Fear, Expediency, and the Economy
September 25, 2008 by Mike Wilson · Leave a Comment
So leave everything you know and carry only what you fear.
Daily we face the onslaught from the media. A murder here, a rape there. Illegal immigrants taking your jobs here; globalism outsourcing your job to over there. It is called news. Fundamentally, however, it is fear-mongering — and if succumbed to, it is fatal to our soul.
Both political parties attempt to play on fear, portraying the opposition candidate in the most negative light possible to the point where this campaign has become more immature than a kindergarten shout-down (”My dad can beat up your dad!”). In order to achieve support for means that we know are questionable, those in office instill fear of the unknown or the different. Fundamentalism Muslims are referred to as “Islamo-fascists” (a convenient compounding of any word to denigrate the former term).
Our current economic situation is a result of fear…fear of work, fear of hard times, fear of the housing
market plunging more deeply. This fear will cause us to operate from a position of expediency. Expediency resulting from fear pushes us towards means that seem to be fixes to the fearful problem, but are really methods that will, like termites, slowly eat away at our structural foundation.
In the years of the Roaring 20’s, economists (mainly following the theories of Irving Fisher) were convinced that slowly increasing the money supply would allow for continued expansion of the economy without increasing prices too much or causing any damage to the financial and industrial structures. However, an economist in Austria (Ludwig von Mises) was writing a contrary view, contending that increasing the money supply, thus lowering interest rates and making borrowing cheaper and more attractive than savings, might just pull the rug out from under the glass table on which the economy sat. He felt that “if monetary policy pushed ‘market’ interest rates below the ‘natural’ rate, the central bank could create an unstable business cycle that could lead to financial disaster” (’natural’ rate of interest defined to be “the rate that equalizes the supply and demand for saving based on the social rate of time preference”) [Skousen--The Big Three in Economics].
Mises predictions were ignored and the Federal Reserve in the U.S. continued to increase the money supply and lowered interest rates below the natural rate such that structural imbalances were introduced into the economy, contributing to the Great Depression.
Fast-forward to the 1990’s, a time of great economic growth and increases to the money supply as demonstrated by the decreasing interest rates imposed by the Federal Reserve over the last 18 years. What are we facing again? An economy that isn’t saving because the cost of borrowing was cheaper than it should have been is loading the investment market with mortgage-backed that are described as “radioactive toxic waste.” Fear of the economy slowing down during the 90’s and the early 2000’s gave impetus to regulators to adjust the money supply to such a degree that it is likely to have dropped the market rate of interest below the natural rate of interest, leading to the instabilities we’ve seen over the last few months, coming to a head these last ten days.
We know that in order to prosper we need to save. However, we buy into the information spoon-fed to us by a media that is inherently a business and operates on a 24-hour news cycle, thus it is not only subject to fear-mongering, but media is also an objective participant in the generation of economic fear. Politicians also aren’t hesitant to promote fear since our fear gives them greater power as we feel a deeper need for security and every politician will tell us that “changing horses midstream” is a dubious and dangerous proposition.
I started this post with a line from Bruce Springsteen’s ironic warning entitled Magic. We need to listen to the warning voice by holding onto “everything [we] know and [letting go of] what [we] fear”. We must recognize that fear, as described in the following lyrics, is a dangerous thing and if allowed, will turn our heart black and take our God-filled soul and “fill it with devils and dust.”
Now every woman and every man
They want to take a righteous stand
Find the love that God wills
And the faith that He commands
Well I’ve got God on my side
And I’m just trying to survive.
What if what you do to survive
Kills the things you love?
Fear’s a dangerous thing.
It can turn your heart black, you can trust;
It’ll take your God filled soul, fill it with devils and dust.
Decisions based on fear using expediency instead of principles will most often destroy those fundamental principles. Let us be aware of what is seen and unseen and make decisions based on principles and re-establish liberty.
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Copyright © 2008 by The Cause of Liberty. All rights reserved.
Adjusting Interest Rates (errr…What’s Really Going On)
September 22, 2008 by Mike Wilson · 1 Comment
This will be short. While we are witnessing some of the most aggressive and interventionalist economic policy we’ve seen in decades this week, I’ve had the chance to be reading ideas from free market gurus like Adam Smith and Frederic Bastiat. I don’t agree with everything Bastiat has to say (I agree with most of Smith’s points) but I wanted to discuss two policies that are used to deal with economic difficulties in the United States and talk about their ramifications.
Fiscal Policy
Fiscal policy is the idea promoted by John Maynard Keynes that when the economy isn’t growing, the quickest and most sure way to increase economic growth is to stimulate demand. This is most efficiently done by deficit spending (he only recommended it over the short term) wherein the government directly plants money into the economy. The “stimulus checks” that went out earlier this year were examples of fiscal policy in the Keynesian sense. Does it work? Growth in the second quarter increased to the extent that economists expected. Does it fix things long term? No. It’s a short term solution, most often in response to fundamental problems with saving and investing. We’ll discuss this in a later post.
Monetary Policy
The second type of financial policy used to adjust the economy is referred to as monetary policy. This idea was promoted by Milton Friedman and implemented during the 1990’s and earlier part of this decade by Alan Greenspan. It’s name, monetary policy, would indicate that it has something to do with money policy, which it does. However, when the Federal Reserve meets to discuss monetary policy it is presented as an adjustment to the interest rate. The lower the interest rate the cheaper it is to borrow money and this cheaper credit encourages the economy to expand. It encourages borrowing for capital investment, home purchasing, car purchasing. It discourages savings (again we’ll talk about saving in a minute).
How, then, does the Fed adjust the interest rate? They do so by affecting the money supply. In order to make money cheaper (lower the interest rate) they do what microeconomics says will cheapen any commodity — they increase the supply of money. They do so mainly by buy bonds on the bond market and thus increasing the amount of circulating capital. With an increased money supply, banks are more willing to lend to each other and to consumers and consumption increases.
Besides the inherent problems with increasing consumption without addressing production and supply, monetary policy (although less traumatic to long-term economic fundamentals than fiscal policy and deficit spending), because of the way it’s described, has the tendency to impoverish the poor. Increasing the money supply doesn’t make anyone richer. All it does is increase the number of transactions and thus stimulate exchanges, but if there isn’t any more production of labor and capital to purchase, no real growth takes place. But because it is couched in the terminology of “lowering interest rates” instead of “increasing the money supply”, most people don’t realize that it is the money supply that is being adjusted, not the interest rates directly. This affects the laborer more than the owner/merchant in the following way. From Bastiat’s What is Money?:
Under the influence of ignorance and custom, the day’s pay of a country laborer will remain for a long time at a franc, while the saleable price of all the articles of consumption around him will be rising. He will sink into destitution without being able to discover the cause…But this rise in prices is not instantaneous and equal for all things. Sharp men, brokers, and men of business, will not suffer by it; for it is their trade to watch the fluctuations of prices, to observe the cause, and even to speculate upon it. But little tradesmen, countrymen, and workmen, will bear the whole weight of it. The rich man is not any richer for it, but the poor man becomes poorer by it. Therefore, expedients of this kind have the effect of increasing the distance which separates wealth from poverty, of paralyzing the social tendencies which are incessantly bring men to the same level, and it will require centuries for the suffering classes to regain the ground which they have lost.
Remember that this is from one of the most outspoken free market promoters of all time. I think that his assessment is correct. It takes longer for the day laborer, the wage earner, to realize that everything is costing more money because of the increase in supply of dollars, while he is making the same amount of money, than for the business man whose decision-making awaits all the financial news on Bloomberg, FOX, or CNN. One way to lessen this effect would be to change the terminology for what the Fed does: tell everyone that the Fed is increasing the money supply, not that it is lowering interest rates. And be aware when ever anything is done for expediency. There are almost alway unseen costs associated with those interventions.
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Copyright © 2008 by The Cause of Liberty. All rights reserved.
Georgic Economics: The Genesis of Liberty
August 18, 2008 by Hyrum Lefler · 3 Comments
What is meant by a “Georgic Economy?” It occurs when families plant seeds after preparing the ground; they then water, tend, protect, and eventually harvest. In our modern day, it is experienced by families who adopt Georgic Principles in their finances. It is compared to banking as well: Banks plant seeds (of capital) and harvests increase over time.
When America shifted from agriculture to industry they outsourced (unwittingly perhaps) the planting of seeds for their livelihood, to others. The professional farmers provided the food, and the professional financiers provided the capital.
We Americans now do the opposite of banks: We receive products first, then pay for them over time — providing bankers with a harvest. In essence, Americans began choosing material comforts over economic freedom. We lost the principles of Georgics.
The Georgic Economy is not a new concept or practice. It has peeked its perspiring head several times throughout history. Adam was taught this economy by God in the Bible. We see it again with Abraham. It was then forgotten by the Israelites in Egypt — and it took God forty years to revitalize it in the people! The Greeks had it early on; they cultivated it in their rocky soil, only to have the vine blossom in the Golden Age and wilt in the scorching heat of flamboyance and frivolity. The Romans built a powerhouse economy using Georgic principles, but eventually rejected Georgics for bread and circuses.
Virgil the Poet, coined the phrase to describe this economic genesis of liberty in The Georgics (29 BC) and had it read to Octavian, who continued his course for power, along with his people. He became Emperor in 27 BC, and the 800 year-old Republic continued imploding into the pompous Roman Empire.
Georgic economies found life in pockets and bore fruit in the Great Economic Revolution at the turn of the 1st Millennium (See Will Durant’s Story of Civilization Volume IV), in the Renaissance, and in Puritan England. Many of the Puritans, known for their work ethic and devotion to God, sailed to American (beginning in 1620) and on American soil this economy blossomed, birthing the greatest movement of freedom that has ever spread across the world.
As the British surrendered to Washington at Yorktown, their drummers played the march “The Day the World Turned Upside-Down.” (see Siege of Yorktown.) The world had turned upside-down; the Founding Era of our nation rested firmly upon the shoulders of a Georgic Revolution.
Every burst of liberty on the landscape of humanity has been preceded, fueled, tempered, and preserved by Georgic revolutions. We as Americans will not find and secure liberty by legislating it in Washington. It will not be securely founded if spurred on only by discussion, persuasion, rhetoric, and hype. Liberty is a consequence of work — of hard work, sacrifice, patience, and perseverance. Our government’s over-spending on social programs, subsidizing, and other fear-mongered policies, are symptoms of the real problem: We forgot, and eventually refused to admit, that we must first plant, before we can reap.
It is time, once again, to “turn the world upside-down.” YOU are an American! Experience a Georgic Revolution in your own life, for thus it must spread across our land if we are to succeed in moving the Cause of Liberty with any permanence and authenticity. We must do this as our Founding Fathers did. This must be pursued in the natural pattern: Georgic Revolution first, political revolution second. The Founders lived the Declaration long before they ever signed it…
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21st Century Georgics: An Introduction
July 29, 2008 by Hyrum Lefler · 4 Comments
A key factor in maintaining freedom is sustainable economic forms. Are you maintaining freedom through the financial principles and practices you are using? Have American families adopted the economic forms necessary for the preservation of a free people?
The average American household pays over 34.5% of every dollar earned to interest payments. Forget about the taxes — that is serious bondage! Our system has become top heavy, threatening our economic solvency as a nation and necessitating large government bailouts to offset their blunders. When a government is forced to tax its people heavily to keep economic centers of capital from collapsing, how can we expect it to reduce in size? To force such a thing is tantamount to economic collapse.
We have allowed our wealth to centralize and grow in the hands of OTHERS. We have given them our money and the control of it for the “magic of compound interest” and then turned around and borrowed from them with a price.
Families are the foundation of American stability and economic growth, and it is time for families to regain real control of the resources of the economy. What do I suggest? We obviously cannot steal all of the money and put it in our families’ accounts! No, I am suggesting that we have all of the resources we need, and they flow through our hands day after day, and we relinquish control of them day after day. This is because we do not understand money; or, more importantly, we do not understand economy.
The Roman Poet Virgil wrote The Georgics in 29 BC. The concept of “Georgics” that came out of this poem was widely debated and discussed in the founding era of our country. The word basically means “to work the land.”
In early spring-tide, when the icy drip
Melts from the mountains hoar, and Zephyr’s breath
Unbinds the crumbling clod, even then ’tis time;
Press deep your plough behind the groaning ox,
And teach the furrow-burnished share to shine.
That land the craving farmer’s prayer fulfils,
Which twice the sunshine, twice the frost has felt;
Ay, that’s the land whose boundless harvest-crops
Burst, see! the barns.
It was felt by many of our Founders that this connection to the land, to hard work, and the dependence on God that is pre-supposed when seeds are planted, had a profound effect of building an independent and free people — especially when coupled with the other Foundations of Freedom.
Up until 100 years ago, 97% of Americans worked the land with plows — they were farmers. Short of a massive catastrophe, that isn’t going to happen in our time. What can be done in our day to bring the Family Farm — or at least its principles — back to life?
We must first understand Georgics. In the coming weeks I will be posting several articles outlining the basic tenets of Georgic Economics, with links to sites where you can learn how to establish a rebirth of freedom in your family through Georgic principles and forms.
American families must become independent centers of the U.S. economy if our liberties are to be preserved. I am calling for a regeneration of organic, financial systems centered in and controlled by America’s families.
Move the Cause of Liberty by (1) subscribing to the Sentinel, a free weekly newsletter boldly illuminating the principles of freedom in a darkening nation, and (2) pledging your Life, Liberty, and Sacred Honor to the Cause by signing the Declaration of Dependence.
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Copyright © 2008 by The Cause of Liberty. All rights reserved.
Question #9: What are the seven major societal forms, or institutions, and what are the roles of each?
July 7, 2008 by Stephen Palmer · Leave a Comment
| 10 Foundational Questions | Introduction | Question #1 | Question #2 | Question #3 | Question #4 | Question #5 | Question #6 | Question #7 | Question #8 |
The seven major societal institutions are family, community, religion, academia, business, media, and government.
Family
The role of the family is to ensure responsible citizens, preserve society, and balance the desires of individual liberty with the demands of community responsibility. As James C. Ure, professor at George Wythe College, has written, “The family is the bubble in which a child…feels safe enough to explore his individuality. It is also the first place a child learns to make personal sacrifices for the good of the whole. In the family, it is natural for a parent to expose a child to various activities or ideas to determine what unique interests the child may have and to give the child an enhanced sense of self. It is also natural for a parent to ask a child to sacrifice personal interests to benefit the family, such as to provide help with cooking or cleaning. In the end, this is not very different from what makes free societies tick…It is in the family that children are expected to learn the core values and beliefs that democratic institutions later draw on to perpetuate themselves.”
Community
The original concept of federalism meant that as many decisions as possible were made at the lowest level possible. As Cleon Skousen taught, strong, local self-government was the keystone to the original American system. Understanding that power centralizes and expands, the Founders knew that the bulk of our political decisions should be made on the community level. The role of the community, therefore, is to prevent the centralization of power by keeping responsibility and decision-making close to the people.
Religion
John Adams wrote that, “Religion and virtue are are the only foundations, not of republicanism and of all free government, but of social felicity under all government and in all the combinations of human society.” George Washington affirmed, “Whatever may be conceded to the influence of refined education on minds of peculiar structure…reason and experience both forbid us to expect that national morality can prevail in exclusion of religious principle.” The role of religion is to remind republican citizens of their duties to and reliance upon God. Virtue is the bedrock of free society, and religion provides a constant reminder of that fact. Furthermore, religion serves as a venue where citizens serve God by serving their fellowman; philanthropy is enacted in large part through religion.
Academia
Academia advances culture through knowledge, helps to prevent socio-economic inequities, breaks through boundaries of human ignorance and fear, helps societies to avoid repeated historical mistakes, and serves as a check on the government by keeping citizens informed of civic affairs. As John Adams said, “Liberty cannot be preserved without a general knowledge among the people…They have a right, an indisputable, unalienable, indefeasible, divine right to that most dreaded and envied kind of knowledge–I mean, of the characters and conducts of their rulers.”
Business
The role of business is to provide exchange, commerce, and ultimately widespread prosperity. In a free market economy prices tend to decrease through competition and innovation, the ultimate benefactors being end consumers of products and services. In a free market economy poverty decreases, the standard of living rises, and people are able to find self-fulfillment as their subsistence needs are met. In The 5,000 Year Leap, Cleon Skousen wrote that, “By 1905 the U.S. had become the richest industrial nation in the world. With only five percent of the earth’s continental area and merely six percent of the world’s population, the American people were producing over half of almost everything–clothes, food, houses, transportation, communications, even luxuries.” The occurred because of our free market economy, where business was left free to fulfill its role.
Media
The role of the media is to disseminate information, highlight important current events, and to essentially stand as a witness, an observer of cultural, political, community, and educational events. A healthy media provides a check on the government and increases the political astuteness of republican citizens.
Government
The role of government is to protect unalienable rights. Government is the institutionalization of force, and as such should not do anything that would not be right for an individual to do (such as steal). As Thomas Jefferson said, “…a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.”
Why It Matters
Freedom occurs when all seven of these societal institutions are Read more
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