Sunday, November 16, 2008

The Real Conspiracy: Keynesianism and Central Banking

Judging on the basis of Ben's previous post, it appears to me that he has experienced a quantum leap in his understanding of economics and the present sorry state of affairs. To be specific, he appears to have seen through one of the greatest conspiracies of our time: the near universal acceptance of the economic false-doctrine of Keynesian monetary theory and the conspiracy of central banking to control world economics and politics. Another prominent quote from the article he cited:
"While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth," Bush said at Federal Hall on Wall Street. "And the surest path to that growth is free markets and free people."
This statement is patent nonsense. As I have said, the problem is ethics, and so is the solution. When we get that right, we'll have free markets. Then we'll have sustainable economic growth. "Economic growth" and "freedom talk" is neither the solution nor the problem. It is a distraction. The world had mostly free-markets for nearly a century. It had sustained economic growth. It was called the Industrial Revolution. It decided that was not good enough, and got rid of it. Bush only gives the free market lip service as he works to undermine it himself. Sadly, he probably believes he is pro-free market because he and most other people alive today do not know what a free market is. That is because we are all Keynesians. The fact is, Keynesianism displaced Classical economic thought, the chief proponent of the free-market, many decades ago in the midst of the Great Depression. The Depression itself was caused by an abandonment of the free-market a few decades previously when the Federal Reserve was created in 1917. It pursued a policy of monetary expansion during the 1920's which resulted in the now famous boom of the time, then tightened its policy to produce the bust which followed. The Federal Reserve had been created primarily to steal (ahem, "finance") the funding necessary to finance the US war machine during World War I. It was also supposed to serve to alleviate the bank runs that plagued the ethically and financially bankrupt fractional reserve banking system, which never should have been legal in the first place. Its purpose, known to the public or not, understood by the politicians or not, was the forcible withdrawal of their savings through inflation for the purpose of financing government policy. That policy was waging war and propping up bankrupt banks. Not exactly free market. No surprise that it failed. The Austrians, a division of the Classical school and true proponents of the free-market, vocally criticized this system, and for a time in the early 30's it appeared they might become the dominant school of thought as their apocryphal predictions were coming to fruition. However, they became displaced by the followers of Keynesianism, who were seduced by the promise of government managed solutions and a guaranteed path to prosperity and comfort if they would only give the government and Franklin Roosevelt a little more power. Just a little more. Today, Keynesianism dominates the economic discussion we see on business shows on the boob tube and is universally taught as the gospel in the classroom. Occasionally a fringe "supply sider" or a Monetarist (follower of Milton Friedman, or the Chicago school) voice is heard, such as that of Arthur Laffer, but that is rare. Nobody mentions the lessons of the Classical school. It is considered a barbaric relic of the past. According to mainstream opinion, we've moved on since then to more modern ideas. The choice is Keynesianism, or Keynesianism-lite. Keynes was not a defender of the free-market, he was a usurper. Neither the Republicans, nor the Democrats, nor any major political force is for free-markets, though many claim to be. Not even Arthur Laffer. The only ones left are the scattered few Austrians and Ron Paul. Who calls for the abolition of the Federal Reserve or a return to gold as currency? Nobody. To understand what this means, it is akin to "modern" physicists reasserting that lighter objects actually fall more slowly than heavy objects, after a century of studying Newton's laws which state that F=ma and all objects should therefore fall at the same rate. Economics as a field rapidly advanced through the 19th century to a near consensus of opinion at the time the Austrian school came into being, then was rapidly overturned by a change of sentiments early in the 20th during the crisis of the depression. This is bizarre. The reality is that we had it right, but when we didn't like the truth, we turned to pleasant sounding fiction. Keynes was the man of the hour with the tale of the hour. He gave us the illusion of control, and people loved it. We all bought into it. This is the secret of a successful conspiracy, according to R. J. Rushdoony (and Gary North, where I encountered the idea):
The important question to ask is this: What makes a conspiracy work? Let us suppose that a number of us conspired together to turn the United States into a monarchy, and ourselves into its nobility; let us further suppose that we could command millions from our own to achieve this goal. Or, let us suppose that, with equal numbers and money we conspired to enforce Hindu vegetarianism on the country. In either case, we would have then, not a conspiracy, but a joke. A successful conspiracy is one which is so in tune with the faith and aspirations of its day that it offers to men the fulfilment of the ideals of the age. It is an illusion to believe that dangerous or successful conspiracies represent no more than a small, hidden circle of diabolical men who are manipulating the world into ruin. Such groups often exist, but they only exist and succeed because their plan and hope is closely tied to the public dream and the faith of the age. If the threat were only from small circles of hidden men, then our problem would be easy. Then, as Burton Blumert has observed, "if we only unmasked the conspiracy, all our problems would be solved, but if the trouble is in all of us, then we really are in trouble."
That's the trick: we all buy into it. Its a "conspiracy" on a grand scale. We are all a part of it. It is a mass delusion that we buy into because we have adopted a culture that wants to hear these things. And we're never going to fix it so long as we do not know, and don't want to know, what's going on. Ignorance keeps the Federal Reserve and the powers that be in charge. That's the critical part: we don't want to know. We want to believe the fairy tales. They aren't true. That's the real conspiracy. Gary North pointed it out to me. Now, I'm pointing it out to you. Ben and I see through it. You can, too. Don't be a part of it. Don't listen to mainstream economics. Use the links I've put on this very page under "Scott's Econ Links." I know that "Austrian theory" sounds gimicky and strange. I thought so too. I was wrong. Go to Read Mises on Money. Go to Gary North's site. Get a subscription. Read all you can. Its worth it. Learn the truth.

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