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The Daily Reckoning PRESENTS:
Often, the best way to deal with something, or someone, that you find
absurd is to take a step back and laugh. Bill Bonner advises his readers
to employ this strategy when trying to decipher what our world leaders
are really trying to save the world from...
Economics has been called the “dismal science.” But even that is
merely fraud and flattery. Economics is dismal, but it isn’t science.
At its best it is merely voyeurism - peeping in people’s windows as
they go about their business and trying to figure out what they are
doing. At worst, it is pompous theorizing about how to get the schmucks
to do better.
We
doubt that you are especially interested in economics, dear reader. We
know we are not. But we can’t resist a good comedy...or a good
opportunity to point and giggle. We keep our eye on economists and
politicians the way children watch clowns; we can’t wait to see them
get whacked in the head or trip over each other.
But
what is amusing is also instructive. Are not clowns people too? Are they
not part of human life...human organization...and human economy? Every
one of them is driven by the same motors that power everyone else. They
want power...glory...money. But how do they get it? Can we not watch
politicians and economists and learn something about ourselves?
One
of the many conceits of politicians and economists are that they are
somehow out of ordinary. They are godlike, or so they pretend, having no
other ambition but to make the world a better place. Neither drink, nor
meat, nor false witness cross their lips. They sweat for no material
gain...and know no lust - save for the betterment of all mankind. They
pass laws...they enact codes and regulations...they jiggle this lever
and turn another - as if they were the masters of the whole human race,
rather than mere parts of it themselves. Since they float above it all,
they are not subject to the normal temptations. The rest of us spend our
whole lives like animals - craving profits, mates, status, pride, love,
and money like a raccoon searching for a garbage pail without a lid.
Unless we are kept in tight cages, who knows what we will do?
That
is why the tabloid press - especially in England - loves the stories of
the government ministers having affairs with their secretaries or
cheating on their income tax. Who doesn’t like to see hypocrisy
revealed in public? It is as if the King himself had been caught with
his pants down; we gape...and see that he is human, just like the rest
of us.
But
thank God there are leaders! Thinkers! Theorists with their “isms”
and their rat wire...ready not merely to keep us from hurting one
another, but also to give us a sense of moral purpose. It is not enough
that we should each seek happiness in our own private way, we must Free
the Sudetenland! Abolish Poverty! Make the World Safe for Democracy! We
must realize our manifest destiny...and provide liebensraum [living
space] for the German people! Full employment! A minimum wage! No humbug
left behind!
We
bring this up only to laugh at it.
In
the early 20th century, John Maynard Keynes came up with a new idea
about economics. The politicians loved it; Keynes explained how they
could meddle in private affairs on a grand scale - and, of course, make
things better. Keynes argued that a government could take the edge off a
business recession by making more credit available when money got
tight...and by spending itself to make up for the lack of spending on
the part of consumers and businessmen. Keynes suggested, whimsically,
hiding bottles of cash all around town, where boys might find them,
spend the money, and revive the economy.
The
new idea caught on. Soon economists were advising all major governments
about how to implement the new “ism.” It did not seem to bother
anyone that the new system was a fraud. Where would this new money come
from? And what made anyone think that the economists’ judgment of
whether it made sense to spend or save was better than individuals? All
the Keynesians had done was to substitute their own guesses for the
private, personal, economic opinions of millions of ordinary citizens.
They had resorted to what Franz Oppenheimer called “political
means,” instead of allowing normal “economic means” to take their
own course.
The
economists wanted what everyone else wants - power, prestige, women
(except for Keynes himself, who preferred men). And there are only two
ways to get what you want in life, dear reader. There are honest means,
and dishonest ones. There are economic means, and there are political
means. There is persuasion...and there is force. There are civilized
ways...and barbaric ones. The economist is a harmless crank as long as
he is just peeping through the window. That is what we do here at The
Daily Reckoning. But when he undertakes to get people to do what he
wants - either by offering them money that is not his own...by
defrauding them with artificially low interest rates...or by printing up
money that is not backed by something of real value (such as gold)...he
has crossed over the dark side. He has moved to political means to get
what he wants. He has become a jackass.
Keynesian
improvements were applied in the ‘20s - when Fed governor Ben Strong
decided to give the economy a little “coup de whiskey” - and later
in the ‘30s when the stockmarket was recovering from the hangover. The
results were predictably disastrous. And along came other economists
with their own bad ideas. Rare was the man, like Robert Lucas or Murray
Rothbard, who pointed out that you could not really improve economic
results with political means. If a national assembly could make people
rich simply by passing laws, we would all be billionaires, because
assemblies have passed a multitude of laws and seem capable of enacting
any piece of legislation brought before them. If laws could make people
wealthy, some assembly somewhere would have found the magic edicts -
simply by chance.
But
instead of making them richer, each law makes them a little poorer.
Every time political means are used they interfere with the private,
civilized economic arrangements that actually get people what they want.
One man makes shoes. Another grows potatoes. The potato grower goes to
the cobbler to buy a pair of shoes. He must exchange two sacks of
potatoes for one pair of penny loafers. But then the meddlers show up
and tell him he must charge three sacks...so that he can pay one in
“taxes,” to the meddlers themselves. And then he needs to put in an
alarm system in his shop, and buy a hardhat, and pay his helper minimum
wage, and fill out forms for all manner of laudable purposes. When the
potato farmer finally shows up at the cobbler’s he is informed that
the shoes will cost seven sacks of potatoes! That is just what he has to
charge in order to end up with the same two sacks he needed to charge in
the beginning. “No thanks,” says the potato man, “At that price, I
can’t afford a pair of shoes.”
What
the potato grower needs, say the economists, is more money! The money
supply has failed to keep pace, they add. That was why they urged the
government to set up the Federal Reserve in the first place; they wanted
a stooge currency that would be ready to go along with their plans. Gold
is fine, they said, but it’s anti-social. It resists new “isms”
and drags its feet on financing new social programs. Why, it is
positively recalcitrant! Clearly, when we face a war or a Great National
Purpose we need money that is willing to stand up and sign on. Gold
malingers. Gold hesitates. Gold is reluctant and reticent. Gold is fine
as a private money. But what we need is a source of public funding...a
flexible, expandable national currency...a political money that we can
work with. We need a dollar that is not linked to gold.
In
the many years since the creation of the Federal Reserve system as
America’s central bank, gold has remained as steadfast and immobile as
ever. An ounce of it today buys about the same amount of goods and
services as an ounce in 1913. But the dollar has gone along with every
bit of political gimcrackery that has come along - the war in Europe,
the New Deal, WWII, the Cold War, the Vietnam War, the war on poverty,
the war on illiteracy, the New Frontier, the Great Society, Social
Security, Medicare, Medicaid, the War in Iraq, the war on terror...the
list is long and sordid. As a result, guess how much a dollar is worth
today in comparison to one in 1913? Five cents.
Keynesianism
is a fraud. Supply-siderism is a con. The dollar itself is a scam. All
were developed by people with good intentions. But these good intentions
not only paved the road to Hell, they greased it. There was no point
putting on the brakes. Once underway, there was no stopping it.
Right
now, the United States slides towards some sort of Hell. A half-century
of deceit has produced a nation that is ready to believe anything...and
go along with anything...provided it promises to make them rich. They
will be very disappointed when they discover that all the political
means they counted on - the phony money, the laws, the regulations, and
the wars - have made them poorer. That is when we will really need
cages...
“Nothing
in nature is evil,” said Marcus Aurelius. Keynes was human. Even Adolf
Hitler was a man, a part of nature himself. And the “Evil Empire,”
was it not created by men too, men who - like economists and politicians
- followed their own natural impulses? Adolf may have erred and strayed.
But he did so with the best of intentions; he thought he was building a
better world. And he had all the “reasons” you could ask for. He
could argue all day; “proving” that his plan was the best way
forward.
Not
that there weren’t arguments on the other side. What were smart people
to do? People argued about Keynesianism for many years. Each side had
good points. One was convincing; the other was persuasive. It was like a
couple arguing in divorce court - the husband forgot to take out the
trash and knocked over a vase; the wife ran him over with the family
car. “He had it coming,” she says.
What
would an observer think? No amount of logic could help him. Both parties
made good points. All the judge could do was to fall back on his own
deep sense of right and wrong, of proportion...and good taste. “She
shouldn’t have run him down,” he says solomaniacally.
“Love
the man, hate the sin,” say the Baptist preachers. They have a useful
point. There’s no point in hating Adolf, Josef, Osama...or John
Maynard...or any of the other thousands of clowns who entertain, annoy
and murder us. They are God’s creatures too, just like the rest of us.
What they did wrong was what they always do wrong...they all resorted to
political means, to get what they wanted.
We
do not hate them; we just hope they get what they deserve.
Bill
Bonner
The Daily Reckoning
© 2005 Bill Bonner
The
Daily Reckoning Archives
 www.dailyreckoning.com
 Bill Bonner is the founder and president of Agora
Publishing, one of the world's most successful consumer newsletter
publishing companies, and the author of the free daily e-mail The
Daily Reckoning. He
is also the author, with Addison Wiggin, of “Financial
Reckoning Day: Surviving The Soft Depression of The 21st
Century” (John Wiley & Sons).
You
can sign up for a free subscription to the Daily Reckoning here: http://www.dailyreckoning.com.
This
essay was originally published in The Daily Reckoning.
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