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Jim Cook

 

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
November 29, 2004
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REAPING THE WHIRLWIND

Last week I got a book in the mail from economist, Hans Sennholz. He is a former professor of economics and was a student of Ludwig von Mises, the great Austrian school economist, while at NYU. The title, Sowing the Wind, is a play on the Old Testament passage, "For they have sown the wind, and they shall reap the Whirlwind."

Mr. Sennholz may be the most persuasive critic of loose money and credit in the country today. He points out, "Money creation and credit expansion breed booms and busts and lead to painful recessions or even depressions."

On the current situation in America, he says, "Today, the Fed….is making every effort to stimulate the economy by flooding the money market while the U.S. Treasury is accelerating its deficit spending. Both point towards monetary upheavals and deep global recession straight ahead, and both cash a shadow on the future of the dollar standard."

Professor Sennholz remains an intrepid critic of government deficits. "If we cannot return to fiscal integrity because the public prefers profusion and prodigality over balanced budgets, we cannot escape paying the price, which is ever lower incomes and standards of living for all. The pains of economic stagnation and decline which are plaguing us today are likely to intensify and multiply in the coming years. The social and racial conflict, which springs from the redistribution ideology, may deepen as economic output is shrinking and transfer ‘entitlements’ cause budget deficits to soar. The U.S. dollar, which has become a mere corollary of government finance, is unlikely to survive the soaring deficits."

He explains how government deficits expand. "When the public demand for government services and benefits grows beyond the ability of business and wealthy taxpayers to pay, budgetary deficits become unavoidable. After all, the popularity of redistribution by political force tends to grow with every dollar of ‘free’ service rendered. The clamor finally becomes so intense that, in order to be heard, every new call is presented as an ‘emergency’ that must be met immediately before all others. Redistributive government then rushes from one emergency to another, trying to meet the most noise and politically potent demands."

On the subject of debt he writes, "The man who lives above his present circumstances is in great danger of soon living much beneath them. The same is true with a group of people called ‘society.’ To live beyond its means is to invite poverty and deprivation…. deficit spending….consumes substance and wealth, engages in mass deceit about economic reality, sets a poor example to others, makes people dependent and subservient, causes uncertainty and instability, and breeds social conflict and strife. It may even weaken the political institutions of a free society."

He argues that the capital consumed by government would have been better spent in private hands. "It is difficult to estimate the number of factories and stores that were not built, the tools and dies that were not cast, the jobs not created, the wages not paid, the food, clothing and shelter not produced on account of this massive consumption of capital. The coming generation of Americans and countless others to come will be poorer by far as a result of our deficit spending.

"Of course, the beneficiaries of the redistribution process may enjoy every moment of it. With present-oriented people, today’s enjoyment is always more pleasurable than saving for tomorrow. In their ignorance, they may applaud the very favors and handouts that are destroying their jobs and the wages they could have earned."

Mr. Sennholz explains the nasty consequences of America’s financial bubbles. "Many failed to recognize the gradual development of financial bubbles especially in equity markets and real estate. Bubbles, which ultimately must deflate and come to naught, are difficult to spot because they closely resemble real economic expansion. They look like genuine capital formation which causes interest rates to decline, profits to rise, and asset prices to advance. Actually, they are visible symptoms of maladjustments caused by wanton money and credit creation and false interest rates. They enjoy the loud support and confirmation by the monetary authorities blowing the bubbles and by politicians who love the booms.

"While true economic expansion builds on genuine saving and capital formation, a financial bubble springs from deliberate money and credit creation which falsifies interest rates and goods prices, misleads businessmen and consumers, wastes productive capital, and benefits a few speculators at the expense of multitudes of investors."

Mr. Sennholz makes no bones about the final outcome. "The ultimate destination of the present road of political fiat is hyperinflation with all its ominous economic, social and political consequences. On this road, no federal plan, program, incomes policy, control, nationalization, threat, fine, or prison can prevent the continuous erosion and ultimate destruction of the dollar."