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Wednesday, December 11, 2013

Thinking Economics

As the Obamacare disaster continues to unfold in all its highly predictable "glory," I can't help but think about one little stubborn fact. You can repeal prohibition; make drugs illegal; establish speed limits; reroute rivers; blast off from the face of the earth for the distant stars. You cannot, however, repeal the grim laws of economics. Those intersecting supply and demand lines, and the golden rule of economics that "there is no free lunch" will get you every time you try to monkey with the economy.

Thanks to Smith, Ricardo, Bastiat, Hayek, Friedman, etc., the West has a long history of uncovering and describing the brutal, but elegantly simple truths that guide economics. Lately, however, we have put in power people who not only have no knowledge of those "simple truths," but have grown and developed professionally far removed from the "real economy." Community organizers, professional politicians and bureaucrats, and life-long academics live in a sheltered nook in which they do not see the economic machinery at work that provides them their incomes and lifestyles. They are like a city dweller who thinks that meat and vegetables come from the supermarket.

We have people running our institutions who believe that by sheer force of their rhetoric, the fact that they have degrees from "prestigious" universities, and that they know what is best for the downtrodden, in fact, for all of us, they do not have to learn the laws of economics, that those don't apply, anyhow. They, therefore, pass minimum wage laws to help the poor that create unemployment for the poor. They assume that a nation's wealth belongs to the government and that they, as custodians of the government, can do as they wish with that wealth: Solyndra, bail-outs to corrupt unions, subsidies to abortionists, and, of course, a complete redo of our health system to help the uninsured that will increase the number of uninsured.

So, I thought it appropriate to re-post this little piece I wrote last year, March 12, 2012.

The End of Economics?

Some years ago it was all the rage to go on about the "end of politics as we know them," the "end of history as we know it," or the "end of big government as we know it." That all seems so long ago, and so wrong. Not one to be deterred by prologue, and firmly believing in Dr. Johnson's bromide about "the triumph of hope over experience," I have a new one to add to this list of pithy, but wrong, observations. I think this one, however, might have longer legs, at least when it comes to the situation we see in Europe, and to the one, unfortunately, developing at home.

Let me first toot The Diplomad horn, mind you just a bit. This humble blog has some hits on the foresight chart: a recent one was the observation about modern democratic politics being increasingly about the battle between voters and taxpayers (here and there are others). We got on that theme well before it became a topic of widespread political discourse, and we have had some others on the importance of manufacturing to our economy, and other topics now debated in the electoral period we have entered.

That said, please let The Diplomad opine that we might be seeing the "end of economics." It's a bit of an exaggeration, but for now go along with it before, like Homer's boss Mr. Burns, you unleash the hounds. As you will see, I eventually will back off a bit.

I have written a great deal about the economic situation in Greece, Spain, Portugal, etc, not JUST to beat up on the Europeans and their silly pretensions, but also because we have a President who wants us to emulate the Europeans. We are not there yet, and our beloved Grand Republic still has time to avoid the Obama Grecian Formula that leads inexorably to the Grecian Urn, but time grows short.

Greece: The birthplace (sort of) of democracy and perhaps the model for its death. I won't go over it all again, but suffice to say that the Greeks developed the ultimate entitlement culture. The whole country was on the dole, from top to bottom. With the Euro as their currency--and let's be honest, the Euro is just a new version of the German Mark--the Greeks thought themselves fabulously wealthy and in no need to engage in work, real work, the kind that produces national wealth and allows the state to take its taste. The Greeks lived well beyond their means. The average Greek sought to live like a German without working or saving like a German. The Greeks managed to do this for about a decade thanks to the Euro, phony book keeping by the Greek government, and EU willingness to turn a blind eye to the chicanery in pursuit of the obsessive, even mad Imperial Dream to challenge the United States.

When a nation "lives beyond its means" the government has an open invitation to insert itself more and more into daily life: the Greek government accepted the invitation. With its guaranteed employment, high wages, generous and early pensions, and powerful public sector unions the government became the preferred employer. The private sector shrank under the impact of the government's subsidized competition and expansion; increasing regulation; a crushing tax burden to be avoided by all means fair and foul; and the overvalued Euro which made Greece as expensive as Germany but not as productive. For Greeks, it simply was not worthwhile to work. Their country developed generous public assistance programs and "pro-worker" legislation that made hiring someone more binding than marriage--you could get divorced easier than you could fire a redundant or incompetent worker. All this was made possible, as I noted above, by lying Greek politicians, an electorate willing to vote itself ever increasing benefits and to believe that money just comes from "out there," and a politically driven and pampered EU bureaucracy committed to seeing the "European Project" succeed above all else. We also must lay a share of the blame at the door of German politicians; they were being taken to the cleaners by the Greeks (and the Spaniards, the Portuguese and . . .) but would not say "Nien." Maybe it was WWII guilt. Maybe they saw Germany achieving what neither the Kaiser nor theFuehrer could, i.e., dominance from Moscow to Lisbon. Maybe it simply results from the low quality of German political leadership which has left the Germans playing second fiddle to the French, and their pan-European aspirations. Whatever the explanation, the Germans paid and still pay to give unproductive southern Europe a living standard worthy of productive northern Europe--and the beaches are better.

Bottom line: in Greece the government is the economy. That presents a problem for economics. Shades of the USSR.

The formulas being offered for Greece's salvation will not work. I won't bother linking to them but there are seemingly endless articles in the international press every day announcing that a deal has been reached. The Euro is safe! The European project lives! Stock markets rally! Everybody breathes a sigh of relief. I defy anybody to decipher the different deals being announced and to figure out which if any of them has a chance to be approved by Greece. All these deals, however, share one thing in common: they all claim that "default" has been averted. Ooops! Sorry. They also share one other thing in common: they are lies. Default is not being averted; it is being defined away in a blizzard of verbiage, e.g., "hair cut," or "credit event." You can look up more "neat-o" new words the EUrocrats employ. Baghdad Bob would be right at home.

The typical "deal" involves bond holders, private ones that is as the European Central Bank (ECB) has exempted itself (as Tom Petty says, "It's good to be King") taking a "haircut" of between 50-75%, maybe even more. That is a default in anybody's book. It looks like a duck, walks like a duck, and craps like a duck. In exchange the Greeks will get more money from the Germans and PROMISE to make significant public sector spending cuts. Wouldn't you like a deal like that from your banker? The Greeks, however, most likely will not agree to such a deal or will say they do, and then lie about complying with it, and the Eurocrats will go along. That is the European bureaucratic way. Their bureaucrats are even more unaccountable than ours.

There is no clean solution to the Greek mess and to the mess that is about to befall much of the rest of Europe and which is beginning to knock on our doors. The Greek situation defies both traditional conservative and left-wing economics, at least in the short to medium term. A conservative solution is to cut taxes and cut spending. Makes sense except for what I noted above. The government essentially has absorbed the Greek economy: the economy is the government and the government is the economy. If you cut one, you cut the other. The leftist (and ECB) prescription runs afoul of Maggie's old dictum about "running out of other people's money." We are reaching that point. It is now in the political sphere, to wit, can or will Germany keep paying to save an unnecessary political project, the EU, and its golden amulet, the Euro?

What would be the effect of the Germans saying no? My opinion is that we would see a situation not too dissimilar to what we saw happen in the USSR when the rules of economics could no longer be defied. The Greek system would collapse. If the Germans keep paying, however, they will see Spain, Portugal, Italy, and who knows whom else lining up for their dole. The EU, after all, is all about doles. Could even the mighty German ATM generate that much cash?

Decades of insane leftist economics, of trying to repeal the laws of economics have created disaster for the people of Greece, and of Europe. These decades saw the destruction of private enterprise, and private incentive. The problem that has resulted is immense. In the end, the "solution" is a highly messy and painful one, and easy to prescribe from thousands of miles away but not so easy to live. Greece (probably Spain, Italy, and Portugal as well) must "default," real default not the fake "default" being conjured up by the Eurocrats. It must give up the Euro, and return to its own currency which will float in the international markets to its "true" value, and make Greece, in the long run, admittedly, a more attractive and affordable place to invest. This is not going to be simple or pretty. It is going to be horrendous, and might even need for Greece, much like Haiti in the interwar years, to come under international tutelage, maybe as a protectorate of Germany--something really unpalatable--to redo completely the Greek state. Fantasies. I doubt these things will happen.

What we see are the consequences of defying the age old rules of economics. Like gravity, you can for a bit, but, as that CW song wisely says, "falling feels like flying, for a little while." The Obama mis-administration might want to learn something from what is happening in Europe. They won't. They continue to insist on defying the laws of economics, and for a time "falling will feel like flying." And I am not speaking just about spending. They try to do it in the classic totalitarian way: they will reform us, literally, reform us to be perfect moral creatures who act only for the public good without thought for ourselves. They will decide how much medical care we need. They will decide if our salaries are excessive. They will control the horizontal and the vertical. Greed is bad! Advancement for you and your family is bad, unless it is with the sanction of a government program that insures we all "advance" together. These models of perfect people are exactly the ones our Founding Fathers rejected.

I end this overly long piece by leaving you with the closing lines of the Fable of the Bees by Mandeville. Those who would try to defy the rules of economics by shaping a new man, would do well to read his words.

THEN leave Complaints: Fools only strive
To make a Great an honest Hive.
T'enjoy the World's Conveniencies,
Be famed in War, yet live in Ease
Without great Vices, is a vain
Eutopia seated in the Brain.
Fraud, Luxury, and Pride must live;
We the Benefits receive.
Hunger's a dreadful Plague no doubt,
Yet who digests or thrives without?
Do we not owe the Growth of Wine
To the dry, crooked, shabby Vine?
Which, whist its neglected flood,
Choak'd other Plants, and ran to Wood;
But blest us with his Noble Fruit;
As soon as it was tied, and cut:
So Vice is beneficial found,
When it's by Justice, and bound;
Nay, where the People would be great,
As necessary to the State,
At Hunger is to make 'em eat.
Bare Vertue can't make Nations live
In Splendour; they, that would revive
A Golden Age, must be as free,
For Acorns, as for Honesty.


  1. The German's were able to turn the other way because the Greek's and others were borrowing from German and other banks, and buying German products such as cars. When the Greek's could no longer pay, the German's foreclosed on the debt.

  2. I had an economics course a number of years ago where the prof said one day that whereas there are many things in the field of economics that can be debated, the laws of supply and demand are ironclad. Unfortunately those laws are largely at odds with what many politicians want to accomplish. They keep beating their heads against that wall and the people keep paying the price.

  3. Another perceptive and to-be-honest, rather scary post.

    What should be quite clear seems to have escaped the professional political class.

    What was the phrase "They don't really care of the kill the goose that lays the golden eggs........just so long as it does not die on their watch."

    Something like that.

  4. I almost feel like the opposite is true. We've imbued the entire concept of 'economics' with too much undeserved credibility.
    Yes, the concepts of supply and demand are clear and accurate descriptions of human nature, and attempting to run a system outside of those concepts is complete folly.
    But macro-economics isn't really scientific in nature, and people tend to give lots of undeserved credit or blame to economic figures such as fed reserve chairman, potus, or multibillionaire.
    For much of this, credit/blame is no better/worse than credit/blame for the weather.
    There are a few basics which can be measured and studied, like natural resource exploitation and some level of labor/productivity analysis. But when something akin to 'investment' becomes part of the puzzle, economics becomes a 3rd floor apartment resting upon it's 2nd floor foundation, sociology, which itself rests upon the 1st floor wobbly walls of the bunk discipline of psychology.

    What's the moral of my story? How about the government stick to what it's supposed to do and let the hidden hand sort out the rest? Focus on those who *can't* fend for themselves and be conscious in selecting those apart from the *won't* crowd.

    Rather than attempting to change our 'nature' by addicting us to 'free' health care and a never ending new string of "not-quite-rights", focus on those with birth defects and real physical disabilities?

    The attempt here is to invade the spirit of the people of our country and sap them of the independence our forefathers have worked so hard to ensure.

    I read a wise saying: "Give your children the gift of freedom, never let your adult children become financially dependent upon you, as you will all regret it." But we can't expect the current administration to act like growns.

    - reader #1482

  5. The entire history of the nineteenth century could be titled, Ignorance of Economics. The Protective Tariff worked. It produced disparity between the product of Northern Labor and Southern, leading to the perpetuation of slavery, which most of the world abandoned because it was inefficient, not because it was inhumane. When slavery was abolished, over the protests of Northern workers, it was replaced with share cropping, which is not in itself such a bad deal. My family and my wifes's sometimes raised a crop "on shares." But, to have most of the cotton produced by people who'd only get two thirds of the value of their labor, no matter how well they work or how favorable the weather, is a pretty sorry business. The cashless economy also meant that only the girls were sent to school, since a teacher in the family could provide a bit of cash, and pay the interest on a crop loan in a bad year, whereas the boys, in a good year, could make some serious money, even if half was siphoned away in rent (share) and interest. We still see this, in Northern Ghettos, where the boys disdain studying as being "for girls."That's what their grand parents believed, so they believe it, too.

    And Karl Marx! Ai, Groucho knew more economics than he did. Karl consistently conflated the manorial exactions of the feudal lords with profit. His followers, even today, can not grasp that profit, as a return on investment, or even as the ignorati conceive it, as a portion of the price of goods, is a much smaller portion than labor or materials. If there really were fifty percent profits to be made in something, there would be, almost instantly, hordes of people in the business, soon reducing prices and profits. The more limited understanding of economics, the manipulation of one aspect or another by government, is dumb enough, but the more fundamental principle that politicians are like cockroaches, it's not what they carry off but what they fall into and mess up that matters, that's the one we need to keep in mind at all times.

    1. What about instabilities which lead to monopolies and, conversely union-monopolies?
      Yeah, so long as there are high profits to be made, people will enter the market and keep profits under control ... except when a monopoly can lock others out of the market.
      This happens with for examples, Boeing, and with the UAW/other unions who wont compete with each other but instead collude.

      - reader #1482

  6. I have never met a people more ignorant of human nature than Socialists. They and I cannot both be right. When the peoples of Europe gave up tragedy, whether Christian or pagan, they forgot they cannot be perfected. Hell is coming. I hope I don’t live to see it. I really hope I don’t live to suffer it.

  7. The New Soviet Man
    === ===
    [edited] Karl Marx (1818-1883) expected society to progress from capitalism through proletarian revolution to communism. Fundamental economic and social restructuring would generate radical changes to the character of the people.

    Vladimir Lenin (1870-1924) and Josef Stalin (1879-1953) (Dictators over Soviet Russia) insisted that the regime had to actively transform the people's values, even in a socialist society.

    Nikita Khrushchev (1894-1971) specified the "moral code of the builder of communism" at the Twenty-Second Party Congress in 1961. The builder of communism would be educated, hard working, collectivist, patriotic, and unfailingly loyal to the Communist Party of the Soviet Union. Vestiges of past culture such as religion, corruption, and drunkenness would be eradicated.
    === ===


    Capitalism is a transitory stage in the moral development of (wo)mankind. At present, people work for their selfish interests, creating property which they cling to like children. This false religion of consumerism produces an unfair society of wealth inequality and dog-eat-dog competition.

    We will transform society. This will also change the social construct of "human nature". We will all work for the collective good, producing more of both individual comfort and public wealth. What can compare to the large, public square with a children's fountain in the center? We Leaders already devote our lives to the public good.

    You might scoff at this. But, the vast productive abilities of the people can only be released when they are working for the great body. They can only feel their greatest joy when they know they belong to the great body. We seek to release the best of human nature, not crush it in competition as currently known.

    When some of you tell us that this is "uneconomic", then you childishly refer to the behavior of people in the soon to be past. The new men and women will produce a new economics, where they produce more for the common good than they ever could for their selfish selves and their greedy corporate overseers.

    Of course there will be resisitence. We are realists. The child will throw tantrums when he begins his education to be a responsible adult. There will be training classes and retreats for those who offer the most resistance. All will join with us in the end.

    * * *
    To me, this is parody, but not to our Dear Leaders. Russia was run on this theory, and many societies today. So, be very afraid. Anyway, this is why our Dear Leaders are "uneconomic". They believe in the economics of the New Man, not the economics of free individuals and enemies of the socialist utopia.

    Leading the People
    I met a social revolutionary in college who described the future of fairness and collectivism. I disagreed with this plan. He replied that I might not agree now, but I would later.

    1. Re the remaking of a people's values:

      Interesting that Khruschev's predecessor, Georgii Malenkov, ended up reconciled to the Eastern Orthodox Church and participated in a choir in his later years; while Brezhnev's widow snuck a cross into his coffin during the funeral.

      In China, Mao's Cult of Personality probably came so easily because of the long tradition of a sacred emperor, and gods that were once real people (Guang Gong, for instance; ancestor worship).

      I also wonder what will happen if there remain reservoirs of tradition and health in our society after the current effort to remake us in the image of the O starts to fizzle. I predict that in twenty-some years, some of the same lawyers now prosecuting people for refusal to cater to homosexual weddings will sail off into very comfortable retirements after suing the bajayzas out of every institution that made the plight of a horde of young men coming out of the woodwork with woeful tales of growing up bu%%ered by "two daddies" possible. It might even make re-crirminalizing sodomy fashionable.

      I suspect as well that after a few more confrontations with Islamic militants, there will be a re-appreciation of Western culture, and a corresponding reaction against the EmCeePeeCee shtick. I'll freely admit that there's someone near and dear to me who is very liberal, yet who has already decided that all Muslims are enemies (and even I have not gone so far).

      And, of course, the sad fact that there's no such thing as a free lunch will hit home sooner or later, too.

  8. Sigh ... I am becoming acquainted with the laws of the marketplace even know, even though my personal economy is underwritten by a military pension - albeit a relatively paltry one.
    I am also the partner in a Teeny Publishing Bidness. I have had to lecture my senior partner over and over again, about how everything has changed. Now the wealthy writers who wanted so spend a bomb on their bespoke high-quality books are not so many. We can't wait for the whales - we have to look to the minnows, and afford them the same attention and quality. Sigh. My work is keeping the company afloat.

  9. I was able to follow your line of reasoning but, I can tell you that there is a huge number of Americans that cannot. I have met them. Their vocabulary is so limited that they have a difficult time expressing a thought, let alone comprehending one. They vote.

    1. I agree. I have lots of them on college campuses. We (and Europe) are producing batches of totally ignorant asses and turning them loose to run our societies.

    2. These people can tell you when American Idol and Survivor come on I'll bet.

  10. Great article. I keep in touch with many of my relatives in Greece and they tell me things are absolutely terrible and keep getting worse. I have tried to tell them it is the fault of the people who wanted this carefree lifestyle and voted for the politicians who encouraged it. They will not admit that they were fools. Now that the country is in a mess, all they are concerned about is if the government will be able to take care of them. The vast majority still do not want to work.

    What has happened in Greece will soon happen here in the US. The only reason it has not happened here yet is that the government keeps printing money. Sooner or later people will have to realize that a social welfare state cannot work and will eventually lead to an ugly collapse. That is when things will REALLY get interesting around here and--to be honest--I am looking forward to it.

    1. Sounds as if the Americans are becoming Greeks.

      And, not too long ago, an economist from Hong Kong, when he thought nobody was listening, told a meeting of Chinese provincial Party chiefs that every province in China was a "Greece".

      Once again, Greece becomes the source of modern civilization!

  11. The reason the Germans tolerated the Greeks, et al, is that those latter economies kept the value of the Euro low enough for Germany's export based economy to function. The Germans are not innocent, and certainly not guilt driven. They are every bit the economic vampire that the Greeks are.

  12. Puts it in perspective with the help of the Curmudgeon.



  13. Well Mr. Mad I've got a question. When the crash comes (if it will come can be debated) will it be a slow motion wreck or a seemingly out of the blue splat. I personally think it will be the latter. I think we're in the former now, but I could be wrong for no one and I mean no one can see the future with 100% clarity.

    1. James, like one hedge fund manager said--buy gold guns and groceries.

  14. I have to say, with the thoroughness of this piece and its analysis of "us and them", I can slack off reading ZeroHedge. Nice presentation Diplomad.

  15. A very good read. One of the things going on in the background of all this is the desperation of the bond holders not to book the actual losses on the bonds. They will play "let's pretend" as long as they can.

  16. Thankyou,

    I truly enjoy the Mad Blog and the comments. Every time I visit I am educated.

  17. Kipling explained this in The Gods of the Copybook Headings.

    "As it will be in the future, it was at the birth of Man --
    There are only four things certain since Social Progress began --
    That the Dog returns to his Vomit and the Sow returns to her Mire,
    And the burnt Fool's bandaged finger goes wabbling back to the Fire --
    And that after this is accomplished, and the brave new world begins
    When all men are paid for existing and no man must pay for his sins
    As surely as Water will wet us, as surely as Fire will burn
    The Gods of the Copybook Headings with terror and slaughter return!"

    1. I was thinking of the same thing.

      I'm not sure I like the title though . . . . . I think it's the channel conflict between the content (which is universal human frailty and stupidity, as true today as ever and written in terms as understandable today as ever), and the title "The Gods of the Copybook Headings", which if you understand the context is a perfect title, but even in Britain, I don't think any schools teach writing with Copybook Headings anymore, so the meaning and context of the title is unique for a relatively short period of time . . . .

  18. Mr. Mad: I do so love your blog. I learn SOOO much every time. Thank you a million times and I wish many, many years of good health upon you so you will keep teaching.

    Liberty Grace's Grandma (#13)

  19. Excellent piece Mad. I'd appreciate your opinion regarding Ireland's performance under the same conditions. From the esteemed BBC; http://goo.gl/Y4YXn5. Max.

  20. Since I came of age and was permitted to think for myself I have viewed the 'markets' as very much like casinos with lots of games of chance 'fixed' to a regulatory fancy.

    With digitalization of gaming, less is left to chance and casinos have become ‘legal’ Ponzi schemes. I wonder if digitalization has had the same effect on the ‘markets’. Max.

  21. " an electorate willing to vote itself ever increasing benefits and to believe that money just comes from 'out there,’”

    Proof that restriction of the franchise is the most important law of any republic.

  22. "The Greek situation defies both traditional conservative and left-wing economics,”

    Is there a solution other than hand-waving one by saying the solution will be appointment of a German Gauleiter (that’s the term the Greeks will use) or German Proconsul (an ancient term).

    If the government has absorbed the economy, the solution is the separation of economy and state. Abolition of state enterprises, abolition of state subsidies, et.al. Today. For tomorrow. And for ever.

    1. Yes, absolutely, but my point is that that is, or would be if it's ever done, a very painful process much easier to prescribe than to live through.

    2. Diplo: There's a growing appreciation in the economics profession about the growth-limiting problems arising from the extremely high Debt/GDP levels in most developed countries around the world. Kenneth Rogoff and Carmen Reinhart have done the most recent research, though Irving Fisher wrote a very good research essay called "The Debt-Deflation Theory of Depressions" back in the 1930s and 1940s (he revised it repeatedly). The basic idea is that when the outstanding, cumulative stock of debt gets very high relative to the annual flow of GDP, further economic growth is slowed markedly.

      The problem that exists in lots of developed countries is that the existing income tax regime is already so high and deficits are so high that there's no sound option for fixing the problem, as ever-so-steadily, debt is increasing faster than GDP growth, so the Debt/GDP ratio in most key countries continues to increase.

      In the 1930s, eventually, the problem was addressed with widespread defaults and an incredible flood of human misery - but because the debt was defaulted away, the floodwaters of human misery receded and the foundation was laid for a fabulous recovery post-WWII.

      Nowadays, the problem is continually getting worse and not much is being done to set things right. Keep your eye on the Debt/GDP ratios in Greece, and Spain, and Italy, and Japan and the US - because that's the limiting factor.

      Last, the consensus is building - slowly, and unevenly, but building nonetheless - for an eventual "one-time" wealth tax. Savers beware!

      The moral case for a one-off wealth tax is compelling
      The idea should be taken seriously – but it is no substitute for fundamental long-term tax reform The Guardian by Kenneth Rogoff


  23. I just entered a post, and it disappeared. Not the first time, either. Blogger is getting weirder and weirder.

    Again, you point out the obvious, and it's appreciated. Unfortunately, it doesn't reach the ears of those that need to hear it.

    I'd like to contact you about a personal matter. My email address is my name at gmail dot com. Maybe this time Blogger will accept my post.

  24. Germany's, along with the rest of Northern Europe's, higher standard of living depends on producing a surplus and selling it to southern Europeans that southern Europeans can't afford. So to put of their own day of reckoning, Northern Europeans make loans the Southern Europeans that Southern Europeans can't afford, to enable them to buy stuff they don't need and can't afford. It's all fine and dandy state the southern Europeans are living above their means but that also applies to Northern Europeans. There are no innocent victims in the macro sense. Everyone has their own motives to go along with the charade.


    1. Good observation. Germany's export driven economy must be supported to the bitter end. If it takes a fiat currency like the Euro, then so be it. Europe is a large hamster wheel where the weak players appear to progress while reaching into the wheel to extract some Euros only to put them back in again. The most vulnerable point of every nation, big or small, is its currency.

    2. Yes, just like us, and the Chinese!

    3. Anon...you got it! Fiat currencies all the way down.

  25. I have a very basic understanding of economics.

    After retiring from HM's Service I started a small, successful business. It was really pretty simple.

    Money comes in. You pay your bills, take a salary, invest in the future of your business by upgrading your equipment and at the end of it still be on the positive side of the ledger. Seemed to be pretty simple logic but I knew I couldn't spend more than I made or, in the case of a big outlay, service on a regular basis. It worked for twenty one years and when I closed down the business it was healthily in the positive side of the ledger.

    Call me naïve and unsophisticated, dumb if you like, but it seems a logical way to run any business or any country.

    On the other hand we had six years of economic idiots running our country as well so perhaps I am not that clever - though I helped to vote the mongrels out.

    1. Good am David. "I have a very basic understanding of economics." That alone makes you a dangerous man and a threat to Keynesian "economics" and Statism in general. Keep a sharp eye out.

    2. G'day Whitewall,

      I trust the "global warming" hasn't blocked you in under all that soft white "sunshine" we hear the northern hemisphere is getting.

      Just a simple serviceman at heart with a libertarian leaning.

    3. Wet and cold has been the order of the day. Speaking of "global warming", looks like Al Gore cashed out just in time.

  26. To your list of economists (among the etc.s perhaps) I would add Von Mises, from whom comes the following:

    "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

    I think many on the political right know this to be true, but one shoould not expect any elected politician to be willing to voluntarily abandon further credit expansion. Nixon did not when he closed the gold window and Reagan did not when he bargained with the Dems for future spending cuts (and got Volker to ease up on credit). They both knew what every other Republican knows that the effect of bringing the house of cards down will only be to assure the repudiation of the Republican Party by the electorate.

    The USA is now an urban nation and a repeat of the Great Depression is not possible with our current demographics. The wheels must turn for people to be fed. When the "final and total catastrophe" comes it will not take long for riots to begin. As cities go up in flames an "emergency" will be declared under the provisions of the Defense Production Act of 1950 (and knock-on legislation).

    The struggle for control of the nation will not be in the streets nor in voting booths, but within the corridors of power in DC.


  27. The eventual collapse of credit-fueled booms was headlined "The End of Economics?" just to parallel to Fukuyama's implausible but provocative title about History [sic Hegelian capital letter]?

  28. "The USA is now an urban nation and a repeat of the Great Depression is not possible with our current demographics. The wheels must turn for people to be fed. "

    There are people buying farm land with just this in mind. I hope they are far enough from cities and have enough ammo.

  29. Got a little memoir of my own out on the purveyor of another anti-economic pipe dream.