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Oct. 29, 2008 Terms being used now include such highly dramatic ones as the Perfect Economic Storm, the Financial or Credit Tsunami, the Economic Crisis of the Century, etc. because the governments of the world are working mightily hard to create the next great economic depression, for several or, perhaps, many years, that they claim they are— simultaneously – just vigorously trying to prevent. Are they to be believed? Well, yes and no. [Extensions of this discussion, with other pertinent details, are to be found in three earlier articles, written by the same author, and also posted on useless-knowledge.com] Government leaders, the majority at least, may sincerely believe that what they are doing will, in fact, prevent the great disaster that will, nonetheless, be created effectively by their various massive acts of stupid interventionism. The Austrian School of Economics (ASE), which creatively stresses the important need for market forces to be properly allowed to work, is, once again, being totally ignored in the insane rush toward the failure in economic thought known as Keynesianism (Fabian Socialism) as the supposed sure means of “saving” the free-market economy for the world at large. It had failed, monumentally, in the 1930s to ever stop or reverse the Great Depression, so, of course, this magical exercise in superstitious pseudo-economics is to be tried, again and again, in the completely false hope that it might, somehow or other, now work for some unknown or strange reason. Political leaders, inclusive of the leftwing and rightwing socialists of all parties, of the many various governments and regimes are rightly filled with fear; this fear, in turn, encourages panic; panic often forces people to think irrationally by seeking out whatever quick fixes might be offered as the best ways to avert massive socioeconomic disaster. These things that brought about the tremendous financial crisis are now said (ironically?) to be actually needed to be further applied, and with an even greater intensity to clean up the mess. Thus, completely regardless of existing regulatory structures and laws, for instance, in the United States such as, e.g., the SEC, Sarbanes-Oxley Act, and an extensive multiplicity of other codes, rules, laws, and regulations, the enormous crisis had still occurred and will predictably, with the terrible “help” of government hyper-activism, get more and more worse. A mere financial panic will go through what could have been a very short recession into a full-blown, worldwide depression for years to come. Moreover, any minor deregulation of the past 40 years, in America, that had happened was simply insignificant compared to the powerful regulatory environment that persists and will, of course, be made much greater under Obama’s Leftist presidency. Regulation has consequences, mostly negative ones; one can, for instance, today sadly read Clarence Carson’s classic volume entitled: Throttling the Railroads as to the way that the US government practically destroyed what had once been one of the fantastic marvels of the modern age, the American railroad industry; it had historically been the finest railroad system in the entire world and, moreover, a significant boast of national pride and civilization on the North American continent. [This was but one small and effective example of terrible real-world consequences, among many, that could be (repetitiously) cited.] So, of course, there will be increasing, ignorant, and uninformed Leftist ideological calls for much more regulation of the American economy, the pouring out of much more taxpayer money toward supposedly "saving the whole economy," etc., meaning increased degrees of interventionism that will move this country from the mixed economy of the welfare-warfare State into a basic, to all intents and purposes, collectivist State favored, it needs to be critically said, by capitalism. This is why free-market economics, according to the ASE, is the true opposite of actual capitalism, also known as mercantile-capitalism or state- capitalism. Socialism and capitalism are, therefore, the two sides of the same coin of a regnant and aggressive modernity: the rationalization and secularization of the entire socioeconomic order for both the grossly materialistic and nihilistic sake of combining Big Government, Big Business, and Big Labor into a single, massed entity: the corporate-government State, not ever the assumed workers’ utopia/dystopia of the Leftist ideological fiction writers such as Karl Marx. Once again, the too evident failure of statism, meaning interventionism, is being erroneously blamed upon free-market economics that often gets confused with state-capitalism, which, as known to the ASE, abhors true risk, genuine competition, actual entrepreneurship, (uncontrolled) innovation, and (uncontrolled) invention within any financial system. Capitalism expects and wants only sheltered “risk” as when the government gives it loans, subsidies, tariffs, trade quotas, and does all those things that have recently been done by the Bush Administration with the cooperation of the US Congress; it wants any true competition with Big Business substantially crushed or, better yet, regulated to death by its friend, the government; entrepreneurship it wants discouraged, hopefully by government actions, because real entrepreneurs accept or create risk, pursue innovation, and seek out ways to support invention for greater economic productivity not desired, of course, by Big Business if it cannot itself benefit decisively by such activities. The esteemed writings of such ASE economists as Carl Menger, Ludwig von Mises, Friedrich von Hayek, Israel Kirzner, and many others can be profitably consulted in needed opposition to the nonsensical stuff produced by most academic and popular economists and financial seers. Monetary theory times ten, moreover, cannot replace realistic concern for the actual functioning of market dynamics concerning such basics as supply and demand; nor can governments finally eradicate the stark reality of Gresham’s Law, though attempts are constantly tried, of course. Liquidity in the financial/credit system is, by opponents of the ASE, looked at backwards and, therefore, incorrectly, by definition, by so positing the often assumed necessity of certain amounts of inflation, either in irregular spurts or even at a fixed rate of inflation. On the contrary, inflation does not need to be artificially induced, especially not by any government; inflation, which can only be caused by the State, is not often properly recognized as a true form of taxation that hits poor people and those on fixed incomes the hardest, as they are victims of the situation, especially pertaining to fiat money (AKA “funny money”). This means, when looked at coldly and realistically, that governments are the only entities or establishments legally permitted to produce counterfeit money, while all other parties can get arrested or, sometimes, even executed for doing so, for acting as if they are irresponsible and, thus, corrupt governments themselves. The ASE logically and doctrinally opposes fiat currency and prefers a gold standard (or some such precious metal(s) or other recognizable indication of hard physical assets) , either a full one or, at the least, a partial one to exist as some kind of precious metal check upon what might be done to adulterate the money supply. This is because the quantity and, much more importantly, the quality of the money in circulation will match the conditions needed to appropriately sustain the market in functional terms of supply and demand by all the economic actors concerned. Governments or regimes only serve, through fiat money systems and State central banks, to corrupt the system of exchange by turning toward inflation when thought to be necessary to avoid deflation or, more honestly put, to serve the greedy needs of politicians. But, both deflation and inflation are things that occur much more through different kinds of interventionism than would ever be caused by any market realities, if a true free-market situation were permitted to basically exist in practice. Thus, for instance, there has been no true free-market economics in operation in the supposed capitalist United States of America since at least the 1930s. Increasingly, a mixed economy has substantively and substantially developed that, now, is significantly verging toward, if all such tendencies do increase, a full-scale collectivist/statist-command economy. It is to be forever highly significantly noted, however, as both a useful, heuristic and forensic analytical demonstration for economists (and other observers) that the onset of the Great Depression of 2008-2009 was not caused by any gold standard or its equivalent; moreover, all the various and variously multiple and multiplying economic terrors, supposedly both real and imagined pertaining to a gold standard, had interestingly occurred with fiat money added to repeated useless acts of interventionism, on a grand scale, not seen since the New Deal Era. As with the occurrences of 1929-30, the wrong analyses and conclusions will be continually made to suggest that more of the same poison is supposedly requisite to this new situation that was also the result of decades of interventionism; this interventionism was, surely, used to get people into homes they couldn’t afford, to get banks/mortgage companies government ratings of their institutions that they ought not to have been forced to seek, and to allow many politicians, from both major political parties, to profit from their spoils system created through both legislation and regulation. And, for all this, free-market economics gets wrongly, one again, totally blamed for, in point of fact, what state-capitalism has achieved in corruptly bringing about the terrible crisis that will lead to a new and extended economic depression. At least, the Austrian School of Economics’ thinking offers a viable way out of the many troubles ahead; this is, of course, if only some politicians become truly genuine statesmen to lead their nations out of all this self-perpetuating turmoil that is sustaining the increasing economic failure, which, however, is supposed to be fought against, ironically, by interventionism.
Collectivism (AKA Keynesianism or Fabian Socialism), therefore, it can be reasonably asseverated, is genuinely an iatrogenic disease if there ever was one!
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