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LewRockwell.com
Americans Live in a Fantasy World
by Gary North
EXCERPT:
This is the essence of the Keynesian economic solution to recession: spend yourself (and the nation) into prosperity.
Keynesians apply this principle to government spending because they believe that consumers are slackers when it comes to spending during a recession.
There is insufficient demand. Demand ' spending ' is the key to recovery ' not thrift (a negative), not reduced wage rates (a negative), but spending.
So, the government must pick up the slack. It must also encourage the public to follow the leader.
This is a child's universe.
The c
ild falls down and scrapes his knee. He runs to his mother to get her to make the pain go away.
His mother will fix it! Two minutes before he fell down, he may have resented his dependence on hi
s mo
ther.
He wanted to be a big boy. Bu
t when big boys fall down, they don't run to their mothers.
He is not ready to be a big boy after all.
Americans have bought the Keynesian party line.
They believe that self-discipline is not the way to success. They believe in the state as mother.
So, we live under the watchful eye of the nanny state. That is what most Americans want.
They vote for politicians who refuse to cut back on government spending. The state grows ever larger, and so do its promises.
We have again seen the rate of thrift fall to about 1%.
We have seen the Federal government's percentage of the economy rise to 25%. These phenomena are the result of the same mind-set.
As surely as the determination to save is related to the de
termination to become independent economically,
so is the determination to take on consumer debt to buy depreciating assets linked to the determination to find someone else to solve life's econo
mic
problems. <b
r>
"Make it stop hurting!"
When the economy falls d
own and goes un-boom, the voters run to the government.
"It hurts. Make it better."
What snookums needs is a cotton swab drenched in alcohol. "This is going to hurt."
Response: "No! Don't!"
The child wants the hurt to go away now.
He doesn't want what is necessary to solve his problem ' his real problem. He doesn't know anything about infection.
He knows only that his knee hurts and he wants mommy to make it stop hurting.
In politics, however, mommy has to be re-elected at regular intervals.
Mommy is not secure in her high office. So, she promises never to use that nasty old alcohol.
She will kiss the wound and make it well. <
br>In doing so, she will increase the risk of infection.
Ever since John Maynard Keynes persuaded politicians that what they wanted to do '
increase spending without raising taxes,
<b
r>and therefore incr
ease the national deficit ' is economically sound policy,
the politicians have become incorrigible spendthr
ifts.
They want to be re-elected, and a slack economy is their own scraped knee.
So, they run to the central bank. "Kiss it and make the pain go away."
The central bank obliges. It creates money. The supply of money goes up.
This tends to lower the price of money ' the interest rate ' in the recession phase.
The result: the destruction of a positive economic return for savers, after taxes and price inflation.
Keynes taught that what is rational for the individual during a recession '
increased thrift ' is bad for the economy as a whole.
To cut expenses personally is self-defeating nationally, says the K
eynesian, even if he calls himself a supply-side economist, a monetarist, or an Austrian economist.
If his argument is that thrift and cost-cutting are good for the individual
but bad fo
r the economy, he is a Keyne
sian.
He is denying the heart of free market economics, from Adam Smith to the present.
He is saying that rational individu
al self-interest not only fails to coordinate the economy, it is bad for the economy.
This assumption is the heart, mind, and soul of anti-capitalism,
from the old mercantilism that Adam Smith refuted
to the new mercantilism in its various incarnations. Most economists share the same faith in government:
"The free market needs the government to kiss it and make it not hurt any more."
This is the child's universe. The West has entered its second childhood. It has become dependent on government to provide fiat money.
America has become dependent on Asians to supply us with loans and capital.
T
he problem now facing Americans is that Asian investors in the second half of 2003 dramatically reduced their rate of investing in the United States.
What appears to b
e Asian investm
ent today is in fact Asian fiat mone
y.
The Japanese central bank and the Chinese central bank are in high gear.
They are keeping the dollar's value high by inflating their own currencies an
d buying U.S. government debt.
This is Asian mercantilism. "What is bad for individual investors ' monetary inflation ' is good for the export sector."
If the world's central banks were ever to stop creating money,
the malinvestments which their low interest rate policies have created
would be exposed
by the capital markets as misused capital.
The capital markets would fall like a stone.
The West's central banks have undermined thrift,
and what little thrift remains is lured into projects that cannot be sustained
apart from the illusion provided by even
more fiat money.
The nanny state has kissed the nasty scrape,
and in doing so, has infected it.
The voters cry, "Make it stop hurting!"
They never stop cr
ying.
The West is now in its second
childhood.
It refuses to do what is necessary to grow up:
reduce taxes, increase thrift, pay off the national debt, and stop creating new money.
This can be done, but it won't be done.
To do
it would hurt.
"Make it stop hurting!"
LewRockwell.com
Americans Live in a Fantasy World
by Gary North
EXCERPT:
This is the essence of the Keynesian economic solution to recession: spend yourself (and the nation) into prosperity.
Keynesians apply this principle to government spending because they believe that consumers are slackers when it comes to spending during a recession.
There is insufficient demand. Demand ' spending ' is the key to recovery ' not thrift (a negative), not reduced wage rates (a negative), but spending.
So, the government must pick up the slack. It must also encourage the public to follow the leader.
This is a child's universe.
The c
ild falls down and scrapes his knee. He runs to his mother to get her to make the pain go away.
His mother will fix it! Two minutes before he fell down, he may have resented his dependence on hi
s mo
ther.
He wanted to be a big boy. Bu
t when big boys fall down, they don't run to their mothers.
He is not ready to be a big boy after all.
Americans have bought the Keynesian party line.
They believe that self-discipline is not the way to success. They believe in the state as mother.
So, we live under the watchful eye of the nanny state. That is what most Americans want.
They vote for politicians who refuse to cut back on government spending. The state grows ever larger, and so do its promises.
We have again seen the rate of thrift fall to about 1%.
We have seen the Federal government's percentage of the economy rise to 25%. These phenomena are the result of the same mind-set.
As surely as the determination to save is related to the de
termination to become independent economically,
so is the determination to take on consumer debt to buy depreciating assets linked to the determination to find someone else to solve life's econo
mic
problems. <b
r>
"Make it stop hurting!"
When the economy falls d
own and goes un-boom, the voters run to the government.
"It hurts. Make it better."
What snookums needs is a cotton swab drenched in alcohol. "This is going to hurt."
Response: "No! Don't!"
The child wants the hurt to go away now.
He doesn't want what is necessary to solve his problem ' his real problem. He doesn't know anything about infection.
He knows only that his knee hurts and he wants mommy to make it stop hurting.
In politics, however, mommy has to be re-elected at regular intervals.
Mommy is not secure in her high office. So, she promises never to use that nasty old alcohol.
She will kiss the wound and make it well. <
br>In doing so, she will increase the risk of infection.
Ever since John Maynard Keynes persuaded politicians that what they wanted to do '
increase spending without raising taxes,
<b
r>and therefore incr
ease the national deficit ' is economically sound policy,
the politicians have become incorrigible spendthr
ifts.
They want to be re-elected, and a slack economy is their own scraped knee.
So, they run to the central bank. "Kiss it and make the pain go away."
The central bank obliges. It creates money. The supply of money goes up.
This tends to lower the price of money ' the interest rate ' in the recession phase.
The result: the destruction of a positive economic return for savers, after taxes and price inflation.
Keynes taught that what is rational for the individual during a recession '
increased thrift ' is bad for the economy as a whole.
To cut expenses personally is self-defeating nationally, says the K
eynesian, even if he calls himself a supply-side economist, a monetarist, or an Austrian economist.
If his argument is that thrift and cost-cutting are good for the individual
but bad fo
r the economy, he is a Keyne
sian.
He is denying the heart of free market economics, from Adam Smith to the present.
He is saying that rational individu
al self-interest not only fails to coordinate the economy, it is bad for the economy.
This assumption is the heart, mind, and soul of anti-capitalism,
from the old mercantilism that Adam Smith refuted
to the new mercantilism in its various incarnations. Most economists share the same faith in government:
"The free market needs the government to kiss it and make it not hurt any more."
This is the child's universe. The West has entered its second childhood. It has become dependent on government to provide fiat money.
America has become dependent on Asians to supply us with loans and capital.
T
he problem now facing Americans is that Asian investors in the second half of 2003 dramatically reduced their rate of investing in the United States.
What appears to b
e Asian investm
ent today is in fact Asian fiat mone
y.
The Japanese central bank and the Chinese central bank are in high gear.
They are keeping the dollar's value high by inflating their own currencies an
d buying U.S. government debt.
This is Asian mercantilism. "What is bad for individual investors ' monetary inflation ' is good for the export sector."
If the world's central banks were ever to stop creating money,
the malinvestments which their low interest rate policies have created
would be exposed
by the capital markets as misused capital.
The capital markets would fall like a stone.
The West's central banks have undermined thrift,
and what little thrift remains is lured into projects that cannot be sustained
apart from the illusion provided by even
more fiat money.
The nanny state has kissed the nasty scrape,
and in doing so, has infected it.
The voters cry, "Make it stop hurting!"
They never stop cr
ying.
The West is now in its second
childhood.
It refuses to do what is necessary to grow up:
reduce taxes, increase thrift, pay off the national debt, and stop creating new money.
This can be done, but it won't be done.
To do
it would hurt.
"Make it stop hurting!"