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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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The Best of Jim Cook Archive

Best of Bill Buckler
April 6, 2012
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It is routinely stated in the U.S. that the bulk of all economic activity is provided by what is called “consumption”.  For at least two decades, the claim is made that consumption is the most important driver of economic “growth” and contributes anything between 65 and 75 percent of that “growth”.  Nobody has ever bothered to explain how a nation which consumes more than it produces can be enjoying economic “growth”.  There is, of course, a very good reason for that.  It cannot be explained.  As any individual knows, the road to the poorhouse is paved with consumption in excess of production.  It cannot and never has been otherwise, no matter how “elastic” economic concepts have become.

There is only one essential sector left as far as those tasked with “running” the economy is concerned. This is the financial sector - specifically the banking sector and the financial assets markets.  The rest of the economy, especially the dwindling part of it that actually produces goods, has been utterly sidelined. When it comes to regulating production, anything goes.  The elasticity shown here is all but infinite with no principles whatsoever involved in the avalanche of rules, regulations and restrictions routinely churned out by government to “protect” the consumer.  But when it comes to the major facilitator of this government control, the financial sector, there is only one rule which has no “give” in it at all.  That rule is that the financial sector will be propped up no matter how stretched out of shape the “real” economy becomes in the process.  The reason is clear when we look at the ultimate in “elasticity”.  

Elastic Money!:

This is and always has been the object of the exercise.  Every advance in “the art of the possible” in both politics and economics has been underpinned by it.  According to the “theory”, money is the one economic good which CAN be created out of thin air.  Indeed, the “money managers” go further than this. They claim that money MUST be created out of thin air if they are to go on “running” the economy.  Here they are right.  A market economy works by means of voluntary trade and for this, an unchanging medium of exchange is vital.  A command economy is justified on the premise that those being commanded are getting something for nothing.  That requires a money stretched to fit what they deem “possible”

As John Maynard Keynes himself asserted in the preface to his “General Theory of Employment, Interest and Money”, the task he had set himself was to “escape” from what he called outmoded economic laws.  Foremost amongst these laws was the one stated more than a century earlier by the French economist and businessman Jean Baptiste Say.  Say made one of those brilliant observations which becomes obviously true to all who hear it - but only once it is stated.  He held that for any participant in any kind of market economy, economic goods are not “paid for” with money, they are paid for with other economic goods. Money is merely the medium of exchange.  A person’s demand for a good is ultimately and completely determined by the goods he has supplied to the market first.  The popular formulation of this obvious truth is that “supply creates its own demand”.  In reality, what Say was stating in the form of an economic law is the obvious truism that one cannot create “something” out of “nothing”.

This observation did then and should have for all time demolished the contention that the failure of an individual to prosper in the marketplace was due to a “scarcity” of money.  On the contrary, the money had nothing to do with it.  What was being complained about was the inconvenient fact that in the real world, one must supply before one can demand.  In a market economy, those who are most successful at producing the goods in highest demand by the most people prosper, each of them to the degree that they succeed in that task.  Their reward is in the form of money, voluntarily exchanged for the GOODS they have produced.  But their production must come first.  Before they can demand, they must supply.

If You Can’t Refute It - Ignore It:

Keynes and his followers have long claimed success in the refutation of Say’s law.  They have long contended that it is unnecessary to create new production facilities and maintain existing ones in order to consume more wealth.  They have long contended that the problem of production has been solved and all that needs to be tackled now is the problem of “distribution”.  Observing the world around them and seeing that most forms of real wealth change hands through the use of money, they have seized on money as the only determining factor.  Make sure of the “supply” of money, and demand will take care of itself.  The results of this fatuous nonsense are all around us today, in particular in the investment “markets”.



.Ó 2009 – The Privateer

(reproduced with permission)


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