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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

 

Condensed Articles

January 4, 2013

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KEYNESIANS AND PONZIANS
By Monty Pelerin

The economy cannot recover without a complete cleansing of the excesses that have built up over the last half century plus.  It is not a unique idea.  It is a foundational belief of Austrian economics and an integral part of Austrian Business Cycle theory.

Ludwig von Mises provided this fundamental observation: “Credit expansion can bring about a temporary boom.  But such a fictitious prosperity must end in a general depression of trade, a slump.”

There has likely never been a boom so great (and so fictitious) as the one that this country experienced for the last several decades.  Its origins began with the hubris of government economists in the decade of the 1960s who believed that the economy could be managed like a piece of machinery.  They believed that they had the tools (and wisdom) to eliminate business cycles by judiciously stepping on and letting off the gas at the correct times.  This incorrect belief is still fundamental to Keynesian economists, despite the impressive string of failures it has produced.

The movement toward a social welfare state provided additional incentives for Keynesians.  With its provision of increasing benefits to increasing numbers of people, the welfare state required that a boom be maintained lest the Ponzi scheme collapse prematurely.  No boom in history has been created by easier money and bigger government interventions.  Nor has any other been so desperately maintained by government.
As a result, this boom has been more artificial and damaging to the economy than any other.  For decades the Fed and government interventions distorted interest rates and product prices.  These incorrect price signals encouraged entrepreneurs to engage in behavior that should never have been undertaken.  Massive mis-allocations of capital and labor are the result and they have built up over fifty years.

Markets are now trying to right these wrongs.  Government is desperately trying to prevent the curative process.  More stimulus and interventions may stem the tide for a while longer, but they also increase the distortions.  Government efforts to stop markets are doomed to failure.  Markets will prevail.  They always do.  Regarding such efforts, Mises observed: “There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion.  The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.”

This quote summarizes what will be.  It describes what the last five years has been about – a battle between political desire and economic law.  It is a battle of hope against reality.  Politicians foolishly believe they can bend the laws of nature.  They are fools for trying.  Sadly, the pain and suffering that will be incurred will be borne by the millions of citizens dependent on markets and the economy.

Do not forget the big picture.  Knowing the underlying and immutable laws of economics will ensure you don’t fall prey to the political propaganda spewed out daily from Washington, their media minions and Wall Street shills.