The Fringe, Part III - The Austrians and the Pseudo-Austrians

Lastly, we come to my little neck of the woods -- the Austrian School.   What we have is a well developed and comprehensive theory of money and economics that contradicts a lot of what the other schools say, or at least, will acknowledge is true.  And based on that theory, we believe that the money system as it stands is illegitimate, or at least, a complete repudiation of what we would look for in a decent system of money.  It's not just a case of 'bad management.'  It seems to us that almost all of the problems we are seeing today are the result of our screwed up money system, and the fact that the whole thing is designed on the basis of theories that are completely wrong.  Nothing's gonna change so long as that system stays in place.  That's probably the most controversial thing that separates us from everybody else. 

The Fringe, Part II - Economic Heterodoxy

Hmmm.  I see you're back.  Lost something?  Oh, I see.  Thought you'd have another look around.  Well, how 'bout I give you the grand tour?  'Least the little area I know about, anyways, which ain't much really.

Mainstream Keynesianism and Economic Heterodoxy

The little part I know of just so happens to be the area lots of folks are interested in these days -- Economic Heterodoxy.  My little corner is the Austrian School, and it's the area I know best.  But I'm passing familiar with some other parts that you might wind up encountering, so I can give you some little idea of what's going on there, and why you should maybe steer clear of a few of 'em.

The Fringe, Part I - The General Whereabouts

Howdy, stranger!  What brings you out to these parts?

I see!  So, you've come to doubt the 'experts,' have you?  The economy's got you stressed, and the nice government men, the egghead academics, the politicians, journalists, and the other know-it-alls on the TV set say they understand the situation, everything's under control, and there's nothing to worry about.  Nevertheless you do.  After all, they were saying that before IT happened, so why should anybody believe them now?  And weren't they all operating on the same theories that you were taught in school?  That everybody knows to be true?  Is it possible that *gulp* everybody is wrong?

Congratulations!  In that little thought, you've just taken a very big step -- right outside the mainstream and into the fringe, if only for a moment or so.  Might I invite you to stay awhile and chat, before you come to your senses and step back into that humdrum world you came from?  You see, you've gone and done a very dangerous thing -- very dangerous, and very good, mind you -- and so long as you're out of your right mind, you might as well hear a word or two from a professional lunatic if you're going to be about these things.

The danger is, you've really upped the ante in life. You've doubled down, though you may not have realized it, and it really could go either way for you.  Before, you were safe and snug in what THEY tell you.  You operated in THEIR system, according to THEIR rules and theories, right along with most everybody else, and you could really only go as wrong as the rest of the herd.  Now, out here, you could go much more wrong...but you might just get a thing or two fantastically right.

Economic Ignorance at the IMF

Came across this today and couldn't help but roll my eyes:

WASHINGTON (Reuters) - The International Monetary Fund on Wednesday slashed growth forecasts for every major country and urged governments to take forceful action to ensure the world economy's recovery from a severe recession.

In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 percent this year in the deepest post-World War Two recession by far.

Growth is set to re-emerge at a sluggish 1.9 percent next year but the pick-up depends on aggressive measures to repair a poorly functioning financial system. "The longer this goes on, the longer and the deeper will be the recession," IMF chief economist Olivier Blanchard told a news conference.

Just three months ago, the IMF had projected global growth of 0.5 percent, although last month it warned of a deep recession.

The sentence that really hacked me off occurs a few lines later:

In offering new economic projections, the IMF said government measures to battle recession should be sustained, if not increased, in 2010, warning that premature withdrawal of stimulus could set back a recovery.

So, the IMF admits that its economic projections were completely wrong, not even close, in fact, then tells us that if we do not follow its prescribed actions, we are in for an even rougher ride. Why should we believe them? It wasn't long ago that the IMF was predicting 2.2 percent growth for 2009. Last November, in fact. That's a pretty big revision in only about six months Just in case you haven't figured it out yet: you probably shouldn't listen to the bureaucrats at the IMF, and pretty much all other such bodies, because they do not understand economics and have no idea what they are talking about. Either that, or they are deliberately lying for some ulterior motive. I'm beginning to suspect the latter, as it occurs to me that no sane person working for that place could possibly think that their economic models were correct at this point. If they were actually trying to do economics at that place, I'd have never guessed. Note that it is not even a debatable point whether or not "stimulus" is effective in "reviving" the economy. No, any point of view which questions the proposition that government action is necessary or even effectual, let alone ethical, in bringing about economic recovery is not even considered. It is not that it is suppressed; it is not that it is questioned. It is not even mentioned. Unless he is already quite astute and given to such questioning, such a train of thought escapes the casual reader. The thought never occurs to him. That's how the conspiracy works, boys and girls. Soon, the thought will have been erased from existence. The government gets control, because, well, that's just the way it works, after all. A good economy is the result of government policy, and if things go wrong, the government has to step in and fix things. Everybody knows that. Well, maybe not yet. But, if all goes according to plan, someday soon they will...

Gerard Jackson: It's NOT a Conspiracy

Gerard Jackson has opined that it is stupid to believe that recent financial shenanigans are the result of conspiracy:

Every economic bust demands scapegoats. And you can always bet your bottom dollar that politicians and journalists will be the ones leading the mob. (One need only recall the Democrats' recent efforts at whipping up hatred against bankers for confirmation of this dismal fact). But all said and done, you can never beat a good conspiracy story. And that is basically what Simon Johnson has given us. According to this brilliant student of economic history America is facing

elite business interests -- financiers, in the case of the U.S. -- played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them. (The Quiet Coup, The Atlantic, May 2009).

These sinister business interests have now formed a "financial oligarchy" whose political balance of power . . . gives the financial sector a veto over public policy". (And some of my readers still wonder why I am so contemptuous of journalists). Like the vast majority of his colleagues Johnson is completely ignorant of economic matters and of anything pertaining to the history of economic thought and economic history. (With respect to the latter the same can be said of the vast majority of economists and economic commentators).

Gerard Jackson is indeed much more highly informed than most anybody with regards to the intricate workings of economics and Austrian economic theory. I don't think I have ever encountered anyone with as detailed a knowledge of the economic literature, and an apparently near photographic memory as he is able to pull up volumes of apt quotations from all sorts of sources for each of his regularly appearing articles. (Gary North might give him a run for his money in this regard, though.) That being said, I think he is wrong to dismiss conspiracy as the source of our problems. It is perfectly true, as he points out, that the Fed and other central banks of the world are the engineers of the monetary inflation that allowed things to go so completely hog-wild. I do not argue one bit with his model of boom-and-bust. But that hardly explains the present stream of selective bailouts. And it hardly explains why central banking and its incurable penchant for inflation exists in the first place. I do not claim to have special knowledge of the inner workings of any supposed oligarchy. But I do know a few facts about basic economics that would lead me to believe that it is virtually certain that conspiracies of the sort to which Simon Johnson alludes must really exist. Namely, individual economic actors tend to undertake behavior which furthers each individual's own self-interest. That is probably the quintessential economic axiom. It is roundly acknowledged by all parties involved without the slightest bit of controversy that inflation results in the net transfer of wealth from one party to another, and further it is clear that the source of inflation is the world's central banks. It is therefore hard to imagine that the main beneficiaries of said inflation, which are primarily the governments and credit institutions of the world, would not seek to exert an inflationary bias towards central banking policy. Yes, I am fully aware of the fact that Austrian economic theory is far from mainstream. But I find it hard to believe that the parties involved are completely unaware that monetary inflation is to their benefit, and are further completely unable to see the dishonesty inherent in government's expansion of the money supply. Furthermore, as Gerard Jackson and every other Austrian economist well knows, central banks are entirely unnecessary to a functioning economy. A healthy economy needs no direction or monetary management. It just needs a functioning money system, preferably a commodity money, which is not an artificial construct but a natural product of human endeavor and needs no body for its creation. Throw in a reasonable degree of rule of law, and that's it; the rest takes care of itself. There really is no reason for a central bank to exist, except to exert influence on the economy. Influence? This seminal fact begs the question: to what end? Why should a healthy economy need influencing? To somehow improve upon reality, for the good of all, we are asked to believe? Hardly. As Adam Smith has said in one of his most famous quotations (and which I find myself using all too frequently):

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

I can't imagine any population which spends more time in meetings and discussions of their collective action than politicians. And if you think that their activities are not undertaken primarily for their own individual self-gain, unlike businessmen who are only in it for profit, you are hopelessly naive. The Chinese conspire against the West and their own population, attempting to use mercantilism to enrich themselves above and beyond their own industrial and manufacturing competitiveness. The Fed conspires against holders of dollars in an attempt to direct the economy to politicians' desired ends and reward client banks. Voting blocs conspire with politicians and against one another, trying to get the biggest share of government-seized booty. The entire world is wrapped up in a conspiracy of all against all and all against God, each actor seeking to have his way through guile or force instead of through voluntary transaction and the normal course of events subject to the non-arbitrary and unchanging laws of the universe. Everyone knows that there will be big, big losers as a result of the implosion of the credit bubble, which is to say, as a natural result of the misallocation of resources caused by the FED's monetary expansion over the last 30 years or so. Everyone knows that during the inflation of the bubble the FED created big winners who were about to become big losers as a result of its tightening. Everyone knows that the entire purpose of the bailout is to ensure that the government gets to decide who it will foist the losses onto. There is no reason for the government to act except to decide who is going to shoulder the burden instead of letting the market decide, and to further the interests of those who have a say in the matter. This universal human tendency towards acting in self-interest is precisely the reason that monetary and economic systems should not be under the control of anyone at all. This is not lawlessness; it is placing these matters into the custody of natural laws which are always in force. If it were otherwise, logically, those in charge would be influenced by their own selfish goals and desires. Placing these matters under the custody of self-serving and dishonest politicians is to subject ourselves to the lawlessness of arbitrary and corrupt human whim, as we are now clearly seeing. It is to subject ourselves to the grandest conspiracies imaginable. To argue that politicians are hopelessly corrupt, which is to say, spend their professional lives neck deep in conspiracy, but that somehow central bankers are pristine little angels who shun such things strains all credulity. Are we to believe that it was all an honest mistake, simply because they happen subscribe to the wrong economic theories? Surely, they do subscribe to wrong economic theories, but I believe it is obvious that there must be more to it than that, particularly with regards to why they subscribe to their chosen theories in the face of countervailing facts. These people aren't stupid. Spilling a glass of iced-tea on oneself over dinner is an honest mistake. Printing money isn't. Taxpayer financed bailout isn't. Both are inherently, obviously dishonest. These activities create winners and losers. The deciders have motives. They aren't good ones.

Conspiracy: A Biblical View

I recently finished reading Gary North's Conspiracy: A Biblical View. I had known about this book for some time, but for whatever reason hadn't found it sufficiently interesting a topic to read. After all, there are an awful lot of things out there demanding attention right now, and I just haven't had the time for reading much recently. I have a whole pile of books that I have intended to read sitting around gathering dust, or whatever it is that e-books gather when they are not in use, and this topic was certainly not one that was screaming for attention considering the present economic situation. But enough of that. So what did I think? First of all, let me say that I am not predisposed or even mildly sympathetic to the view that there are about three guys or some secret society that runs the world from the shadows. This point of view really grates on me. I get very tired of the infantile thesis that Hitler or Stalin or Mao or whoever ruined Germany, Russia, China, mankind, the 20th century, or fill-in-the-blank all by his lonesome self. No single human being can accomplish a feat this large without a considerable amount of help! These kinds of statements deny the culpability of the innumerable guilty parties that helped these leaders in their gruesome tasks, or otherwise stood by and allowed it to happen. They also ignore the fact that for anyone to attain the kind of political power that these men undeniably had, there must be a very sizable population that was sympathetic to their professed ideals, at least for a time. Likewise, if there really are a handful of sinister people operating from the shadows to accomplish all the evils of this world, this is only made possible by a compliant population. Not a knowing population necessarily, but at least one that "goes along with the plan." But surely people have minds of their own, or at least ought to be held accountable for their own actions? If the "conspiracy" is guilty of evil, this would imply that we ourselves are guilty of evil, for it is we who carry out their will. Are we questioning the actions we are asked to undertake? Do we bother to ask whether what we are doing is evil? If we are not, or worse, we ask, answer, and do anyway, then who is really to blame? In short, such a view of history is simply ludicrous, and is in my opinion an attempt by certain parties to avoid blame, or to avoid having to consider the possibility that humanity as a whole is capable of such evil. It is easier to shift all of the blame onto a single person, preferably a dead person for whom it is widely acceptable to publicly condemn and is incapable of defending himself. But it is not rational. This is why I have taken the cultural view of history. It is not possible for a single man, or even a few, to control a vast population which is diametrically opposed to such rule. Government necessarily is a product of culture. On the other hand, our very own conspiracy theorist Ben can point to many events which clearly show acts of duplicity on the part of the ruling class towards the ruled. There is undeniably a great deal of shuck-and-jive that goes on in the world of politics, and an awful lot of instances of voters manifestly not getting what they asked for. So who's really in charge here? Somebody's got to be making these decisions, and it sure as heck isn't "We the People." If you've been paying attention to this blog for some time, you've seen an ongoing debate between the two of us over precisely this point. After reading this little book, I'd have to say that the debate is officially over. It seems that we both had a little bit right (OK, so maybe Ben had a bit more than I did), but neither of us knew the half of it. At any rate, I'm surrendering my position. I agree with Gary and Ben: it really is a conspiracy. But there's a lot more to conspiracies than you might think. I was pretty amazed how similar a lot of what we had been thinking was to some of the central ideas of this book. It is true that I read a lot of Gary North's stuff, but I tend to avoid things like this. I usually stick to his economic and religious writings. Maybe its just that his thinking has influenced me to such a degree that I have basically shuffled down paths of thought that would lead more or less to a lot of the ideas in this book. I also encountered one of the key ideas in a quote from R. J. Rushdoony that Gary uses frequently, which I used awhile back. But Ben? Actually, the Rushdoony quote is a good place to start:

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."

And that first question is what this book is about: what makes a conspiracy work. Of course, it is a pretty short book, and provides mostly just an outline. If you are looking for a lot of specifics, this isn't the book for you. But it might be a good place to start, as it has an excellent bibliography. This book is more for a person who might be straddling the fence, who's a bit skeptical of both sides, the mainstream and the kooks, thinks there might be a bit more going on than makes the evening news, there might be a bit of manipulation going on, but has little patience for theories about space aliens killing JFK (sound familiar?) A lot of space is devoted to the broader, shared ideology of the "conspiracies," the main one of which he terms the "Establishment," (yes, that Establishment, the one that controls the USA) and just how they manipulate public opinion, a necessary requisite for controlling the public, rather than the public controlling the conspirators. A lot of it will sound familiar: control of the mainstream media outlets, control of academia, etc. But a good bit is commonsensical stuff that I never would have thought of: passive suppression of truthful conspiracy theories themselves as "kooky," even as the ideas promoted by the conspirators are far and away more bizarre. The conspirators use a lot of human-self censorship and irrationality to accomplish their goals (controlling public education helps in this regard...), and silence debate using such means far more than they actually bother to combat their rivals head on. But be forewarned: if you're not on board with the whole Christianity thing, first of all, you really ought to reconsider, but secondly, as the title suggests, the book takes a distinctly Christian view of things. If you are easily off-put by the suggestion that God has much to do with things that happen in real life, this book is going to get under your skin. Gary takes the view that all conspiracies are evil and necessarily against God's chosen order. He explicitly says that:

Western Civilization's moral foundations and especially legal foundations were constructed in terms of biblical morality and biblical law. Thus, the conspirators are at war against Western Civilization.

So, if you're an atheist, better keep an open mind (or find another book. But I'm telling you, you're missing out...) The last part is devoted to combating the conspiracy. Believe it or not, Gary has a lot of confidence that the conspiracy will eventually be broken. Maybe that's because he's taken the view that they are going up against God. I suppose smart money would naturally be on The Almighty. But he has a lot of regular old boring arguments to make his case, too, though this was written sometime before the present financial crisis. Interestingly, he even predicts in this book, which is fairly old, that there will inevitably be a severe financial crisis which will force the population to "choose sides," and though he isn't certain the good guys win this time around, he seems to heavily favor them. This is on the basis of the "conservative uprising" that has been occurring over the last few decades, throwing a lot of unwanted light on the institutions controlled by the Establishment, even if they don't necessarily have their own act all that together. Of course, he's got an unfair advantage making such a prediction, being a fantastic economist in his own right, but I still find it impressive that he was predicting these kinds of things in the '90's. He terms the solution "education," but to me, it sounds more like simple rejection of the conspirators. As he even explains, understanding isn't really necessary; just a simple distaste for what the conspirators have to say and want to do, and a willingness to give them the boot. And since he is of the opinion that the conspiracy is inherently anti-God, the solution is simply understanding and acceptance of God's order in their lives. Knowledge or even awareness of the machinations of the conspirators is really beside the point. As the Rushdoony quote implies, the conspiracy needs public approval of its plans. The conspiracy is only in charge of what the public wants to do. If the public isn't game, and can't be manipulated into playing the way the conspirators would like, well, it's all over. I would highly recommend this little book to anybody with any interest whatsoever in the topics discussed on this blog. No, there are no monetary statistics, and not much Austrian theory either, but I have a feeling most folks would rather tune in for politics anyway. And if you really want to "do something" about the present situation, I can't think of a better source. So, what are you waiting for? Check it out!

Gary's Column Has Wings

I posted a brief comment (and a recommendation that you READ!) a column by Gary North which first appeared as a regular post on his website for subscribers only (where I got to read it first! hahaha!), and then later appeared on LRC, at which time I commented on it since it would be available for your viewing pleasure. It was then commented on by Vox Day, and now it has moved to one of the daily columns on Mises.org. The reason this particular essay has legs is BECAUSE IT IS IMPORTANT! What we are seeing probably is just as big as he says that it is. When historians are writing their history books two centuries from now, they will say that American power began its final collapse in October, 2008, just as Soviet communism began its collapse with the fall of the Berlin wall. It was the event that revealed the Empire had no clothes. The ability and willingness to project overwhelming force held the Soviet bloc together. The American financial system is what is holding the "American empire" together, such as it is. This is the means by which America funds its military operations, projects power across the globe, and maintains domestic tranquility between some very unhappily wed countrymen. Without it, the American government is impotent, both at home and abroad. Similarly, the USSR had been in dire financial straits prior to the civil unrest which brought it down. I have a Russian friend whose mother's factory had been paying her in alarm clocks in the months prior to collapse, because the domestic economy had become something of a joke. Nobody took the financial system seriously anymore. It is difficult for a government to project power when money and finance has become a laughingstock. How does one pay its soldiers and police? How does one ensure that they don't pick up "side work" to help pay the bills? I think this is one of the major problems Mexico has, and it seems to be getting worse lately. The money and lifestyle available from illicit activities simply overwhelms what legally legitimate activities can provide. The mismanagement and dysfunction with which their domestic affairs are handled has ensured that their economy cannot offer up substantial legitimate opportunity, while at the same time ensuring that the domestic government hasn't the resources to effectively dissuade illegal activity. Coupled with a northern neighbor whose citizens can afford to pay a fortune for certain substances that for some reason it is also intent on banning, and you have a recipe for, well, Mexico. This is an important lesson: the ability of a government to project power/maintain order is at its most fundamental level based upon its willingness to refrain from using that power, which entails tolerating a bit of liberty and that other players acquire a bit of power in their own right. Without a bit of liberty, economies simply don't function. When a government tries to control everything, in effect it is able to control nothing. In other words, for a society to function, it has to embrace a certain level of Austrian theory. This is because, simply, Austrian theory is true. Acting on what is true results in positive outcomes in a world governed by universal laws, both physical and ethical. "The truth shall set you free," as a very wise Man once said, at least to what is possible within the confines of this physical existence. An economist, politician, or civilization can no more do just as one pleases than an engineer can design an aircraft in the shape of a cube simply because he desires it. An engineer that ignores the truth of physical law will forever remain on the ground. An engineer that submits to them and takes them into account may one day fly among the clouds. So it is with civilizations. China appears to have learned this lesson to some degree, probably from the example of the USSR. America knew this lesson once, and seems to have forgotten. Of course, said future historians probably still won't understand economics, certainly not as well as Gary North does, and the collapse will just go down as the end of an excessively free financial system that was allowed to rum amok. At least that is how history has treated other such occurrences, as we perpetually hear the Great Depression being explained and we are currently being force-fed about the present crisis. Some truth we simply never accept.

Are You Deviant?

Found a neat link on Vox's blog:

Now we can see why blogging and the Net matter so greatly in political journalism. In the age of mass media, the press was able to define the sphere of legitimate debate with relative ease because the people on the receiving end were atomized— meaning they were connected “up” to Big Media but not across to each other. But today one of the biggest factors changing our world is the falling cost for like-minded people to locate each other, share information, trade impressions and realize their number. Among the first things they may do is establish that the “sphere of legitimate debate” as defined by journalists doesn’t match up with their own definition.

In the past there was nowhere for this kind of sentiment to go. Now it collects, solidifies and expresses itself online. Bloggers tap into it to gain a following and serve demand. Journalists call this the “echo chamber,” which is their way of downgrading it as a reliable source. But what’s really happening is that the authority of the press to assume consensus, define deviance and set the terms for legitimate debate is weaker when people can connect horizontally around and about the news.

And thank goodness for the Internet!

This is one of those articles that, once you read it, you realize, "Oh my goodness! That is exactly what people do! That is exactly what is going on!"

There really are such things as conspiracies, folks. They just don't look like what we expect; there's no meeting in dark alleys and secret handshakes. It turns out they're freakin' obvious, if we'll just pull our heads out of wherever we've stuck 'em and think a little. Our knee-jerk, government educated selves are usually a big part of the problem.

On a personal note, it's just too bad I came across all this stuff so late. I waited too long to get on the Internet bandwagon. But better late than never, I suppose.

Oh well. I'm still doing better than the liberal-by-twenty, conservative-by-thirty. I was conservative-by-twenty, libertarian-by-thirty.

But, come to think of it, these days that's really just two ways of saying the same thing...

Herbert Hoover's New Deal

The standard American mythological explanation for the roaring 20's and the Great Depression is something along the lines of capitalism got rolling along at a crazy pace, shot way past what was sustainable, then the economy crashed. Sometimes people mention the Smoot-Hawley tarriff, Milton Friedman's Chicago boys say the Fed stupidly contracted the money supply, instead of expanding it as it should have, but other than that, nobody really seems to know for certain what it was that caused the crash. Most people think FDR's New Deal and WWII somehow combined to bring the US out of the Depression, but most people don't seem to know for sure how this worked. All of this is flatly wrong, but probably the single biggest myth is this one: that Herbert Hoover let the Depression get immeasurably worse by insisting on laissez-faire non-interventionism in the situation, so things just spiraled ever worse and worse. I know this is what I was taught in school. Nothing could be further from the truth. Anybody who studies Hoover's record before the presidency will know that he was the biggest busybody interventionist bureaucrat in the world. He became famous for organizing food supply chains for government efforts in WWI, and was so popular for his "Hooverizing" efforts that he ended up being Secretary of Commerce for Republican Presidents Harding and Coolidge (after having worked for Democratic President Wilson) and was eventually elected President himself. Even Wikipedia, not know for being a bastion of conservative thought, reports:

As the United States Secretary of Commerce in the 1920s under Presidents Warren Harding and Calvin Coolidge, he promoted government intervention under the rubric "economic modernization".

Are we to then believe he sat by and did nothing during the onset of the Great Depression? It strains credulity. Here is an excerpt from a speech given by Hoover himself, which I found in America's Great Depression by Murray Rothbard, which I am still in the process of tackling as part of Voxonomics.

we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world. Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for . . . “the common run of men and women.” Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitterend liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction.

Herbert Hoover was not a proponent of laissez-faire. He was an interventionist through-and-through. He started the New Deal far before Roosevelt. The policies of FDR should be seen as a continuation of the policies of Hoover, not a departure from them. And is it any wonder they didn't work? "For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished." Maybe its just me, but I would think most companies would try to operate at a profit. Maybe the reason they didn't hire more people and expand their activities and productive capacity was because THEY WEREN'T ALLOWED TO MAKE ANY MONEY! All we have to fear is not fear itself. What we have to fear is the grasping hand of our fellow citizen and his ally, the tirelessly meddlesome, power hungry bureaucrat. There is only one word which could possibly describe the whitewashing of our history books in such a manner, and replacing it with something so bizarrely counterintuitive that people would actually believe it. Wait for it.... CONSPIRACY!

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 Mises.org. Read Mises on Money. Go to Gary North's site. Get a subscription. Read all you can. Its worth it. Learn the truth.

Alan Greenspan = John Galt?

As Ben is quite fond of conspiracy theories, I thought I'd throw this one out there. It is really quite interesting. I saw it first on Gary North's site, then went looking on google for more info. The basic premise is that Alan Greenspan saw/sees himself as a John Galt, a la Atlas Shrugged. For those who haven't read the novel (you should!), the story is about how global socialism and human socialistic tendencies lead unproductive people to attempt to live on the backs of the productive. John Galt leads a revolt among the productive folks, urging them to quit what they are doing and join in the parasitic behavior. By destroy their own successful businesses, there is nobody left to support the unproductive, and they are left to survive on their own pathetic means. John Galt is known as the "man who stopped the engine of the world." Alan Greenspan appears to have very nearly done the same thing: he may very well have destroyed the US dollar through his inflationary policies. The US dollar is now the world's reserve currency, and serves as the glue holding together the world economy as we know it today. Actually, Austrian critics of Alan Greenspan have been saying that he has destroyed the dollar and the American economy for some time, creating a number of bubbles including the Tech and Housing bubbles, and now the commodity bubble. But nobody, to my knowledge, ever accused him of doing it deliberately! They all seem to agree he was only incompetent! What makes it look like a conspiracy is that Alan Greenspan was actually a very, very close friend of Ayn Rand. Like the Austrians, the Objectivists (Ayn Rand followers) despise the Federal Reserve and believe the country should use gold as currency. Yet Ayn apparently did not object to one of her star pupils becoming chairman of the Federal Reserve. Very strange... Further, his behavior very closely mimics exactly what characters like d'Anconia did in the book: suddenly do a complete 180 and pretend to go along with the system and adopt its views, and use his position and skill to totally destroy the institution he is in charge of, all the while acting like he doesn't know what's going on. Recently, Greenspan made news by "admitting" that maybe free markets didn't really work. Very out of character for a Rand follower, but exactly what one might expect of a faker along the lines of a John Galt trying to destroy the present financial arrangement so that it must be recreated from scratch. Preferrably, better scratch. Am I buying it? No, not really. I'm not big on conspiracy theories. I tend to think that culture determines history more than anything else. But who could ever say... only Greenspan himself! And he'd never tell...