The theme of my book, The Left, the Right, and the State, is that both sides of the political aisle represent a grave threat to liberty — though each of a different sort.  It is like two people tugging at a turkey’s wishbone: the turkey is liberty, and you are the bone.

We’ve lived through eight years of the threat from the Right. It was all about nationalism, militarism, war, torture, state secrets, attacks on privacy, the use of tax funds to subsidize “conservative values,” the outsourcing of government in a fascistic business-government partnership, the banning of products and services that government doesn’t like, the regimentation of educational life, government impositions in the name of security, and so on.

With the end of the Bush years, many of these threats have receded, if only slightly. Consider the problem of nationalism, for example. The neoconservatives who ran the country during the last two Bush terms exploited this dangerous impulse for all it was worth.

If you were not for their wars, you were against America, and hence deserving of jail without trial. The whole ideological apparatus of the Bush years was profoundly anti-intellectual, and while the neocons shouted down anyone who compared their administration to the Third Reich or Mussolini, the ideological comparison was actually quite apt: right-wing government control stems from the same motives of exalting security, discipline, and chauvinism above liberty.

In two short months, however, that ethos has subsided, and it has been replaced by a threat from the Left. It is tragic that Obama should be president at all. If we had a position called “national well-wisher,” “national greeter,” or “national symbol of accomplishment,” he would be perfect for the job. He is elegant, graceful, and articulate, and he inspires people in an unusual way. As chief policymaker, however, he has revealed himself as nothing more than a two-bit socialist.

After all the ghastly statism of the Bush years, you might think that the Left would back off from using power to achieve its aims. Instead, they have learned nothing. The Left has been lying in wait for its chance. As the Obama people entered the White House, it was as if they found a closet labeled “failed ideas of the past.” They opened it and the contents spilled everywhere. They started grabbing things and putting them in the regulatory books and in legislation.

What an amazing pile of junky, worn-out, bogus policy ideas! Equal pay for equal work. Infrastructure spending. More money to the public schools. Socialized medicine. Rock-bottom interest rates. Welfare! Every wish granted by government. Down with business. Down with business failures. Curbs on fat-cat pay. Down with Wall Street. Turn on the money spigots. Expropriate the expropriators. Subsidies for every lifestyle that flies in the face of bourgeois prejudice.

Thus are we again reminded of what a profound threat the Left represents to liberty. It’s been more than a decade now since we’ve seen this at work, and probably longer really. Clinton was a pain, but he was smart enough not to take his reigning ideological framework too seriously. He actually showed some deference to reality from time to time.

The Obamaites are different. They are woefully ignorant of economics. They seem to actually believe all that socialist claptrap that has provided an excuse for innumerable foreign dictators: the idea that government is the source of wealth and can make anything happen with the push of a button.

They see no limits to the possibility that government can make society perfect, righting every perceived social injustice, and bringing prosperity to all via stealing from the haves and giving it to the have-nots. Is there inequality? Mandate equality. Is there deprivation? Provide! Recession? Spend hundreds of billions!

What we have here is not just a profound love of the state; it is a profound confidence in the capacity of the unlimited state to create heaven on earth. How does this square with the idea of human liberty, of social cooperation, and of the rights of all? Herein lies the great mystery of leftism. The Left seems oblivious to the relationship between their chosen means and their ends. It’s not that they hate liberty as such; it is that they believe that it must always take a backseat to other social priorities, like equality. In the end, they have a tendency to build the total state and find themselves taken aback when the whole of society ends up in a cage.

Those Obamaites! So compassionate, loving, universally minded, progressive — except that their ideological cousins managed to starve and destroy whole civilizations. Loyalty to their creed means death, because their ideology is the pathway to the gulag — and for one simple reason: their preferred means of social change is the state. The state is always and everywhere a threat to liberty, and liberty is the basic building block of prosperity and civilization.

Despite the slogans about progress, the upshot of the Obama administration is as deeply reactionary as anything that Bush conjured up. Despite all the hype and hope, what Obama offers is nothing new. It amounts to the robber state and the regimentation of society, a plan that will kill off prosperity and the conditions that allow for it.

The Republicans are right to fight this tendency at every turn, for it represents a radical attack on all things truly American. Worse still, by playing with the printing presses, the policy tendency here is also deeply dangerous. It could destroy the dollar internationally and domestically, igniting a hyperinflation that no one will be able to control once it gets going. One only wishes that the Republicans had been so principled when their president was in charge!

The Obama administration says that we have to give the stimulus time to work. No need. The stimulus will not work. If we manage to pull ourselves out of this slump, it will be despite and not because of this stimulus package.

When putting together my book, I wondered which threat was actually more dangerous for us, the Right or the Left. I’m still not sure, for national socialism and international socialism are in close competition.  I ended up focusing on both.

Source: The Left in Power

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 he 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 versions 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.

Americans are proud of their system of government, but consider what it has given us this time around. We had an outgoing president who thought it was his right to grab as much as he could while leaving. Now we have a new president who thinks that the election entitled him to grab as much as he can, right from the beginning. We get looted by the state coming and going. It all amounts to one massive war on prosperity and freedom.

Particularly culpable here are the official historians who have for generations heralded FDR as the great savior. It is a case study in how a civic lie can appear and fester for decades. The fact is that the New Deal did not work. It prolonged what might have been a troubling two-year downturn into a horrifying blow to world prosperity that ended up in a war that killed countless millions. It was one of the greatest acts of wreckage in world history.

And Obama is inspired by this? He wants to repeat it?

I’m not so cynical about human affairs that I believe that errors must be endlessly repeated. Obama can put a stop to his madness. He needs to know – someone must tell him frankly and openly – that his current path is going to lead not to recovery, but to an extension of suffering, and untold amounts of it.

The biggest threat facing the American economy right now is rarely even discussed. It is the massive buildup of paper bank reserves in the last quarter of 2008. This was Bush’s doing. He ordered the Fed to print like mad. Fortunately for us, the banks are still holding on to these reserves. When they start lending again, the result could be hyperinflation of Confederate-dollar proportions.

Hence the priority of the Obama administration should be to first do no evil, and second to find some means for withdrawing those reserves from the banking system before they wash through the economic structure and destroy the dollar. There is still time. He must act. Yes, that will lead to bank failures. That’s good! It will lead to business failures. That’s good and essential too.

There simply is no choice. If he acts now, he could find that recovery will come before his second term. This is precisely what happened with Reagan. He was fortunate to have advisers who insisted that he let the liquidation happen rather than attempt to fix the recession of 1981-82 with huge new government spending programs.

In any case, the hardest work to do here is intellectual. Obama’s head is filled with myths and lies, not only about FDR and the New Deal but also about the government’s power to repair the existing economic problems. With this model in his head, he can only do evil. This must change.

Nothing is inevitable. He can turn on a dime. The main message: do not repeat the actions of FDR, lest you destroy what is left of American liberty and prosperity.

Source: Obama’s Wealth Destruction

So it is with Madoff’s scheme. The mystery isn’t how one person was able to fool a few. The scheme in which yesterday’s “investors” are paid off with the money of today’s victims is known in all places and probably all times – and it always goes belly up to the originator’s complete disgrace. It is a classic example of how moral laws are self-enforcing in the world of economics.

The critical difference this time is that Madoff ran his scheme during an economic boom, a time when people’s normal sense of incredulity is put on the shelf. This is part of the grave cultural distortion introduced by funny money. Money is the most widely demanded good in society, and the Fed is making new quantities of it not as a reflection of new real wealth, but purely as an administrative decree.

There is a sense in which funny money literally drives everyone crazy, leading to what is sometimes called the “madness of crowds.” Guido Hulsmann explains it all in his remarkably timely and revealing new book: The Ethics of Money Production. With artificial stimulation from the credit machine, multitudes are willing to believe in something that cannot possibly be true. In Madoff’s case, it was that he could, even in falling markets, earn 15-20% a year without risk.

Why not? Most everyone believed in some version of the myth. We believed that house prices would go up and up despite the reality that houses are physical things that deteriorate from the instant they are finished, just like cars or computers or anything else. Why did we believe this about houses? Again, you have to look to the fraudulent money system to see why.

And we believed that we could all become millionaires by putting our money in the stocks of companies that weren’t actually earning money or paying dividends, companies whose wealth was entirely based on infusions of cash from the stock market which in turn were based on the belief that others would buy the stocks and so on. In other words, we believed that something out of nothing was possible, and anyone who didn’t believe it was a chump. It’s exactly what people believed during the other great inflations of history.

What’s more, we believed that buying these stocks constituted not consumption, but savings for the future. In fact, people routinely attacked official savings data on grounds that they did not include what people were “saving” in terms of their stock market accounts. In a similar way, people were measuring our national wealth not in terms of accumulated capital, but rather through consumption data, as if granite kitchen counters in bigger houses were a measure of wealth instead of the opposite: the depletion of wealth.

The left is big on attacking the salaries of investment bankers, and they were indeed outlandish. But these too represented not a unique problem, but more evidence of inflationary finance. In a bubble economy, the money chases what is most fashionable, and financial services qualified. So the salaries were market. What was wildly distorted was the market itself.

Now let’s talk about government finance during these years. The market tried to correct itself from 1999-2001, but the government wouldn’t tolerate it. Instead, it used every sign of downturn as an excuse to keep the illusion going, creating billions and billions in new dollars. The Fed drove interest rates lower and lower despite the non-existence of savings available to back them up.

(Low interest rates in a sound money system are a reflection of accumulated capital and deferred consumption. When you see the Fed pushing them down during a boom, it is creating a dangerous mirage.)

Did anyone stop and wonder where the government was getting all this money to pump up the system? Yes, the Austrian economists warned us. The pages of Mises.org and LewRockwell.com were filled with alarms. But it was something people wanted to ignore. We are talking about human nature: the desire to believe in things that do not exist. The government was happy to fuel this sense because it gave the Fed, its connected industries, and the state more power and more money in the short term.

Madoff’s scheme played into the belief that wealth was not something to work for, but something to scheme for. It could be generated by playing your cards right, hooking into the right networks, and finding the right “investments.” The people with whom he dealt had, it turns out, some internal sense that there was something a little bit shady about the whole operation. But they dispensed with this sense when the fat checks arrived, and concluded that whatever was making this perpetual motion machine operate, it did work.

But listen: the government right now is using the same tactic to convince you that it is saving you from the recession. The whole scheme partakes of the same sense of denying reality that characterized Madoff’s scheme. And I’m not just talking about Social Security, which is almost an exact replica of the Ponzi version, except that at least Charles Ponzi didn’t force people to give him money. I’m speaking of something broader.
The entire financial system that is propped up by the Treasury and the Fed is based on the same idea: that something out of nothing is possible.

So they will jail Madoff. Wall Street would flog him if it could. He is disgraced for all of history. But meanwhile, the likes of Bush, Bernanke, Paulson, Obama, and all the rest are still riding high, even though their scheme is far larger and more egregious.

Most of us like to believe that we wouldn’t have been tricked by Madoff. But are you being tricked by the elites who claim that they can conjure up a trillion dollars to stabilize our economy by clicking a few buttons on a computer screen? Most people are. Certainly the press seems to have bought it. Many people were outwitted by Madoff. Many more people are today being outwitted by the government and its central bank. And it will all end in disgrace and disaster, only on a far, far grander scale.

Source: Madoff as Metaphor

Grand Theft Society

Llewellyn H. Rockwell

A core problem with government is that its managers believe that all reality will conform to their wishes if they issue the right orders, pass the right laws, and put the right people in charge. Reality resists this simple-minded approach; witness the debacle of the war on terror. Sadly, the same group that has managed that war is now managing another one: the war on recession.

The tendency of these managers is to fabricate a view of cause and effect that conforms to what they would like to do. In the war on terror, we were told that the 9-11 attacks came about because shadowy bad guys from afar resent our freedom. If you believe that, the answer is more militarism and killing as a preventative measure. If, however, you realize that these attacks grew out of a desire for vengeance against American military policies, the implied policy solution looks radically different.

So it is with the economy and the proper policy response to recession. If you believe that there is no good reason for an economic downturn other than a wave of animal spirits and flagging public confidence, your response is to inject optimism via the printing press. Surely, nothing makes folks happier – temporarily – than for them to find themselves awash in newly printed bills. This will lead to internal joy, consumer spending, and thus recovery.

So believes the silly political class.

Consider a different view of cause and effect. If the recession is a correction to an overly pumped economic boom, matters change. The recession, then, is not an aberration crying out for correction; it is itself the correction for the unsustainable economic bubble that preceded it. It should be welcomed in the same way we welcome a sober day after a drunken evening, or the detoxification of an addict after a period of addiction.

But here again, government begins with a view of cause and effect that conforms to its institutional wishes. The recession is the problem, and the only problem, and it can be corrected through the usual means: issuing orders, passing laws, and giving more power to the right people.

It gets worse. A recession contains at least one feature that turns out to be a saving grace for consumers who are hit with economic instability. In the midst of layoffs, tighter lending standards, and a riskier entrepreneurial environment, at least there are some sectors that have declining prices. At least in some areas, the purchasing power of money is rising. This makes life a bit easier. In times when there is very little good news, this is something to hang on to.

But instead of seeing falling prices as the silver lining in the recessionary cloud, government (and the media as an echo) sees them as the cause of all other problems. So, wouldn’t you know, government sets out to stamp out falling prices on the theory that if this succeeds, the entire economy will rise like a phoenix from the ashes.

This was the view during the Great Depression. Herbert Hoover’s and then FDR’s economic team was convinced that falling prices represented not a saving grace but a mortal economic sin. They spent more than ten years trying to make all prices rise. This, they believed, would cause recovery. They tried inflating the money supply. They tried wage and price floors, with vigilante enforcement, and even all-around industrial price planning. Finally, FDR tried the ultimate sand-in-your-face tactic: he went to war, and sent all those unemployed folks to foreign lands to kill and be killed, or to make-work jobs in the military-industrial complex, the CCC on steroids.

What did we learn from that debacle? Let’s make it official: we have learned nothing from our experience during the Great Depression. Even now, people are under the impression that falling prices cause recessions. Here is proof from the lead to this New York Times story: “With sinking home values continuing to drag down the economy…”

Sorry, but it just isn’t true. Falling house prices are not good news for homeowners who believed that they had purchased an asset that would forever go up in price. But they are wonderful news for people who are shopping for homes. They can buy more for less, and avoid frightening levels of mortgage debt in the process. In macroeconomic terms, the housing bust is also a welcome event since it was precisely this sector that was wildly ballooned during the boom. Unsound investments (or consumption goods masquerading as investments) must be leveled out before economic recovery can begin.

But it is really true that an economy can survive and thrive with falling prices. Falling computer prices didn’t drag down the economy in the ’90s. Nor did falling clothing prices. And consider the Gilded Era, the most prosperous until that point in all of human history. The consumer price index fell from 47 in 1864 to 25 in 1900 – nearly by half. That’s another way of saying that money became twice as valuable. And where was the calamity? Savings and pay packets zoomed in value. This period is called the Second Industrial Revolution because of the astounding increases in productivity, population, and technology. Falling prices and sustainable economic expansion are positively related in all of economic history.

If government and the Fed succeed in propping up home prices or preventing them from falling as much as they might otherwise, what will be the result? Homes will continue to be overexpensive and, on the margin, unwarranted purchases. This will not bring about economic recovery. This will force American consumers to spend more at precisely the time when they should be saving and getting out of debt.

There are lessons here. One is never to permit the government to discern the relationship between cause and effect. Government invariably rules out the possibility that the structure of the public sector itself is to blame for the problem, whether that problem is terrorism or recession.

Another lesson is that we need to shut down the machinery that allows government to enact its plans. If there continues to be a slice of the population that gets its kicks from issuing orders and trying to make the world conform to them, these people ought to be given a video-game console to play with. The game can be called Grand Theft Society. The stakes are too high to permit them to play their games using real wealth and real lives.

Regards,

Lew Rockwell
for The Daily Reckoning

Source: Grand Theft Society