RUNAWAY SOCIAL SYMPATHY
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 Jim Cook
February 5, 2009
A MYTHICAL INTERVIEW WITH
LUDWIG VON MISES
Ludwig von Mises (1881-1973 pronounced Meesez) was the most influential economist in what is known as the Austrian School. He advocated limited government, free markets and sound money. In 1920 he proved that Communism and socialist planning must fail because of the absence of market pricing. He was credited with numerous other brilliant and important theoretical accomplishments.
His predictions and warnings have proven accurate. His followers have been the only effective forecasters of the current economic crisis. Austrian economics provides a financial compass for you. It stands in stark contrast to the failed Keynesian economics of Washington and Wall Street. It’s imperative that you grasp the content of this interview and begin to think in terms of Austrian economics. Nothing I can tell you today is more important.
The answers to the following questions are exact quotes from various books.
- Over the past few decades our national savings rate has plummeted. What do you make of that?
- Saving and the resulting accumulation of capital goods are at the beginning of every attempt to improve the material conditions of man; they are the foundation of human civilization.
- Please elaborate.
- Saving, capital accumulation, and investment withhold the amount concerned from current consumption and dedicate it to the improvement of future conditions.
- Why have our national savings collapsed?
- The policies advocated by the welfare school remove the incentive to saving on the part of private citizens.
- How important is the reversal of this trend?
- If people do not consume their whole incomes, the non-consumed surplus can be invested, it increases the amount of capital goods available and thereby makes it possible to embark upon projects which could not be executed before.
- How does the Keynesian economics practiced in Washington impact this view?
- The essence of Keynesianism is its complete failure to conceive the role that saving and capital accumulation play in the improvement of economic conditions.
- Why isn’t this more widely understood?
- Most people take it simply for granted that some mysterious factor is operative that makes the nation richer from year to year.
- What do you say to them?
- Do the American voters know that the unprecedented improvement in their standard of living that the last hundred years brought was the result of the steady rise in the per-head quota of capital invested? Do they realize that every measure leading to capital decumulation jeopardizes their prosperity?
- Are you saying that capital is scarce?
- Strictly speaking, capital has always been scarce and will always be. The available supply of capital goods can never become so abundant that all projects, the execution of which could improve the material well-being of people, could be undertaken. If it were otherwise, mankind would live in the Garden of Eden and would not have to bother at all about production.
- How does this impact us today?
- A nation cannot prosper if its members are not fully aware of the fact that what alone can improve their conditions is more and better production. And this can only be brought about by increased saving and capital accumulation.
- How do you explain the influence of Keynes on contemporary politics?
- The unprecedented success of Keynesianism is due to the fact that it provides an apparent justification for the ‘deficit spending’ policies of contemporary governments. It is the pseudo-philosophy of those who can think of nothing else than to dissipate the capital accumulated by previous generations.
- You mean inflating?
- Yes, deficit spending means increasing the quantity of money in circulation. That the official terminology avoids calling it inflation is of no avail whatever.
- Inflating is more popular than ever.
- Inflationism is the oldest of all fallacies.
- What’s the main argument against it?
- Credit expansion and inflationary increases of the quantity of money frustrate the ‘common man’s’ attempts to save and to accumulate reserves for less propitious days.
- Why is it so popular?
- For the naïve mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared with that of the government’s Treasury Department.
- What are the consequences for the economy?
- An artificial boom, a boom built entirely upon the illusions of ample and easy money.
- We’ve had that. What’s next?
- The inevitable result of inflationary policies is a drop in the monetary unit’s purchasing power.
- The monetary authorities seem to think that’s helpful.
- Only the naïve inflationists could believe that government could enrich mankind through fiat money.
- There’s no benefit?
- No increase in the welfare of the members of a society can result from the availability of an additional quantity of money.
- What are some of the consequences?
- Under the illusions created by the credit expansion, business has embarked upon projects for the execution of which the real savings are not rich enough. When this mal-investment becomes visible, the boom collapses.
- The economy worsens?
- Credit expansion is not a nostrum to make people happy. The boom it engenders must inevitably lead to a debacle and unhappiness.
- Their answer is to lower interest rates. What do you say to this?
- If one wants to avert depressions, one must abstain from any tampering with the rate of interest.
- Isn’t it too late?
- People must learn that the only means to avoid the recurrence of economic catastrophes is to let the market – and not the government – determine interest rates.
- We’ve ignored this lesson. What happens now?
- The monetary and credit policies of all nations are headed for a new catastrophe, probably more disastrous than any of the older slumps.
- We are told that government spending will bail us out. What say you?
- What the government spends is entirely taken from the pockets of the individual citizens and corporations. The spending and investing capacity of the public is curtailed to the same extent to which the spending ability of the government expands.
- Our current policies are for more of the same. What’s your prognosis?
- It has often been suggested to ‘stimulate’ economic activity and to ‘prime the pump’ by recourse to a new extension of credit which would allow the depression to be ended and bring about a recovery or at least a return to normal conditions; the advocates of this method forget, however, that even though it might overcome the difficulties of the moment, it will certainly produce a worse situation in a not too distant future.
- Aren’t you afraid of a depression?
- The depression is the process of liquidating the errors committed in the excesses of the artificial boom; it is the return to calm reasoning and a reasonable conduct of affairs within the limits of the available supply of capital goods. It is a painful process, but it is a process of restoration of business health.
- That will not happen. What’s next for us?
- If the credit expansion is not stopped in time, the boom turns into the crack-up boom; the flight into real values begins, and the whole monetary system founders.