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UNDERSTANDING
BUBBLES
No one need take my word alone for this: "Above all, we must realize that no arsenal, or no weapon in the arsenals of the world, is so formidable as the will and moral courage of free men and women. It is a weapon our adversaries in today's world do not have. It is a weapon that we as Americans do have. Let that be understood by those who practice terrorism and prey upon their neighbors." Ronald Reagan One of the first lessons that we learned in medical school is that observers are more astute at recognizing things that they have been trained to recognize. Some would call it pattern recognition, but it is more complex than that. Shortly after proving the benefit of a trained observer, we learned another related lesson. The incidence of any disease is directly proportional to how often and how hard you look for it. Sophomores in medical school were perpetually sick, euphemistically known as sophomoritits or the sophomore medical student syndrome. Every time students learned a new disease, it would not be very long until some students began to "see" the signs and/or symptoms in themselves. While the Chairman maintains that bubbles cannot be recognized in real time, I will proffer that once you have learned to recognize a generic bubble, you can then recognize bubbles where ever or in what ever domain they form. And with experience, you learn to distinguish most of the illusions or the imaginary from the real thing. Socialism is not the only bubble that "professional" politicians have fostered. Governments at every level have become bubbles. All government growth occurs at the expense of individual Americans. Every government employee is an expense to every American family. There are now reportedly more government employees than are employed in the entire manufacturing sector of the US economy. Every law, every regulation and every government employee takes a measure of freedom away from each and every American. If you have ever wondered what all of those government "workers" do all day to stay employed, I recommend screening the Federal Register where proposed regulations are published. Volume 68, more than 75,000 pages, covers the year 2003, while 2004 is represented by Vol. 69. Vol. 69 went over 55,000 pages (3 columns-small print) on Friday, September 10, 2004. Every state has a similar publication. Let's look at a few charts of government growth, courtesy of Mike Hodges, author of the Grandfather's Economic Report:
Asking the right questions is the first step to getting the right answers, a distinctly different exercise from getting the answers right. If President Reagan is correct, as echoed by my statement above, and the strength and might of the United States are dependent upon the people of the United States remaining free, how much has the trebling or quadrupling of government weakened our nation now confronted by renegade or rogue nations like North Korea, the war with terrorists, and a westernizing China exploding in industrial growth, but still under the control of a communist regime? Anyone who is seriously wondering how many added government workers are civilians versus how many are uniformed military personnel should probably be watching CBS or reading the New York Times instead of this series. For a time, the military might of the Soviet Union's nuclear capabilities essentially matched those of the US during the insane policies of the mutually assured destruction (MAD) era. Pre-Reagan, the Soviet conventional forces capabilities ominously exceeded the conventional forces of the US. Like it or not, the Soviet Union was number one and we were number two. Most Americans lived in fear of the Soviets launching a sneak nuclear attack or that gradually escalating tensions would lead to an accidental or intentional first strike launch from the Soviets. The Soviets were not the threat of causing a nuclear extinction; we were. Our conventional inferiority meant that we would have to use nuclear weapons as our only viable option for meaningful self defense. Limiting ourselves to conventional weapons would have fulfilled the wishes of those on the left who would have rather been "red than dead". Reagan came along and did two things. He embarked on the largest buildup of conventional and advanced weapons technology in history and he determined to end the insanity of MAD by using our technological and industrial supremacy to build an impregnable or near impregnable shield against nuclear attack. After putting policies in place that would allow the economy to strengthen, Reagan began the military buildup of conventional forces. In little more than a decade after Reagan took office, the Soviet Union collapsed and ceased to exist while the US became the only Super-power, and more importantly, a super-power that no longer needed nuclear weapons at all. Freedom and free enterprise capitalism are what made this possible. Ronald Reagan realized that our capitalistic economy could close the gap between our conventional forces and the Soviet conventional forces and then over take them. In addition, Reagan recognized that our advanced technological abilities had the potential to provide us a nuclear shield which the Soviets could not economically or technologically match. Reagan not only won the cold war single-handedly, but he also won it by overcoming strident opposition from Democrats. "Star Wars" could have been the straw that broke the back of the Soviet Union, but it might have been meaningless without the conventional forces muscle to back it up. Without Reagan's vision, the risk of conventional war and an eventual nuclear holocaust would have been much higher. In the early 70's, we kept 300,000 troops in the path that Soviet tanks would take in the event the Soviets decided to take Europe with conventional forces. It was euphemistically stated those troops were there to defend against such an attack. The conventional superiority of Soviet forces were such that it was estimated that they could have taken Europe in roughly five days. Our troops weren't there to defend anything. In truth, those troops were there to die or become casualties. The expectation was that if American deaths and casualties were high enough, that the American people would accept the use of tactical nuclear weapons to defend Europe and the concomitant risk of an escalating nuclear conflagration. Predictions were that the risks would become greatest sometime around 1980 with the peaking of Soviet conventional power and would begin to decline after that as obsolescence, spare parts problems, and supply line deficiencies would begin to reduce the Soviet edge. It was widely believed that Soviet planning was factoring in a use it or lose it factor for their conventional forces. Who knows what would have happened if Carter's finger had been the one that remained on the button instead of Reagan's? No one can know what Carter would have done if the Soviet tanks started rolling through Poland and Germany, but no one can doubt that Ronald Reagan would have done whatever was necessary in order to defend our partners in the Nato alliance. No rational Soviet commander could have doubted; Reagan was not going to blink. The same cannot be said for Carter. Adult Americans who lived through this era know that Reagan's view was diametrically opposite to the views of Democrats. Democrats uniformly believed Reagan's "war mongering rhetoric" verged on insanity. Democrats now claim they believe the collapse of the Soviet Union was both predictable and inevitable. With virtually no fear of contradiction, there was not a single Democrat who believed that during the time Reagan was in office. And to this day, Democrats cannot understand the paradox between the Viet Nam war and the two Desert Storms. As socialists, Democrats do not place the same high value on freedom that free market capitalists do. And it is neither a coincidence nor is it plausibly deniable that Democrats are not willing to place the same high premium on defending freedom as most other Americans. No matter how much rhetoric to the contrary or how Democrats might howl, the voting action of Democrats on defense budgets is a matter of a record. Kerry and Carter are birds of the same feather. Almost all Democrats suffer from the illusion that socialistic economies are as productive as capitalistic economies, but many Democrats also believe the socialistic delusion that socialistic economies can be more productive than capitalistic economies because of the mistaken belief that planners can plan a more efficient economy than could occur with free markets. Reagan's victory over the Soviet Union was made possible by our capitalistic economy's productive advantage over the Soviet's socialistic economy. The continued maintenance of a strong military and a strong national defense requires a strong capitalistic economy. Socialism is the core belief of the Democratic Party, not freedom or national defense. Frank Shostak has written an article entitled The Subsistence Fund published on the von Mises Institute website. Getting the right answers takes more than a fifteen second sound byte. This is a long article, but it is a step by step understanding of the process of capital formation and will help people to understand why Federal Reserve Notes are a medium of exchange, but they are most certainly not money. Shostak's article will also make it easier for many people to understand why socialism and capitalism are incompatible. Understanding capital formation makes it possible to understand why socialism will lower the standard of living of every individual in a socialistic economy. It also explains why only a free market capitalistic economy can raise the standard of living for everyone. If Americans continue to accept socialism as a way of life, socialism absolutely guarantees that Americans will have a lower standard of living. And there is now reasonable evidence to believe the continued acceptance of socialism will mean not only acceptance of a lower standard of living, but also a progressively falling standard of living as well. If national defense is priority one for government, and if socialism clearly interferes with our ability to defend our selves, can socialism be a rational choice? The quote, "Money is the root of all evil," is as old as antiquity, but nothing could be farther from the truth. "Honest money" or "real money" makes it possible for every human being to store and save their units of labor for consumption on "rainy days" and far more importantly to save for investment in capital goods that will allow them to increase their output from each hour of labor. In order for something to truly be money, its value must be stabile or increase over time in order to enable the savings function. Honest or real money is the foundation for the division of labor and the foundation of capitalism itself. Honest or real money is actually the bedrock on which modern civilization is built. Government is the sole source for the corruption of money and fosters the corruption of credit. Money is not the root of all evil; government is. Without a national spokesman and in the absence of a major media presence, only you can spread the word about the Reagan Wing of the Republican Party and the Reagan Renaissance it hopes to foster. You can make a difference. Contact your friends and family. Send a link to these articles to Republican office holders and candidates that represent your district. Inform them of your views on socialism and that you are Pro-choice. Please email a link to this article and one to the Reagan Renaissance Archive to your favorite conservative third party, web site, political analyst, talk show host or any other conservative organization that might have an interest in turning up the heat in order to melt the ice. One man standing on the dock pushing on the bow of the Titanic will eventually push the ship away from the dock. Avoiding the iceberg in our future is going to take a lot of hands on deck. And time is of the essence. Chart Courtesy: The Grandfather Economic Report
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