“The rich ruleth over the poor, And the borrower is servant to the lender.” -Proverbs 22:7
Politicians lie. Well, most politicians lie much of the time.
Example? In 1932, the Democrat Franklin Delano Roosevelt lied when he campaigned on a plank of a balanced federal budget, accusing the hapless President Hoover of leading America down the road to socialism.
Another example? In 1994, the Republican Newt Gingrich preached a balanced federal budget. Subsequently in 2000, after winning the White House and the entire Congress, the Republicans created the biggest deficits in American history.
There’s a scientific explanation for why politicians lie. Consider the following: B = f(x) under c. Behavior is a function of its consequences under a given set of conditions (context). In the context of politics, the consequence of telling the truth often is defeat at the polls. Of lying? Victory. As it is said, a political gaffe is defined as a politician’s stating an obvious truth when he shouldn’t.
Why should the consequence of truth be defeat and of lying be victory? Answer . . . most people will choose to hear a pleasant lie over an unpleasant truth, even knowing that the lie is a lie.
As the character played by John Ireland advised the politician played by Broderick Crawford in the 1949-film, All the King’s Men, just tell ‘em you’re gonna soak the rich. Mr. Obama claims it’s to protect the “middle class”. Well, it’s a lie. Politicians use that lie to soak all the productive . . . rich and not-so-rich. Why? That’s where the money is.
The political concept is to steal the money from the productive to buy the votes of the unproductive. It’s a compelling reason to limit the reach of government and to disenfranchise those who take and to empower those who make. Who is John Galt?*
Soaking the rich isn’t sufficient. Simply put, the rich aren’t sufficiently rich to feed the insatiable governmental beast. Accordingly, the governmental tax-bandits since FDR have been following the alleged observation of the late bank-bandit, Willie Sutton.
“Willie, why do you rob banks?”
“Because that’s where the money is.”
To rob the middle-class, Democrats and Republicans, while trading power back and forth, have used two, main weapons of legalized theft . . . inflation and budgetary deficits. Inflation robs the living, mainly savers. Deficits robs the yet-to-be born, the defenseless.
To use inflation, the politicos have their accomplices . . . the bureaucrats at The Federal Reserve Bank who debase the currency by printing worthless banknotes or their derivatives. For deficits, the politicos have their accomplices at The Department of the Treasury who issue debt while the politicos raise its imaginary ceiling.
In this regard, given the twisted logic of politicians, a decrease in the rate of inflation is called deflation. It’s similar to the gambler who feels he gained by losing less than last time.
Given the size and resources of The USA, for two generations, the markets had allowed American politicians and bureaucrats to continue their stealing spree with abandon. When questioned, initially the politicos had claimed debt wasn’t a problem because we Americans owed the money to us ourselves. Then, after 1980, The USA went from the largest creditor-nation in the world to the largest debtor-nation, increasingly owing money to friendly foreigners.
“Still no problem,” the politicos had reassured us mistakenly.
Now, as Speaker of House, John Boehner, recently stated succinctly, “We’re broke!” Today, we Americans owe much of the debt to unfriendly adversaries if not to outright enemies . . . think China.
Despite being broke, The United States of America, as a nation, coast on their credit, at least for the moment. Continuing credit allows economists at “The Fed” (primarily Benjamin Shalom Bernanke as did his predecessor, Alan Greenspan) to keep in play fatally flawed policies based upon their faulty analyses, in turn, based upon their idiosyncratic ideologies instead of allowing the free-market to determine policy congruent with Scientific Capitalism.
As misguided as their policies have been, fortunately for The USA, the policies of most other major players, such as the Eurozone, have been even more misguided. Recall that The USA defeated the erstwhile Soviet Union not because we Americans were so cunning and skilled but because the Russians were so inept and incompetent.
Will the same paradigm hold true in our current context? Given the incredibly inept and incompetent behavior of the European politicians and bureaucrats, it just might, at least for a while.
*Part Two of the cinematic version of Ayn Rand’s Atlas Shrugged is being released this month.
“To relieve the present exigency is always the object which principally interests those immediately concerned in the administration of public affairs. The future liberation of public revenue they leave to the care of posterity.”
– Adam Smith, The Wealth of Nations (1776)
Well, it’s now 2012, and the Greek crisis created by . . . the Greeks . . . continues. Greek politicians had blamed everyone but the perpetrators . . . themselves; much of the Greek populace still is blaming others, mainly the Germans. Yet, it was the Greek politicians who promoted the borrowing of money in order to promote consumptive not productive behaviors.
Now, as the Greeks renege on their latest promise, they beg their creditors in a threatening tone, “Just one more extension of credit . . . ‘to save yourselves’.” So much for Greeks bearing promises, in particular. So much for the credibility of verbal behavior, in general.
The short-term consequence of their borrowing behavior, the Greek politicians hoped, would be getting themselves re-elected. The long-term consequence, they feared, would be economic disaster . . . worse, losing power; both have come to pass.
“For every complex and difficult problem, there is a simple solution – and it is wrong.”
-H. L. Mencken
Could it have been different? Yes, if culturally the Greeks were Germans or, perhaps, even Irish. It’s easy to offer simple solutions to complex problems . . . politicians do so routinely. Two examples of promising to resolve debt painlessly are the following: 1) by creating more debt or 2) by reneging on prior debt. Selling more U.S. Treasury Bonds represents the first; “monetizing” the debt represents the second. The typical and inescapable consequences of both are the scenario unfolding in Europe as financial contagion spreads . . . Greece, Cyprus, Spain, Italy, then . . . .?
Had the European politicians adhered to their own now-broken “rules”, the euro might have become the preëminent reserve-currency instead of being placed on life-support administered by the Deutsche Bundesbank and the Schweizerische Nationalbank. One critical variable governing the euro becoming a reserve-currency was the behavior of The USA.
In their desperate, insatiable hunger for funds and penchant for political pandering, American governments at every level became untrustworthy. At the federal-based level, the government even violated the sanctity of contracts. One example? The “bailout” of General Motors.
At the state-based level, a recent example was the mugging of the British bank, Standard Chartered, by the State of New York. The real crime was not alleged “money laundering” by the bank but extortion by the State in the amount of $345,000,000. This particular example of governmental mugging may be one that stands out, but it hardly stands alone . . . think Barclays and HSBC as well as, even more recently, Royal Bank of Scotland and J. P. Morgan.
So, despite the egregious antics of American governments, given the current trend, the euro, nevertheless, appears doomed as a reserve-currency . . . if not as a currency, altogether. Still, the U.S. dollar also appears increasingly unstable as the creditworthiness of the federal government drowns in a rising sea of currency . . . think QE-Infinity. What’s an investor to do?
“Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency . . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose.” – John Maynard Keynes
Is there an alternative to the debauched U.S. dollar? The Japanese yen? Doubtful . . . Japan has an increasingly aged and enfeebled population and too much governmental debt.
The Swiss franc? Not viable . . . too few.
The Russian rouble? Despite Russian optimism to promote the rouble as a reserve-currency, Russian financial structure remains too primitive, and Russian governmental foundation too shaky.
Ah, the Chinese renminbi? Question . . . to what extent will international investors trust a currency issued by a despotic, oppressive government Hell-bent on dominating East Asia? Answer . . . if the Chinese play their economic and political cards skillfully, a lot.
Why? Because America is acting more recklessly than our foremost adversary. How? As former Chairman of the Federal Reserve Bank, Paul Volker, has noted, the FRB is exceeding its legal and constitutional mandates to manage the economy, such management being the task of elected congressional representatives not presidentially appointed bureaucrats. Given its economic policies, there may be no alternative but China and its proxies.
Isn’t there a better way for us Americans to pursue commerce than that embodied in the variations on the same, hollow, economic theme currently mouthed by Democrats and Republicans . . . government creating jobs, jobs, jobs by creating debt, debt, debt? Fortunately, there is.
What? Employment of scientific methodology through biobehavioral science to analyze and resolve the situations-in-question . . . not just economic but governmental, legal, educational, and health-related. We have the means. Ah, but do we have the will? If so, do we have the leadership to harness those means and that will?
Leadership? Who? Obama? Romney?
Unfortunately, we’re not likely to find competent leadership among the cast of Fellini-like characters in the current political charade enacted by the Democrats and Republicans. America needs a new political party . . . a party based upon the U.S. Constitution, American Tradition, and Science . . . a party that will tell the unpleasant as well as pleasant truths instead of only pleasant lies wrapped in weak excuses.
Uh oh, remember that most people will choose to hear a pleasant lie over an unpleasant truth, even knowing that the lie is a lie. Do Americans really want to hear the truth? Judging by the rhetoric in the current presidential campaign, one would answer, “No.” Presented a scientifically-based and scientifically-driven analysis and plan, however, mightn’t the answer be “Yes” (www.inescapableconsequences.com)?
Let’s give Americans a chance to answer for themselves. To paraphrase the late Senator Barry Goldwater, let’s give Americans a real choice not a weak echo.
Assuming the will to choose the right course by bringing our societal behavior under the control of long-term instead of short-term consequences, one might ask, “How much time do we Americans have before an economic Armageddon?” For the answer, don’t ask the Democrats. Don’t ask the Republicans. Don’t ask the Europeans. All are the servants.
Ask the Chinese. Ask the Japanese. They are the masters.