THE RETURN OF THE ROBBER BARONS
The world in which the economist lives is as alien to the average citizen as are the Plains of Mars. Yet, economists and their postulates are the driving force of our “modern” economic system. Economists, since the Great Depression have had more impact on changing the character or our nation then any of the tumultuous events since that time including the disastrous economic and social upheavals of The Great Depression and World War II. One economist, more than any other is responsible for the economic and moral decline of America and for that matter of most of the western democracies. That man is John Maynard Keynes. It is an anomaly that this man and his monumental commentary on the causes and solutions to economic destabilization and the promotion of a universal economic and social equilibrium, (The General theory of Employment, Interest and Money), has so greatly influenced academia and has become so invested in government policy and is so widely accepted by government policy makers. His entire theory and his defense of it is so garbled, inconsistent, and so incorrect that it should have been rejected as rapidly as economists rejected the economic absurdity of Huey Long and Francis Townsend and his Townsend Plan during the 1930’s. This assessment of Keynes’ General Theory would be suspect if not for the fact that it is the consensus of a number of Keynes’ highly respected contemporary peers. Among his detractors we find F.A. Hayek, Henry Hazlitt and Ludwig von Mises. A current critique is David Stockman author of the current bestseller, THE GREAT DEFORMATION, The Corruption of Capitalism in America (Public Affairs, 2013).
Keynes’ greatest contribution in aid of his monetary scheme is the concept that the government through its central bank should have exclusive control of the currency, print money and expand the money supply to the point where interest rates would be reduced to the zero point. To Keynes, interest rates naturally exceed the value of money lent and when allowed to rise will bring on a depression or recession. Hence, interest rates on invested funds (as well as stock dividends) should be eliminated. Although Henry Hazlitt’s critique of The General Theory consisting of a virtual word by word sentence by sentence examination and repudiation of the General Theory is greatly informative, it is burdened with a thoroughness that makes it as difficult to read and comprehend as is Keynes’ General Theory itself. Fortunately this problem has been remedied by economist Hunter Lewis in his recent E-Book WHERE KEYNES WENT WRONG, And Why World Governments Keep Creating Inflation, Bubbles and Busts. Mr. Lewis has reviewed, as did Hazlett, each paragraph of the General Theory and found it irrational and based upon suppositions, assumed facts and fanciful economic theory. Fortunately, he states his case in layman’s language. The question he tries to answer is the one that confounds even David Stockman and indeed the rest of the rational world: if Keynes is indeed as irrational as Hazlett asserts, why have economists from Harvard to Berkley extolled and adopted the dogma encompassed in his General Theory? Why is Keynesism the foundation of our national and world economic structure after having been so soundly repudiated? How can economists like Paul Krugman, Ben Bernanke, and Allen Greenspan along with virtually every member of the Federal Reserve Board and Treasury Department subscribe to Keynesian doctrine?
In my recent book OBAMANOMICS, Nation Building on a Charge Card (Amazon Kindle, 2013) I attempted to explain the popularity of Keynesism. I start by suggesting that the greater volume of the General Theory is irrelevant to the present economic community. For the liberal elite, their only interest in Keynesism is its assertion that the government should assume a dominant autocracy over a nation’s and for that matter the world’s money recourses. When he published his General Theory in 1936, many economists let it pass apparently believing it was not intended to be serious work. Others no doubt passed on criticizing the work to avoid the scathing broad side that Keynes was noted to unleash on his critics.
The General Theory was published when the world and America were in the trough of the Great Depression and Capitalism was under attack. Roosevelt, Stalin, Mussolini and Hitler had each declared that Capitalism was a failure and that a new economic order was mandated to bring to the oppressed masses, social justice. Keyens’s General Theory, whether so intended or not provided a rational support to the rise of the super state. I do not intend by the above grouping to suggest that each of the world leaders were during the 30’s of the same character. Each, however, would lead their nations away from capitalist individualism and put their nation on the pathway to a new social order rejecting the legal and social traditions that would have placed restraints on their ambitions. Fortunately for America, the transition was not wrought by brutality and was imposed upon us by a gentler hand. (It was the old frog in the boiling pot approach). Roosevelt, upon taking office had already launched a program of big government spending and confiscatory taxation. Keynes’ General Theory, premised as it was on the concept of deficit spending and market intervention fit like a glove on Roosevelt’s heavy handed market intervention. Keynes’ theory on suppressing or eliminating interest rates and expanding the money supply through deficit spending to stimulate economic growth thrives yet today having been adopted as the policy justification underlying Roosevelt’s New Deal and has also the effect of confirming the liquidity policies of the Federal Reserve.
Keynes knew as few did at the time, that he who controlled the economic structure of any nation through a central banking structure controlled not only the wealth of the nation but also held dominion over the liberties and the limits thereon of the nation’s citizens. Keynes avoided the raging philosophical confrontation between Capitalism and totalitarian socialism by espousing yet a new doctrine which he asserted (when convenient) was not anti capitalist. Keynes believed and so stated in his General Theory, that the individual, whether businessman or laborer was too ignorant to wisely manage his own affairs, thus concluding that the wealth of a nation should be managed by others (never quite identified) who had the superior knowledge and experience to make the right choices and decisions in managing the nation’s capital. Of course this argument justifies in Keynes’ work that Central Banks and central planning is a necessity and that governments should have dominion over the individual, his property and his welfare. Keynes asserted that those superior persons appointed to manage our money and welfare would alleviate man from the burdens of every day endeavor and bring to all a universal, sustainable prosperity, eliminate recessions and depression and equally distribute the wealth of the nation. (This is of course the same allusions promoted by communists and socialists) Weather we call this system communism or socialism is basically irrelevant. It is however without doubt despotism in is most virulent form. It is our present misfortune to have a government of self anointed economic imperialists motivated not by our nation’s moral and law based traditions, but upon their Keynesian belief that they are superior to us all and through central banking and central planning can lead the nation into their conception of a new utopian social order.
As pointed out by his above named detractors, the greatest absurdity engaged in by present economists is the Keynesian concept that when the policy of deficit spending, regulation and taxation fails to stabilize the economy, the inevitable answer is that you obviously have been too timid and must create more debt, more spending and more regulation ad infinitum until your program finally works. This is the position taken by Paul Krugman, in his New York Times Articles. What is left of the economy and the savings of the multitude by that time you reach his intended equilibrium is not addressed in the General Theory. Keynes of course is no advocate of personal saving, to him that only defeats the market intervention. Savings to Keynes is considered almost anti social as it runs contrary to his conception that the more spending there is the more jobs are created. He ignores the fact that savings are converted into investments, but to him investing is defined as money printing and deficit financing.
Without addressing the cause of our current recession (yes, we are still in a recession) which I address in my book OBAMANOMICS Nation Building on a Charge Card I would again refer to the criticism of David Stockman and Mr. Lewis. The continuing bubble to burst economy they refer to is the direct consequence of Federal Reserve’s Keynesian money policy. Roosevelt and Nixon in order to finance larger and larger and more intrusive government knew they could not do so as long as the American dollar was the world’s reserve currency and was backed by a gold standard. Roosevelt ended gold-dollar convertibility and Nixon took the nation off the gold standard altogether. The dollar was allowed to float and money inflation became the means to finance big government. As a consequence the value of the dollar has decreased by 95% since the Federal Reserve took over the money market. Energy prices and food prices continue to rise as real personal income declines. Most significant, the rich are becoming richer while the rest of the population suffers from economic stagnation or retraction. How does this happen? The answer to this question lies in simple money market economics which Keynesian economist shroud in a jargon that is meant to and does mislead the public away from an understanding of how the general public is being pillaged through our Federal Reserve and big government policies.
The Federal Reserve is not a government agency. It is owned and managed by member banks and is independent of and in many ways more powerful than our constitutionally created government. The chairmanship of the Fed is an autonomous office once the chairman is appointed. This independence is asserted to make the Fed immune from political influences which in itself is an absurdity. The Fed is, as intended by its early advocates, dominated by the large Wall Street banks as is the Department of the Treasury where Wall Street bankers find a home. The current Fed policy of quantative easing, pumping billions of dollars into the economy is supposedly intended to encourage economic growth and end our present recession is in actuality creating only inflation and dollar devaluation. There could be no other result when the Fed uses the Wall Street banks as the conduits to money expansion. Would it be a surprise to anyone that these banks, being the first to receive the funds would get the first take and would first enhance their own position before passing the money through their system to stimulate the economy by granting loans that are burdened with their interest costs? Books have been written about the Fed, its dubious founding, and its deleterious effect on our national economy. The paper money the Fed prints, supposedly backed by the full faith and credit of the United States Government is in actuality a farce as the so called faith and credit is backed only by more printed money that has no real value except that value caused by the money monopoly enjoyed by Wall Street and the Federal Reserve. As President Obama sets out on a new crusade to allow the Federal government to entrench itself ever deeper into the nation’s educational institutions, he does so with the knowledge that there are no real restraints to his ambitions as the Fed will print the money to make it happen. It is time that our nation, as urged by David Stockman and many traditional economist, to eliminate the Federal Reserve and put our money back on a free market gold standard and thus eliminate the autocracy of the Wall Street bankers over the nation’s economy! It is time to end the crony Capitalism addressed by David Stockman that makes billionaires on Wall Street and paupers on Main Street.
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