Friday, November 14, 2008

Go to John Galt!

Great link, Scott.  Yes, I do like a good conspiracy theory every now and again.  This one was both educational and thought-provoking.  But, I want to add something to it that might yield a more "rational" theory.
I was poking around on the Internet yesterday, and I happened to come across President Bush's speech before the G20 meeting.  I decided to listen.  Most of it was the usual economic rhetoric, such as:
"...the surest path to growth is free markets and free people."
Ok, that sounds good....but then Bush said this:
"I'm a market-oriented guy, but not when I'm faced with the prospect of a global meltdown."
Mind you that the article where I found this quote is entitled:
"Bush defends free-market system ahead of G20."
That is not a defense of a free-market system.  A defense of a free-market system would have been something like, "I'm a market-oriented guy, ESPECIALLY when I'm faced with the prospect of a global meltdown."  If you don't trust the market in the face of a meltdown, then when do you trust it?
I found the answer today on the Mises site (thank you, Scott).  In the November 13 audio article Jeffery Tucker at about minute 2:30 explains that one who studies the Austrian or Classical schools of economic theory... 
"...is immediately confronted with the reality that this is of course not the economic theory propounded in the business press or accepted by the government.  The major theoretical apparatus that these people use has its origin in the work of John Maynard Keynes, whose major assumption...is that the price system does not work properly."  
Tucker then explains that Keynesians view prices as something that should be controlled, prodded and guided, along with everything else in the economy.
Even though Bush talks a lot about free markets, his seemingly off-the-cuff personal admission is actually seriously profound.  He just admitted to which school of thought he belongs.  He's a Keynesian, or at least he's acting that way.  So is Paulson, Bernanke, and probably every government official we've had for the past century.  And finally, probably so is Greenspan.  Maybe Greenspan WAS a laissez-faire guy, but it looks like he changed his mind.  Or maybe he decided that if you can't beat 'em, join 'em was a better approach.  
Granted that this theory isn't nearly as cool as thinking that Greenspan wants to start his own free-market society somewhere....actually, it sounds kind of nice....
Go to John Galt!

2 comments:

  1. Wow, Ben! I'm really impressed!

    You are exactly right. We do not have a free market, we have a government "prodded" one exactly as you have said, and this is the market currently in meltdown mode.

    A truly free market would probably be quite boring. As it is, everybody wants to control this or that. Nobody called it inflation when home prices and stock prices were rising to unreasonable levels. But the truth is, it was inflation! It was driven by the FED's printing press! Only when it showed up in gas and food prices further down the asset food-chain did anybody start complaining.

    You can't have your cake and eat it too. In a free market with accurate pricing, your house really isn't that big a deal. The stock market isn't likely to make you rich. You have to actually work hard and earn your keep if you want a great life. America's pill-popping culture wants a fix for everything and everything to be easy. It doesn't work that way.

    The Keynesians promise us the moon, and deliver us into messes like this one. Like the great depression. The existence of the Federal Reserve and central banking is the primary tool for their schemes and is an anathema to anyone who is free-market oriented.

    If Bush and Bernanke were actually for free-markets, they would call for the FED to be abolished, and move to make the practice of fractional reserve banking illegal as a violation of contract law. These two simple, straightforward moves, plus a move to make gold the currency of this country, would completely obviate the need for 90% of the regulatory apparatus and bureaucracy currently in place to "fix" the problems that it itself creates with its price manipulation and policies of monetary inflation.

    No, it wouldn't be paradise; nothing ever is. People are resourceful creatures and I have the utmost faith that even under the best of conditions they would still find things to screw up. But these events would be isolated, not like the systemic and inescapable boondogles we currently face every 20 years or so. We would have to work hard if we wanted to live well.

    But at least we'd have earned it. At least we'd have a fair shake. That's a far cry better than what we have now.

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