Recently, at a dinner party, the conversation turned to the economy and the direction of our country. "Who will save us?" I asked aloud. A few weeks later it occurred to me that what can save us is Austrian economics. Some call it Libertarian economics. It extols the virtues of a free market and it’s beginning to catch on. One of the chief purveyors of this economic viewpoint is Lew Rockwell of the Mises Institute. I’ve excerpted a few paragraphs from one of his recent essays.
"President Obama is under the impression that history owes him $1 trillion right now to spend on whatever he wants. His language is strident and full of irritation that anyone would question his right to live out his personal dream of being Franklin Roosevelt to George Bush’s Hoover. This, he says, is what the election was all about.
"The arrogance reminds me of George Bush after 9-11, who similarly believed that history owed him a gargantuan war in the tradition of FDR. And look how that arrogance led to disgrace and loss, as we unwittingly presided over the destruction of American prosperity while searching for bugbears abroad.
"It just goes to show you that the presidency is something like a drug. It makes people lose all connection to reality. Part of the reality that Obama needs to recognize is that the New Deal was a calamity far worse than the initial market downturn that began it. He needs to stop basing his policies on dumbed-down civics texts version of events and consider the economic logic.
"With his rhetoric and policies, he has decided to demonize private enterprise, just as FDR did, as a way to present government as the great savior. Now, think about this. If there is a way out of the recession, it will have to be provided by private enterprise. It will come by new businesses, business expansions, entrepreneurship, new technology, and this will be the source of lasting jobs and prosperity.
"You cannot make a country rich by looting taxpayers and paying people to pound nails into siding at public schools! These activities amount to capital consumption. They are not sources of investment. You can say that they are stupid tasks or wonderful tasks, but it is not a matter of ideology as to whether such public projects will make us all wealthier. They will not. They drain the sources of wealth from society. They represent a cost, not a blessing.
"That was also true of Bush’s dumb stimulus program. He was only bailing out his friends at our expense. The effect was to give a little longer life to institutions that were failing anyway. It’s pathetic that the Republicans ever went along with it. You will notice that the scheme didn’t actually work.
"Well, Obama is doing the same thing, though rewarding a different set of friends. This is not wealth production. This is wealth consumption. Do enough of this nonsense and you can destroy the livelihoods of an entire generation."
One of the best introductory books to Libertarian economics is "Planning for Freedom" by Ludwig von Mises. You can order it from The Mises Institute. (www.mises.org)
Once you learn this economic philosophy, you won’t think quite the same way. What’s more, you will have an enormous advantage over others in determining future economic events.
The Federal Reserve wants to blow another asset bubble so that inflation will kick in and water down the government’s debt. It could be a bond bubble, but interest rates are probably going to rise to help sell the government’s debt, and when that happens, bonds are toast. A stock market bubble would be best for the economy and the public. A lot of other assets depend on a booming stock market for their value. The psychological impact of a stock rise would benefit real estate, commodities, art and antiques. It would unleash animal spirits in the financial sector.
Trouble is, a rise in the stock market won’t come from a healthy increase in business production. Corporations are under attack from unions, the media and leftists. Enhanced government regulation and limited access to capital also hurt. Congress has passed legislation that cripples venture capital and financing within the U.S. The liberal administration, anti-business politicians and a large segment of the public have unleashed a blistering attack on business. It doesn’t help that every level of government wants to raise taxes. In the 1930s, business experienced similar difficulties and pulled in its horns, The economy stagnated.
However, if the Fed pumps out enough fresh lucre it could wind up in stocks. It will also create inflation so it could be a break-even proposition. It’s an unhealthy market that rises on credit and money printing rather than new production. Unfortunately, foreign competitors are eating our lunch and formerly great companies like General Motors must rely on government handouts. It’s a sad day when our once great manufacturing sector takes a back seat to other nations. All of this is the fault of government with its social schemes, market interventions and punitive regulation. It’s as if the leftists in government want to reduce oil production, eliminate foreign trade, put the unions in charge, cripple entrepreneurship and crush capitalism.