“Facts are stubborn things; and whatever may be our wishes, our inclination, or the dictates of our passions, they cannot alter the state of facts and evidence.” —John Adams (1770)
With all the advances and w
onderful inventions, both viewed as good and bad (like the cell phone and texting), some things remain the same. If you want to be rich, you have to accumulate money and/or assets to help in that endeavor. If you want to subsist, don’t do anything, Uncle Sam will provide if you sign up for help and hand over your freedom and apply the chains of economic slavery.
Some things never change, like the “laws” of economics. Even though I was taught in college the Keynesian Theory of economics (essentially, government can affect the economy by increasing or decreasing the money supply) – as I found out later, a fatally flawed theory. Certainly the creator of the theory, John Maynard Keynes, an intellectual and brilliant man in his own regard, did not have much faith in the theory.
In fact, he said he would never know the outcome of those countries that followed his theory to manage their respective economies, he would be deceased before the success or failure would be known. He was right, he was dead before the grandest scheme ever perpetrated on those economies practicing his economic theory was played out to the impending disaster we know of today.
Years ago, in 1920-1921, there was a depression. Woodrow Wilson favored more intervention by the federal government. While he attempted to do so, he suffered a series of strokes, debilitating him for the remainder of his presidency.
Enter the new president – Warren Harding. His philosophy was the opposite of Wilson’s. At his acceptance speech at the 1920 Republican convention, he was opposed to government intervention and believed a downturn of the economy would work itself out IF no obstacles were placed in its path.
“We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity. We promise that relief which will attend the halting of waste and extravagance, and the renewal of the practice of public economy, not alone because it will relieve tax burdens but because it will be an example to stimulate thrift and economy in private life.
“Let us call all the people for thrift and economy, for denial and sacrifice if need be, for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic. There hasn’t been a recovery from the waste and abnormalities of war since the story of mankind was first written, except through work and saving, through industry and denial, while needless spending and heedless extravagance have marked every decay in the history of nations.”
Furthermore, he added, “Depressions followed inflations “just as surely as the tides ebb and flow,” but spending taxpayer money was no way to deal with the situation. The excess of stimulation from that source is to be reckoned a cause of trouble rather than a source of cure.”
The depression soon turned into an economic expansion we now know as the “Roaring Twenties.”
If only our Fed chairmen and chairwoman would revisit Harding’s remarks and change course to real economics (also known as Austrian Economics) instead of following a proven loser in Keynesianism, a flawed concept followed since Franklin Roosevelt took office.
The resulting economic bubbles of the past (banking/investment, auto companies, real estate) and those facing us today (college loans, housing, personal credit, stock market) are the result of Keynesianism – injecting large sums of taxpayer money into those areas in trouble. None of the “fixes” corrected the underlying problem – excess debt. The older and more recent bubbles still exist, you just don’t hear about them except from people who know the implications of excess debt and its aftermath of bursting of the bubble, causing crushing changes.
One thing never changes — “the debtor is slave to the lender” and none of the rosy outlooks you hear nightly on the news and financial programs of an ever increasing stock market are not reflecting reality. Those gains are supported by government debt – the infusion of cash into the economy by the Federal Reserve and foreign money, where their markets have no growth. They are not real gains in the economy in terms of additional jobs and productivity. Once the Fed quits injecting the debt, the bubbles will burst.
What is the answer?
Let the markets work, government should not interfere or meddle in markets – they only make the situation worse. Government is always the problem, not markets. Yes, there would have been pain if the banks and car companies would have gone bankrupt. But in the aftermath, somebody would buy the assets and many if not all of the companies affected would continue to operate through bankruptcy and their eventual repayment of debt or be sold to interested parties.
Did loaning GM all that money work? No, they still declared bankruptcy and didn’t pay back the principle on the loan, only the interest. The jobs still left, some dealerships closed, the chess pieces moved, but no real improvement in increasing jobs in the United States. Their products have improved and sales are up because of the market, not government – people needing a vehicle see GM products as desirable and spend their money on GM nameplate product.
Those people working in the GM plant on 36th St. can attest to GM’s inarticulate moves – the most productive GM stamping plant in the U.S. and they shut it down and demolished the building that had stood there for decades. This was the decision after injecting millions into infrastructure and machinery to modernize the plant before shutting it down – so much for strategic thinkers at GM.
But they had your bail-out money, so hey, who’s going to squawk? Reminds me of a famous line about badges applied to jobs “jobs, jobs, we don’t need no stinking jobs.”
Barry Goldwater, in his outstanding book, “The Conscience of a Conservative,” warned us of the government out of control spending and what would result. We are going to reap what we have sown. And it won’t be a harvest of plenty, but years of economic woe. Ignore the warnings, ignore the debt, ignore the damage done to the dollar and the Constitution, but facts are stubborn things, just like John Adams said in 1770, it was true then and true now.
We are ignoring the facts of evidence pointing to our economic downfall. The lack of leadership by our elected officials, especially the President and his administration, is killing this country.
The rotting of America from within continues….. God help us!