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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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Best of Bill Buckler
April 1, 2010
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Global Report
The Economic Flat Earth Society

Ludwig von Mises, the greatest economist of the twentieth century, choseas his motto a quotation from Virgil’s Aeneid: Tu ne cede malis sed contra audentior ito - “do not yield to the bad but always oppose it with courage”. This is also the motto of the Ludwig von Mises Institute, established under the direction of Mises’ widow Margit von Mises in 1982. For many years, the Institute has been the foremost platform for the dissemination of the work of the Austrian economists.

Mises published his first major work - The Theory Of Money And Credit -
in his native German in 1912. Tragically, it did not become available in an English translation until 1934.

Six years later in 1940, he wrote a short autobiography which he entrusted to his wife for safekeeping and which was not published until after his death. In that book, he said this:
“I have come to realise that my theories explain the degeneration of a great civilisation; they do not prevent it. I set out to be a reformer, but only became the historian of decline.”

Ludwig von Mises died in October 1973, months after the ideas which he opposed so brilliantly throughout his long life reached their nadir with the onset of the global floating currency regime.

Denying The Obvious:

On March 16, Gold jumped nearly $US 20.00. The reason given in the financial press was the universal anticipation that the U.S. Fed would not raise their fed funds rate and would justify their inaction with another variation of the statement which has become their mantra. The Fed did not disappoint in their press release: “Economic conditions, including ...stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

Official U.S. interest rates ARE at “exceptionally low levels”. At 0.00 to 0.25 percent, they CANNOT go lower. The fed funds rate has now been at this level for exactly 15 months and the Fed is not likely to move them for the rest of this year - unless they have absolutely no choice in the matter.

What is obvious is the simple fact that ALL the monetary, fiscal and financial manipulations have done NOTHING to revive the economy of the US. What is not so obvious is that under VALID economic theory, so brilliantly elucidated by Ludwig von Mises and the Austrian school of economics, there is no way that such manipulation CAN revive any economy. All they can do is make matters worse. The longer they are clung to, the worse the situation becomes. It is now getting very bad indeed.


Those Who KNOW Can Foresee:

Ludwig von Mises was 25 when he began work on and 31 when he published his first major work – The Theory Of Money And Credit - in 1912. That was a year before the Sixteenth Amendment brought in aU.S. income tax and the Fed was established. It was two years before the start of WWI. It was nearly 20years before the crash of 1929 and the global depression which followed.

The great and enduring value of the book was the fact that Mises understood that money and credit could not be approached as a study separate from that of economics “in general”. That was the prevailing opinion at the time and remains the prevailing opinion to this day. The reason for the popularity of separating the study of money from the study of the rest of economics is easily discerned. It allows the state and the banking system to pretend that their manipulation of money and especially credit is quite compatible with the unhampered functioning of the market. From there, it allows them to pretend that the business cycle of booms and busts is NOT a function of their interference with money and credit but a flaw inherent in the market itself. Mises knew this was not so and said just that in his book.

With this knowledge, Mises was able to predict with certainty that the end result of a burgeoning state control of money and credit would be a major economic crash. He foresaw the great depression two decades before it hit. He also foresaw the current global financial crisis a century in advance. From like causes come like outcomes, their severity dependent on the length of time before the outcome arrives.

“Not One Man In A Million”:

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

That quote appeared in The Economic Consequences of the Peace - a book written by John Maynard Keynes and published in 1919, seven years after Mises’ book. Keynes certainly understood the process of debauching the currency. He probably could have “diagnosed” it too, but he chose not to. Instead, he observed the refinement of the process as it unfolded in the 1920s and early 1930s and then designed an economic theory around it. In essence, he told the politicians and bankers what they wanted to hear. He wrote a book, published in 1936, which claimed in flippant, elegant and often caustic prose that what they were doing was economically sound. The book instantly became holy writ and the entire economics profession became “Keynesian”. At root, and despite all the ongoing “controversies”, it still is.

The Man Who Understood:

What Mises understood is what Keynes stated in 1919. He understood that to - “debauch the currency...engages all the hidden forces of economic law on the side of destruction.” He understood much more.He laid out precisely what these forces of economic law were. He explained how they work when left alone to function in a market context. He explained in detail the processes by which government andbanking practice interfered with them. And he described precisely what the outcome would be if thesepractices were continued unchecked. Mises WAS Keynes’ “not one man in a million”. Keynes knew it.He reviewed Mises’ book - damning it with faint praise - shortly after the outbreak of WWI.

In light of the shambles which is today’s global financial system, it is sobering to reflect that 100 yearsago, a man was hard at work on a book which foresaw all of it and proved that none of it had to happen.This happens with distressing frequency in history. Eratosthenes measured the circumference of the earthwith astonishing accuracy using sound basic principles 2250 years ago. Most of the world didn’t believehim until what was left of Magellan’s fleet made it home to Seville in 1522. A “Flat Earth Society” stillexists. So does its economic equivalent. The difference is that the one is a marginalised and ridiculedremnant while the other is still in the ascendancy. For the present, anyway.

Flat Earth Economics:

Interventionism is flat earth economics, a notion which is plausible when looking out of one’s eyeballs while disconnecting one’s brain but which falls in a heap the moment that it is critically examined. All of history bears witness to that fact, in particular the history of the century since the outbreak of WWI. The legacy of economic interventionism is the 20th century, characterised near its close in the title of a book by the historian Robert Conquest published in 2000. He called it - Reflections on a Ravaged Century.

If it is true that, for example, war is the “health of the state”, then the history of the past century is certainly a road map of how “healthy” - or more precisely how all encompassing - the state has become. But a state cannot make war without first gaining control over the activity and the wealth creation of its own people. Political liberty and economic freedom FROM government are conducive to a happy and prosperous nation, but they are NOT conducive to ever bigger government. The sad fact of the matter is that the prosperity and wealth of the people is inversely proportional to the size of its government.

To get bigger, a government must “intervene”. Once the intervention begins, it can only increase. The original U.S .tax form in 1913 was less than a page and could be filled out by any literate person in full in a minute or so. Today, a gargantuan “industry” is employed in collecting, deciphering and paying tax.

An excellent example of the mire of government “regulation” in which we are suspended today comes from a recent Bloomberg story on the current political war in the US Congress over Mr. Obama’s “health bill”. It comes from the Chairman of the Senate Budget Committee, Mr. Kent Conrad. Mr. Conrad pointed out that every time there is a change of any sort in the bill, the CBO (Congressional Budget Office) has to run the numbers though a complicated computer model again. Why? To quote Mr. Conrad: “...because the interactive effects are more than a human mind can calculate.”

Primitive societies had their witchdoctors, shamans and soothsayers, all of whom professed to see things which “are more than the human mind can calculate”. Their function was to keep the “masses” under control by formulating rules “in the public interest”. Members of the “public” who broke their rules very quickly found out that it was NOT in their interest to do so. We who live in modern times no longer have to take these people seriously. Their function has been usurped - by the “lawmakers”.

The “Lawmakers”:

Fifty years ago, or even twenty years ago, reporting of the doings in any major national capital city described those involved as being members of Congress or elected representatives or even politicians. Today, peruse the headlines on any major internet or printed media reporting on government deliberations and you will continually come across the term “lawmakers”.

Less than two months ago, in our Late January issue (#646, published on January 24), we reported that Mr. Obama’s health bill was about 2000 pages and nearly 500,000 words long. Now, the bill is “2700 plus pages” long and nobody has bothered to count the words in it. A Yahoo news story which appeared on March 16 begins like this: “It took lawmakers a year to shape President Obama’s health care bill. If it finally passes Congress, it’ll take the better part of a decade to write the user manual.”

This is how interventionism works and how it has always worked. First you pass a “law”. Then, you write the “user manual” which consists of whole libraries full of rules, regulation and red tape. All of this gives rise to bigger existing or even brand new government “departments” stuffed with legions of bureaucrats whose job is to enforce the “law” which the lawmakers have passed.

If the cost of all this was just the salaries of the bureaucrats and the offices they work in, it would be bad enough. But government regulation and intervention creates no new wealth, it merely hampers those who would otherwise create it while consuming more and more of the dwindling amount that is still available.

An Economic “Miracle”:

Ludwig von Mises was once asked what the government should do to get the nation out of a depression. He replied - “they should do nothing”. “What?”, came the startled response, “Do you mean that the best way of getting out of a depression is for the government to do NOTHING!?”. “Yes”, said Mises, “that’s exactly what I mean. They should do nothing, but they should start doing it MUCH sooner!”

When it comes to the economy and especially the financial system of a nation, there has never been a government which did “nothing”. But there have certainly been governments that did less, sometimes a whole lot less, than what other governments were doing. One such government existed in the U.S. in the immediate aftermath of WWI. In the face of a post-war recession in 1920-21, that government passed no stimulus programs, bailed out no financial institutions and interfered minimally if at all with wages, prices and interest rates. The economy recovered within 18 months.

Sadly, the government of the day had not started to do nothing soon enough. By that time there was a central bank in the U.S. and it had discovered over the course of its involvement in WWI that it could increase the “money supply” by accepting government debt paper as part of its “reserves”. The mechanism which was discovered then has been used ever since. The fatal seed had been sown but had not yet had time to sprout. As a result of the government’s “hands off” policy during 1920-21, the recovery was rapid. Even more “miraculous”, the U.S. government ran genuine budget SURPLUSES every year from 1920 to 1930. They have run very few since and none since 1960. . . . .


Ó 2009 – The Privateer

(reproduced with permission)


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