October 11, 2009
(The Swamp) - If you do nothing, in time, the economy will eventually recover. If you run around and spend taxpayers' money, the economy will eventually recover.
These two sentiments are unalterably true. The only real question is: "Which one causes the economy to recover faster and hurts the least number of people?"
There is a growing body of evidence that shows the former statement is the quicker. There is also a growing body of evidence that the latter statement may actually prolong the misery of all, at the expense of a few.
In the beginning, even before the industrial revolution, there was no such thing as unfettered capitalism. The emperor or the church decided what was fair trade. So, when the industrial revolution occurred, those with old wealth and the brains to use their influence began a process of monopoly building. Limited elective government took the place of church and monarch, but European values prevailed.
Even after America was up and running as a going concern, and, admittedly, thanks to the drastic results of the Late Unpleasantness, government-blessed monopolies grew giant companies which effected broad sections of population - railroads, electricity, natural gas, road construction, etc. Subsequently, railroad money went into auto money which went into oil money, which went into drug company money. Small and emerging businesses were sidelined or destroyed. Prosperity did not grow as fast as it could.
And, rather than let railroads go the way of the dodo, as they should have over 30 years ago, we got more government support. Rather than let unions die out as a natural result of their initial success, tempering monopolies, they received government support. Thus eventually, former monopolies, now competing in the marketplace, were hampered from increasing their productivity and profit and competition.
Enter John Maynard Keynes. What he thought was a velocity of money aided by government, actually was a velocity slowed down or crippled by government. But since, in his eyes, government was the agent, doing SOMETHING by government would increase the velocity of money. What Keynes did not realize was that the velocity of any object - money or a falling apple - must be slowed by the friction of an outside force. A federal bank or a government program, for instance.
The velocity of money is a complex system, symbolized by the formula V=(P*Y)/M. The problem is that, in order for the formula to work, the velocity (V) has to remain CONSTANT, a fact which is never true. Remember Heisenberg's Uncertainty Principle: You can know where something is (or who's got the money), or you can know how fast it's moving (or how fast it's circulating), but you can't know both at the same time. The same is true of money and its velocity.
What the president and his congress have done and are proposing messes with the economy in an unprecedentedly vigorous way: the friction which uncontrolled printing of money (monetizing the debt) and increasing federal regulation without controlling law, have already started an inflationary spiral.
Don't be shocked in morbid surprise when "stagflation" sets in. What we are seeing is Jimmy Carter times ten.
Yet, people are frightened. They want to be safe. And a frightened populace is a controllable populace. Government knows this. The greatest lie of all, though, is that government can keep us safe. All government can do is lie to us as we either die or struggle to do it ourselves. When one controls the manure factory, one can shovel as much as there is.
And that is the true meaning of shovel-ready.
- Dick Anderson
