon’s death machine expenditures. Stockman brings attention to the data: “Between 1954 and 1963, real GDP growth averaged 3.4 percent while annual CPI inflation remained subdued at 1.4 percent.”

So yes, this was the non-bubble prosperity Krugman is looking for. As Justin Raimondowrites, “[E]ight years of relative fiscal sanity under the Eisenhower presidency ushered in the greatest economic expansion in modern times.” What’s funny is that Krugman is one of the biggest cheerleaders of post-war prosperity and continually advocates going back to the Ike-era. But he wrongly attributes the golden times to pro-union labor policies and high rates of taxation.

Regardless, the takeaway from the decade of General Motors, Elvis, decent manners, and the Red threat is bubbles are not necessary for economic growth. By trying to stimulate demand, the Fed only mucks up economic calculation and capital accumulation.

Krugman’s solutions for the bubble-addicted economy are no better than his own understanding of economic theory. Widespread unemployment can be cured, in his opinion, by weaker purchasing power, a stronger welfare state, and continual government spending. In other words, by top-down central planning that attempts to tweak society “just so.” All these efforts are nothing but a shell game that take money from some and give it to another. Basically, Krugman is King Solomon with a sword, cutting everyone into parts he sees most fit.

Saying we need continuous financial bubbles to keep full employment is such a flawed conception of economics, it belongs on an island of misfit philosophies. Krugman’s incessant promotion of statism is doing more harm to the economy than good. As an opinion-molder, he is perpetuating the economic malaise of the last few years. More bubbles won’t help the recovery, just harm it more. In the middle of a grease fire, Krugman calls for more pig fat. And the rest of us are the ones left burnt.

James E. Miller is editor-in-chief of the Ludwig von Mises Institute of Canada. Send him mail

 

If You Don’t Trust the Fed, Here’s an Inside View That Confirms Your Worst Suspicions | CYNICONOMICS

If You Don’t Trust the Fed, Here’s an Inside View That Confirms Your Worst Suspicions | CYNICONOMICS.

If You Don’t Trust the Fed, Here’s an Inside View That Confirms Your Worst Suspicions

Posted on December 11, 2013 by ffwiley

Earlier this year the notion that the Fed might modestly taper its purchases drove significant upheaval across financial markets. This episode should engender humility on all sides. It should also correct the misimpression that QE is anything other than an untested, incomplete experiment.

– Former FOMC Governor Kevin Warsh, writing in the Wall Street Journal on November 13.

If I may paraphrase a sainted figure for many of my colleagues, John Maynard Keynes: If the members of the FOMC could manage to get themselves to once again be thought of as humble, competent people on the level of dentists, that would be splendid. I would argue that the time to reassume a more humble central banker persona is upon us.

– Dallas Fed President Richard Fisher, speaking in Chicago on December 9.

I fault the Fed for its lack of intellectual leadership on the economy and, in particular, Bernanke’s lack of forthrightness about the limits of the Fed’s ability to address slow growth and fiscal disequilibrium.

– Former St. Louis Fed President William Poole, speaking in Washington D.C. on March 7.

Does anyone else see a common theme?

Last month, we offered a plain language translation of the Warsh op-ed, because we thought it was too carefully worded and left readers wondering what he really wanted to say. Translation wasn’t necessary for Fisher’s speech, which contained a clear no-confidence vote in the Fed’s QE program. Poole’s comment was from a seminar question-and-answer session earlier this year, but it reached our inbox only last week in a transcript published in the latest Financial Analysts Journal. The Q&A was attached to an article that I’ll discuss here, because it makes claims we haven’t heard from others with FOMC experience.

Here’s an example:

Ben Bernanke talks a lot about risk management and the tradeoff between benefits and costs; he maintains that the need to balance these two issues justifies proceeding with the current policy. But Bernanke does not discuss the risk of political intervention in Fed policy despite numerous examples of the Fed giving in to political pressure and waiting too long to change its policy, which results in a detrimental outcome for the economy.

Essentially, pressure on the Fed will come from inside the government and may not be very visible; it may be limited to a few op-ed articles from the housing lobby. [FFW – presumably, Poole intended “it” to refer to the visible part of the pressure.] The true amount of political pressure will be largely hidden.

Poole is more or less saying that we have no idea what’s truly behind the Fed’s decisions. But he doesn’t stop there. He’s willing to make a prediction that you wouldn’t expect from an establishment economist:

[T]he real issue is the politics of monetary policy … I believe that the Fed will not successfully resist the political winds that buffet it. I am not a political expert or a political analyst by trade. My qualification for speaking on this topic is that I have followed the interactions between monetary policy and politics for a very long time. As with all things political, the politics of the Fed means that realities often fail to match outward appearances … I believe the Fed is likely to overdo its current QE policy of purchasing $45 billion of Treasuries and $40 billion of MBSs per month.

So there you have it: a 10-year FOMC veteran wants us to know that central banking isn’t all about the latest hot research on the wonders of unconventional measures.  On the contrary, monetary policy is no different than other types of policymaking; it’s guided by hidden political forces.

If you don’t mind our saying so, we feel a bit vindicated. Our very first Fed post ten months ago included the following:

As for the flip-flop [the Fed’s commitment to lifting the stock market through QE so shortly after claiming no responsibility for stock prices in recent bubbles], it’s easy to find a logical explanation. The banks want QE. Influential political and economic leaders want QE. Therefore, the path of least resistance is to give them QE. On the other hand, market manipulation to prick the Internet and housing bubbles would have been widely unpopular. Therefore, policymakers rejected the idea that they should manipulate markets and prick bubbles. No one likes to be unpopular.

More generally, QE seems to me to be explained by Bernanke (and his colleagues) being unable to sit still. This is natural behavior when you have to continually justify decisions. It’s not easy to explain to Congress, the media or public why you’re doing nothing but waiting for past policies to work. It won’t be long before people portray you as weak and indecisive and tell you to “Get to work, Mr. Chairman.” But once you start implementing new policies, especially if they’re in a direction that’s expedient for everyone in the short-term, then those criticisms go away. They’re replaced by adjectives like bold and proactive. And who doesn’t want to be known as bold and proactive?

We haven’t returned to this theme often, partly because it can’t be tested like we can test the Fed’s economic beliefs. Regular readers know that we do quite a lot of empirical work. We try our best to follow David Hume’s maxim that: “A wise man, therefore, proportions his belief to the evidence.”

As we see it, the Fed’s economic beliefs are proportioned more closely to political factors than real-life evidence. You might replace Hume with Upton Sinclair, who said “it is difficult to get a man to understand something when his salary depends on him not understanding it.”

In other words, politics and personal incentives are a huge part of the picture, and not just in central banking but in the economics profession more generally.

The theories underpinning current policies, which have built up over the last 80 years or so, can’t be properly understood without thinking through the motivations behind key developments. Some of the motivational factors are obvious, while others are more subtle, but I won’t clutter this post with our musings on the hidden drivers in economics. Detlev Schlichter offered a nice summary in his book, Paper Money Collapse:

It would be naïve to simply assume that the exalted position of [mainstream economic] theories in present debate is the result of their superiority in the realm of pure sciences. This is not meant as a conspiracy theory in the sense that professional economists are being hired specifically to develop useful theories for the privileged money producers in order to portray their money printing as universally beneficial. But it would be equally wrong to assume that the battle for ideas is fought only by dispassionate and objective truth-seekers in ivory towers and that only the best theories are handed down to the decision makers in the real world, and that therefore whatever forms the basis of current mainstream discussion must be the best and most accurate theory available. No science operates in a vacuum. The social sciences in particular are often influenced in terms of their focus and method of inquiry by larger cultural and intellectual trends in society. This is probably more readily accepted in the other major social science, history. What questions research asks of the historical record, what areas of inquiry are deemed most pressing and how historians go about historical analysis is often shaped by factors that lie outside the field of science proper and that reflect broader social and political forces.

Moreover, ever since mankind began writing its histories they have served political ends. History frequently provides a narrative for the polity that gives it a sense of identity or purpose, whether this is justified or not, and the dominant interpretations of history can be powerful influences on present politics. Similarly, certain economic theories have become to dominate debate on economic issues because they fit the zeitgeist and specific political ideologies. This is not to say that economics cannot be a pure, objective science. It certainly can and should be. Whether theories are correct or not must be decided by scientific inquiry and debate, and not in the arena of politics and public opinion. But it is certainly true that many economists do depend for their livelihoods on politics and public opinion, and that they cannot operate independently of them.

Schlichter is one of many authors and bloggers willing to discuss the awkward realities lurking behind economic theory and central banking. But these ideas are considered taboo by most mainstream media outlets. They’re not discussed in establishment venues or spoken by establishment figures.

Or so I thought.

Poole’s refreshingly honest take on the Fed’s inner workings – from someone who truly knows what goes on behind the curtains – is more than welcome.

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US Household Wealth Leans Over an Uneven Recovery

US Household Wealth Leans Over an Uneven Recovery.

By Marc Faber • November 18th, 2013 • Related Articles • Filed Under
As H.L. Mencken opined, ‘The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.

It is no wonder that, according to a Gallup Poll conducted in early October, a record-low 14% of Americans thought that the country was headed in the right direction, down from 30% in September. That’s the biggest single-month drop in the poll since the shutdown of 1990. Some 78% think the country is on the wrong track.

Some readers will, of course, ask what this expose about the political future has to do with investments. It has nothing to do with what the stock market will do tomorrow, the day after tomorrow, or in the next three months. But it has a lot to do with the future of the US (and other Western democracies where socio-political conditions are hardly any better).

I have written about the consequences of a dysfunctional political system elsewhere. In May 2011 I explained how expansionary monetary policies had favoured what Joseph Stiglitz called ‘the elite’ at the expense of ordinary people by increasing the wealth and income of the ‘one percent’ far more than that of the majority of the American people.

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I also quoted at the time Alexander Fraser Tytler (1747-1813), who opined as follows: ‘A democracy cannot exist as a permanent form of government. It can only exist until voters discover that they can vote themselves largesse from the Public Treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy, always followed by dictatorship‘.

Later, Alexis de Tocqueville observed: ‘The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.

To be fair to Mr. Obama, the government debt under his administration has expanded at a much slower pace in percentage terms than under the Reagan administration and the two Bush geniuses. In fact, as much as I hate to say this, Mr. Obama has been (or has been forced to be) a fiscal conservative.

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However, what 18th and 19th century economists and social observers failed to observe is that democracies can also collapse over loose monetary policies. And in this respect, under the Obama administration, the Fed’s balance sheet has exploded. John Maynard Keynes got it 100% right when he wrote:

‘By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some…

‘Those to whom the system brings windfalls…become ‘profiteers’ who are the object of the hatred… The process of wealth getting degenerates into a gamble and a lottery… Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.’

The Fed takes great pride in the fact that US household wealth has now exceeded the 2007 high. However, I was pleasantly surprised when I recently attended a presentation by Larry Lindsey, at my friend Gary Bahre’s New Hampshire estate. He unmistakably showed, based on the Fed’s own Survey of Consumer Finance and Flow of Funds, that the recovery in household wealth has been extremely uneven.

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Readers should focus on the last column of Table 1, which depicts the change in household wealth between 2007 and 2013 by wealth percentile. As can be seen, the bottom 50% of the population is still down more than 40% in terms of their ‘wealth’ from the 2007 high. (Lindsey is a rather level-headed former Member of the Board of the Governors of the Federal Reserve System, in which capacity he served between 1991 and 1997.)

Besides the uneven recovery of household wealth among different wealth groups, a closer look at consumer credit, which is now at a record level, is also revealing. Furthermore, consumer credit as a percentage of disposable personal income is almost at the pre-crisis high.

But what I found most interesting is how different income and wealth groups adjusted their outstanding total debt (including consumer credit, mortgage debt, etc.) following the crisis.

Larry Lindsey showed us a table – again based on the Fed’s own Survey of Consumer Finance and Flow of Funds data – which depicts total debt increases and decreases (in US$ billions) among these different income and wealth groups.

I find it remarkable that the lower 40% of income recipients and the lower 50% of wealth owners actually increased their debts meaningfully post-2007. In other words, approximately 50% of Americans in the lower income and wealth groups who are both voters and consumers would seem to be more indebted than ever. A fair assumption is also that these people form the majority of the government’s social benefits recipients.

Now, since these lower income and wealth groups increased their debts post-2007 and enjoyed higher social benefits, they were also to some extent supporting the economy and corporate profits. But what about the future?

Entitlements are unlikely to expand much further as a percentage of GDP, and these lower-income recipients’ higher debts are likely to become a headwind for consumer spending. Simply put, in my opinion, it is most unlikely that US economic growth will surprise on the upside in the next few years.

It is more likely there will be negative surprises.

Regards,

Marc Faber
for The Daily Reckoning Australia

Publisher’s Note: Household Wealth Leans Over an Uneven Recovery originally appeared in the Daily Reckoning USA.

 

Dambisa Moyo on on the need to depolarize economic-policy debates. – Project Syndicate

Dambisa Moyo on on the need to depolarize economic-policy debates. – Project Syndicate.

NEW YORK – Last month’s US government shutdown – the result of a partisan standoff in congressional budget negotiations – epitomizes the polarization that prevails in modern economic-policy debates.

On one side, John Maynard Keynes’s cohort argues that government intervention can help any economy grow its way out of crisis by spurring aggregate demand and, in turn, raising the employment rate. A country’s government, Keynesians contend, has the capacity – and responsibility – to solve many, if not all, of its economic problems.On the opposite side, followers of the Austrian School of economic thought, especially the ideas of Friedrich Hayek, assert that limited government and free enterprise form the only viable path to liberty and prosperity. The market is the best arbiter of how to allocate scarce resources, and thus should serve as an economy’s main driver.

In recent years, this long-running debate has become increasingly contentious – and the costs of stalemate are mounting. In order to restore growth in developed economies, while sustaining strong GDP growth and reducing poverty in the developing world, a more unified approach to economic policymaking that draws from both traditions is needed.Official responses to the global economic crisis highlight the interventionist model’s merits, proving that decisive government action can help to enhance efficiency and clear unbalanced markets, thereby protecting the economy from the demand shortfall caused by falling investment and rising unemployment. But the free market also has a crucial role to play, with longer-term, incentive-based policies catalyzing scientific and technological advancement – and thus boosting economies’ growth potential.

In determining how to promote innovation without sacrificing social protection, economists and policymakers should take a lesson from the field of physics. For nearly a century, physicists have attempted to merge the competing ideas of the field’s titans, including Wolfgang Pauli, the first physicist to predict the existence of neutrinos (the smallest particles of matter), and Albert Einstein, who explained the curvature of space-time. The so-called “theory of everything” would reconcile the inconceivably small with the unimaginably large, providing a comprehensive understanding of the universe’s physical properties.Policymakers should be working to unite seemingly disparate theories to align policy decisions with the business cycle and the economy’s level of development. Such an approach should seek to protect economies from the destabilizing impacts of politically motivated policy changes, without impeding governments’ ability to correct dangerous imbalances. Officials must be at least as vigilant about reducing expenditure and withdrawing stimulus measures during periods of growth as they are inclined to introduce such policies during downturns.

To the extent that this approach reflects the view that policymaking is an art, not a science, that is a good thing: the world needs more flexibility in economic policymaking. But some might consider it a cause for concern, especially given growing suspicion of incentive-based economic policies in the wake of the global economic crisis.

Many blame the crisis on the decades-long ascendancy of a laissez faire approach to economic policymaking, and rightly credit government intervention with facilitating recovery. The tremendous economic success of countries like China, where hundreds of millions of people have escaped abject poverty in a single generation, has reinforced support for state-led systems.In developed countries, too, many advocate a greater role for the state, in order to ensure that promised social benefits are delivered to rapidly aging populations. In fact, in many countries, the government’s capacity is already strained. As German Chancellor Angela Merkel has pointed out, though Europe is home to just 7% of the world’s population and produces 25% of the world’s wealth, it accounts for 50% of global welfare payments. When the United States is included, 11.5% of the global population receives 88% of the world’s welfare payments.

But relegating free-market principles to the past would simply create a new set of imbalances. Rather than allow extremists to continue to hijack economic-policy debates, policymakers must work to bridge competing schools of thought. Only then will productive discourse – the kind that does not end in government shutdown – be possible.

Keynes once wrote that he agreed with “almost all” of Hayek’s ideas. And Hayek found it “reassuring” to know that he and Keynes agreed “so completely.” This raises the question: What is really preventing economists and policymakers from devising – or even seeking – a unified theory of economic?

Read more at http://www.project-syndicate.org/commentary/dambisa-moyo-on-the-need-to-depolarize-economic-policy-debates#pUG7bZ15DoCimRvc.99

 

ClubOrlov: From the Mouths of Babes

ClubOrlov: From the Mouths of Babes. (source)

From the Mouths of Babes

Gottfried Helnwein

[This week’s guest post is by Scott Erickson, who is an award-winning humor writer and the author of a satirical novel titled The Diary of Amy, the 14-Year-Old Girl Who Saved the EarthI liked it. It is entirely disarming and strikes a good balance between humor and seriousness. There are enough jeremiads and diatribes and rants on this topic out there. Luckily, this isn’t one of them because Scott’s scathing social critique and mordant wit are delivered via a charming narrative device: a smart, earnest, precocious 14-year-old girl.]

A 14-YEAR-OLD GIRL EXPLAINS HOW WE CAN STOP THE ADDICTION TO ECONOMIC GROWTH THAT’S DESTROYING THE EARTH

Hi! I’m Amy Johnson-Martinez, the 14-year-old girl who’s saving the earth from environmental destruction. A lot of people don’t understand how the destruction of the earth is connected to our addiction to economic growth. Actually, a lot of people don’t even realize that we’re addicted!

Personally speaking, I think it’s kind of weird that economists don’t tell us about this. So I guess it takes a 14-year-old girl to tell you about it!

Economists always say, “The economy has to keep growing or else it will collapse.” But it can’t grow forever, because the earth is running out of resources. Actually, it’s already starting to happen. That’s a big reason why the economy is getting worse.

Our economy is giving us a totally stupid choice: Save the economy or save the earth. It won’t let us save both! I personally think that’s pretty crazy!

On my journey to save the earth from environmental destruction, I figured out pretty quickly that the main problem is the economy. Pretty much every time there’s an idea that would make things less destructive and more sustainable, the argument against it is always: “It will be bad for economic growth.”

That’s when I found out the economy has to grow or else it collapses. But when I asked why, nobody knew the answer. So I had to figure it out myself.

I looked at a bunch of economic books, but none of them said anything about why we’re addicted to economic growth. I couldn’t even find out how the economy could grow. That’s another basic question: How can money grow?

Isn’t that an interesting question?

This led to another question, “How is money introduced into the economy?”

The answer wasn’t easy to find. At first I thought the answer was that the government prints it, but that was back when I was young and naive. It turns out that the government prints only a tiny percentage of the money in circulation, and the rest is just promises, based on future growth (which is kind of weird if you think about it.)

Then I found out about “quantitative easing,” which sounds intellectually sophisticated. But it’s not the “real” answer, because quantitative easing only creates more promises. And the only way to live up to these promises is by overall growth of the economy. So we’re back to where we started: How does the economy grow?

Since I couldn’t find any answers in books about contemporary economics, I tried looking at books about the history of economics. I focused a lot on John Maynard Keynes, who was from England and invented the basic economic ideas we still use.

I found something interesting that he wrote in 1933. It’s the first thing I found that talks about economic growth. Basically, he thinks it’s important to have the economy grow, but when everybody is doing OK then growth should stop:

Suppose that a hundred years hence we are eight times better off than today. The economic problem may be solved.

The economic problem, the struggle for subsistence, always has been the primary, most pressing problem of the human race. Thus for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to live wisely and agreeably and well.

When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. The love of money will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.

I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue – that avarice is a vice, that the exaction of usury is a misdemeanor, and the love of money is detestable.

But the prediction that economic growth would end poverty hasn’t happened. In fact, even with all the economic growth that’s happened since then, poverty is getting worse. Obviously, the idea that economic growth will end poverty isn’t right.

I had to look up what the word “avarice” means, and basically it means “greed.” I also had to look up what “usury” means. It means to charge interest on loaning money. It’s a religious word and at one time all religions were against it as unethical.

Even though the quote was interesting, it didn’t answer the question about how money can grow. So I had to go back even farther. The ideas of John Maynard Keynes were influenced by another guy – John Law.

What a weird person! According to one book, in addition to being a banker and an economist he was “a gambler, swindler, rake and adventurer forced to flee the British Isles after killing an opponent in a duel.” This kind of person helped invent our economic system?

I found something in a book about John Law that seemed important: “Law made clear the distinction between a passive treasury, where money just accumulated, and an active bank, where money was created.”

Banks create money? That was news to me! I thought they just kept money and loaned some of it out.

The answer has to do with the “fractional reserve system” which started in the 1700s. It used to be that money was sort of a “receipt” for gold. The receipt was called a “banknote,” which was printed by the bank. But then some bankers figured out they could print more “receipts” than the gold they had, therefore they only had a “fraction” of the gold compared to the “receipts” (actual money).

That explains how it came to be that banks could create money, but it didn’t explain how money could “grow” – since banks were only allowed to print a certain percentage extra.

Then, some bankers figured out a way to become even more wealthy with this “extra money” they could print themselves. What they did is to give out the money in the form of a loan. Since they charged interest on the loan, they would get back more than they gave out. This next part is where the addiction starts.

Let’s say you get a loan for $100, but because of the interest you pay back $110. Here’s an interesting question: Where did that extra $10 come from?

It didn’t come from you, since you can’t create money. Only banks can – by making loans. So the extra money could only come from one place: More loans! If you trace money to where money comes from, it almost always comes from a loan.

People can get personal loans, but what’s more important for the economy is business loans – loans to start or expand a business. Of course all the loans have interest, which means paying back more money. But we’ve already figured out that money is “created” by banks issuing loans. So to pay off past loans, somewhere else in the economy there has to be new loans which create more money. But then THOSE loans have to be paid off with money, which means MORE loans.

It always comes back to the banks making more loans to pay off the existing loans. This has been going on for hundreds of years, which is how the economy “grows.”

Economic growth needs more money, but more money needs more economic growth, which needs more money. And it doesn’t stop. It can’t stop.

That’s not only how the economy grows, but why it HAS to grow. We can never get to a point where growth is “enough.”

This is why we’re addicted to economic growth. We’re not creating money; we’re creating debt!Like with any addiction, we keep doing it even when it’s not working any more. This is why even when it’s obvious that economic growth isn’t solving unemployment or ending poverty or doing any of the other stuff it says it can do, we keep trying it anyway. It’s why even though we have more money than ever before in history, we still need more.

The funny thing is that the solution is super-easy. All we have to do is stop the banks from creating money as debt.

You know what’s really interesting? I discovered that our greatest president Abraham Lincoln figured this out and tried to stop it. Lincoln tried to fix the problem by having the government print a kind of money called “greenbacks”—$450 million of interest-free money. But the banks did NOT like this because they wanted to create all the money themselves! So they bought up all the “greenbacks” and forced the government to buy them back in exchange for gold.

Lincoln had the right idea, but he didn’t go far enough. We have to eliminate interest on ALL money. The answer is actually super-easy.

To end the addiction to economic growth and save the earth, this is what we need to do: End the creation of money as interest-bearing loans. Put an end to fractional reserve banking and make it so banks can’t create money. Then give the U.S. Treasury the exclusive right to issue U.S. currency free of debt.

Of course, the big banks won’t like this, because they make money from keeping us addicted. But as I learned in school, we live in a democracy which means companies aren’t the boss of us; we’re the boss of them. Yay for democracy!

Let’s stop the addiction before the economy collapses and destroys the earth, which is very beautiful. In fact, it’s my favorite planet!

 

Is Saving Money Bad for the Economy? – Gregory Bresiger – Mises Daily

Is Saving Money Bad for the Economy? – Gregory Bresiger – Mises Daily. (FULL ARTICLE)

Our grandparents believed in the value of thrift, but many of their grandchildren don’t.

That’s because cultural and economic values have changed dramatically over the last generations as political and media elites have convinced many Americans that saving is passé. So today, under the influence of Keynesian economists who champion government spending and high levels of consumption, thrift has been devalued.

“The growth in wealth, so far from being dependent on the abstinence [savings] of the rich, as is commonly supposed, is more likely to be impeded by it,” according to John Maynard Keynes’s The General Theory of Employment, Interest and Money.

“The more virtuous we are, the more determinedly thrifty, the more obstinately orthodox in our national and personal finance, the more incomes will have to fall,” he writes. “Saving,” Keynes wrote in his Treatise on Money, “is the act of the individual consumer and consists in the negative act of refraining from spending the whole of his current income on consumption.”…

 

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