 A Thousand
Clowns
Bill Bonner
The
Daily Reckoning
May 3, 2005
The Daily Reckoning PRESENTS: Often, the best way to deal with something,
or someone, that you find absurd is to take a step back and laugh.
Bill Bonner advises his readers to employ this strategy when
trying to decipher what our world leaders are really trying to
save the world from...
Economics has been called the
"dismal science." But even that is merely fraud and
flattery. Economics is dismal, but it isn't science. At its best
it is merely voyeurism - peeping in people's windows as they
go about their business and trying to figure out what they are
doing. At worst, it is pompous theorizing about how to get the
schmucks to do better.
We doubt that you are especially
interested in economics, dear reader. We know we are not. But
we can't resist a good comedy... or a good opportunity
to point and giggle. We keep our eye on economists and politicians
the way children watch clowns; we can't wait to see them get
whacked in the head or trip over each other.
But what is amusing is also
instructive. Are not clowns people too? Are they not part of
human life... human organization... and human economy?
Every one of them is driven by the same motors that power everyone
else. They want power... glory... money. But how
do they get it? Can we not watch politicians and economists and
learn something about ourselves?
One of the many conceits of
politicians and economists are that they are somehow out of ordinary.
They are godlike, or so they pretend, having no other ambition
but to make the world a better place. Neither drink, nor meat,
nor false witness cross their lips. They sweat for no material
gain... and know no lust - save for the betterment of
all mankind. They pass laws... they enact codes and regulations...
they jiggle this lever and turn another - as if they were
the masters of the whole human race, rather than mere parts of
it themselves. Since they float above it all, they are not subject
to the normal temptations. The rest of us spend our whole lives
like animals - craving profits, mates, status, pride, love, and
money like a raccoon searching for a garbage pail without a lid.
Unless we are kept in tight cages, who knows what we will do?
That is why the tabloid press
- especially in England - loves the stories of the government
ministers having affairs with their secretaries or cheating on
their income tax. Who doesn't like to see hypocrisy revealed
in public? It is as if the King himself had been caught with
his pants down; we gape... and see that he is human, just
like the rest of us.
But thank God there are leaders!
Thinkers! Theorists with their "isms" and their rat
wire... ready not merely to keep us from hurting one another,
but also to give us a sense of moral purpose. It is not enough
that we should each seek happiness in our own private way, we
must Free the Sudetenland! Abolish Poverty! Make the World Safe
for Democracy! We must realize our manifest destiny... and
provide liebensraum [living space] for the German people! Full
employment! A minimum wage! No humbug left behind!
We bring this up only to laugh
at it.
In the early 20th century,
John Maynard Keynes came up with a new idea about economics.
The politicians loved it; Keynes explained how they could meddle
in private affairs on a grand scale - and, of course, make things
better. Keynes argued that a government could take the edge off
a business recession by making more credit available when money
got tight... and by spending itself to make up for the
lack of spending on the part of consumers and businessmen. Keynes
suggested, whimsically, hiding bottles of cash all around town,
where boys might find them, spend the money, and revive the economy.
The new idea caught on. Soon
economists were advising all major governments about how to implement
the new "ism." It did not seem to bother anyone that
the new system was a fraud. Where would this new money come from?
And what made anyone think that the economists' judgment of whether
it made sense to spend or save was better than individuals? All
the Keynesians had done was to substitute their own guesses for
the private, personal, economic opinions of millions of ordinary
citizens. They had resorted to what Franz Oppenheimer called
"political means," instead of allowing normal "economic
means" to take their own course.
The economists wanted what
everyone else wants - power, prestige, women (except for Keynes
himself, who preferred men). And there are only two ways to get
what you want in life, dear reader. There are honest means, and
dishonest ones. There are economic means, and there are political
means. There is persuasion... and there is force. There
are civilized ways... and barbaric ones. The economist
is a harmless crank as long as he is just peeping through the
window. That is what we do here at The Daily Reckoning. But when
he undertakes to get people to do what he wants - either by offering
them money that is not his own... by defrauding them with
artificially low interest rates... or by printing up money
that is not backed by something of real value (such as gold)...
he has crossed over the dark side. He has moved to political
means to get what he wants. He has become a jackass.
Keynesian improvements were
applied in the '20s - when Fed governor Ben Strong decided to
give the economy a little "coup de whiskey" - and later
in the '30s when the stockmarket was recovering from the hangover.
The results were predictably disastrous. And along came other
economists with their own bad ideas. Rare was the man, like Robert
Lucas or Murray Rothbard, who pointed out that you could not
really improve economic results with political means. If a national
assembly could make people rich simply by passing laws, we would
all be billionaires, because assemblies have passed a multitude
of laws and seem capable of enacting any piece of legislation
brought before them. If laws could make people wealthy, some
assembly somewhere would have found the magic edicts - simply
by chance.
But instead of making them
richer, each law makes them a little poorer. Every time political
means are used they interfere with the private, civilized economic
arrangements that actually get people what they want. One man
makes shoes. Another grows potatoes. The potato grower goes to
the cobbler to buy a pair of shoes. He must exchange two sacks
of potatoes for one pair of penny loafers. But then the meddlers
show up and tell him he must charge three sacks... so
that he can pay one in "taxes," to the meddlers themselves.
And then he needs to put in an alarm system in his shop, and
buy a hardhat, and pay his helper minimum wage, and fill out
forms for all manner of laudable purposes. When the potato farmer
finally shows up at the cobbler's he is informed that the shoes
will cost seven sacks of potatoes! That is just what he has to
charge in order to end up with the same two sacks he needed to
charge in the beginning. "No thanks," says the potato
man, "At that price, I can't afford a pair of shoes."
What the potato grower needs,
say the economists, is more money! The money supply has failed
to keep pace, they add. That was why they urged the government
to set up the Federal Reserve in the first place; they wanted
a stooge currency that would be ready to go along with their
plans. Gold is fine, they said, but it's anti-social. It resists
new "isms" and drags its feet on financing new social
programs. Why, it is positively recalcitrant! Clearly, when we
face a war or a Great National Purpose we need money that is
willing to stand up and sign on. Gold malingers. Gold hesitates.
Gold is reluctant and reticent. Gold is fine as a private money.
But what we need is a source of public funding... a flexible,
expandable national currency... a political money that
we can work with. We need a dollar that is not linked to gold.
In the many years since the
creation of the Federal Reserve system as America's central bank,
gold has remained as steadfast and immobile as ever. An ounce
of it today buys about the same amount of goods and services
as an ounce in 1913. But the dollar has gone along with every
bit of political gimcrackery that has come along - the war in
Europe, the New Deal, WWII, the Cold War, the Vietnam War, the
war on poverty, the war on illiteracy, the New Frontier, the
Great Society, Social Security, Medicare, Medicaid, the War in
Iraq, the war on terror... the list is long and sordid.
As a result, guess how much a dollar is worth today in comparison
to one in 1913? Five cents.
Keynesianism is a fraud. Supply-siderism
is a con. The dollar itself is a scam. All were developed by
people with good intentions. But these good intentions not only
paved the road to Hell, they greased it. There was no point putting
on the brakes. Once underway, there was no stopping it.
Right now, the United States
slides towards some sort of Hell. A half-century of deceit has
produced a nation that is ready to believe anything... and
go along with anything... provided it promises to make
them rich. They will be very disappointed when they discover
that all the political means they counted on - the phony money,
the laws, the regulations, and the wars - have made them poorer.
That is when we will really need cages...
"Nothing in nature is
evil," said Marcus Aurelius. Keynes was human. Even Adolf
Hitler was a man, a part of nature himself. And the "Evil
Empire," was it not created by men too, men who - like economists
and politicians - followed their own natural impulses? Adolf
may have erred and strayed. But he did so with the best of intentions;
he thought he was building a better world. And he had all the
"reasons" you could ask for. He could argue all day;
"proving" that his plan was the best way forward.
Not that there weren't arguments
on the other side. What were smart people to do? People argued
about Keynesianism for many years. Each side had good points.
One was convincing; the other was persuasive. It was like a couple
arguing in divorce court - the husband forgot to take out the
trash and knocked over a vase; the wife ran him over with the
family car. "He had it coming," she says.
What would an observer think?
No amount of logic could help him. Both parties made good points.
All the judge could do was to fall back on his own deep sense
of right and wrong, of proportion... and good taste. "She
shouldn't have run him down," he says solomaniacally.
"Love the man, hate the
sin," say the Baptist preachers. They have a useful point.
There's no point in hating Adolf, Josef, Ossama... or
John Maynard... or any of the other thousands of clowns
who entertain, annoy and murder us. They are God's creatures
too, just like the rest of us. What they did wrong was what they
always do wrong... they all resorted to political means,
to get what they wanted.
We do not hate them; we just
hope they get what they deserve.
Bill Bonner
email: DR@dailyreckoning.com
website: The
Daily Reckoning
Bill Bonner
is the founder and editor of The Daily Reckoning.
Bill's book,
Mobs,
Messiahs and Markets: Surviving the Public Spectacle in Finance and
Politics, is a must-read.
He is also the
author, with Addison Wiggin, of The Wall Street Journal best seller
Financial
Reckoning Day:
Surviving the Soft Depression of the 21st Century (John Wiley
& Sons).
In Bonner and
Wiggin's follow-up book, Empire
of Debt:
The Rise of an Epic Financial Crisis, they wield their sardonic
brand of humor to expose the nation for what it really is - an
empire built on delusions.
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