08/28/10 Alexander City, Alabama – GDP growth revised downward to an “anemic” 1.6%…
Jobless claims rise more than forecast…
Home sales fall off a cliff…worse than economists expected…
Faced with a slew of deteriorating economic data points, Fed Chairman Ben Bernanke delivered a speech on Friday designed to assure investors that he has the fate of the nation’s economy under control.
The Fed, said he, “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”
Come again, Mr. Bernanke? “Deteriorate significantly”? What happened to the recovery? What happened to the “substantial progress” you had so earnestly forecast at last year’s annual Federal Reserve retreat?
On that very occasion, a year ago to the day, Bernanke spoke thus to the committee:
“Although we have avoided the worst, difficult challenges still lie ahead. We must work together to build on the gains already made to secure a sustained economic recovery…and prevent a recurrence of the events of the past two years.
“I hope and expect that, when we meet here a year from now, we will be able to claim substantial progress.”
The inability of Mr. Bernanke – or anyone else for that matter – to hold back the tide of necessary correction ought to be obvious to all.
The study of economics wasn’t always the bottomless well of embarrassment it has come to be. There was a time when moral philosophers – as those of the trade were once known – spent their days pondering things of actual importance. They listened to the market murmurs of the day, instead of forecasting the unknowable events of tomorrow…they observed rather than tinkered…and asked questions instead of falsifying answers.
How ought members of a society allocate limited supply in an environment of unlimited demand? Is there a fair and equitable way to achieve such a goal? What controls, if any, should be employed to govern the process? Etc., etc., etc…
Although economics is itself an imperfect science, a “soft science,” as some assert, the perfect laws of science nevertheless bind it. Quantitative easing, for instance, is and always will be a bogus theory, a monetary mallet made of liquid, unable to bend anything into shape and forever doomed to flooding the system. Borrowing from one pocket to finance the other is a mug’s game; just as increasing the supply of money in a closed system must necessarily devalue all pre-existing units by a commensurate measure. Put another way, two plus two is never equal to five…never mind what the modern economist has to say on the matter.
Similarly, one can be reasonably certain that there are only two ways in which an economy, and indeed an entire society, is capable of governing itself. The first is by force; the second by means of voluntary cooperation. That both are mutually exclusive should be self-evident. One cannot be partly violated any more than they can be a little bit pregnant. The concept is oxymoronic, as well as ordinarily moronic. The idea is akin to that of a “voluntary tax.” Obviously, no such thing truly exists. It is a donation or it is an act of theft. Plain and simple.
Now wait just a moment, we hear some say. What about the rule of the majority? After all, we can’t very well wait around for everyone to agree on everything all the time. That may be true. But, to paraphrase an old adage, the road to ruin is paved with the whims of political expediency. A system built on a foundation of coercion is sentenced to failure, whether by invasion from without or revolution from within.
For its part, the voting process only serves to muddy the waters. Democracy, as Winston Churchill once observed, is the worst form of government…except for all those others that have previously been tried. Even if 99% of the people vote for some kind of sales tax, for instance, a full and very important 1% are still subject to what essentially becomes legalized theft.
When considering that such an overwhelming consensus is so seldom reached in today’s political arena (consider both Britain and Australia’s recently hung parliaments), it is little wonder politicians rank marginally below economists on popular opinion polls. What is incredible, however, is the fact that so many people are content to simply cast their vote and to take the consequences on the chin, believing all along that they were a vital part of the process and that one must take the good along with the bad, and even the ugly.
It was perhaps David Hume who expressed it best when, in his monumental First Principles of Government, he wrote, “Nothing appears more surprising to those who consider affairs with a philosophical eye, than the ease with which the many are governed by the few.”
Self government, through individual and collective acts of voluntary cooperation, therefore, seems to be the only philosophically consistent, defensible form of government available to man. The state, with its various forms of coercion, shrouded in the cloak of good intention and peddled by forecast-mongering central bankers, be damned.
Joel Bowman
for The Daily Reckoning
Joel Bowman
Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
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Question: If Britain and Australia have recently hung their respective Parliments, can we hang our Congress?
Great post.
“…there are only two ways in which an economy, and indeed an entire society, is capable of governing itself. The first is by force; the second by means of voluntary cooperation.”
I think this says it all, yet most in our society cannot see the level of violence our system is based on.
I find it humorous that Election Day this year is also Dia del Muerte.
Don’t forget that Canada was ahead of the curve. We’ve had a minority (“hung”) parliament since 2004.
Economics is not a science. Economics is from the Greek Eco meaning home and nomos meaning custom or law. Economists study the laws and customs of the home, which is more like philosophy, administrating or managing the home than a science. The science of the home is called ecology. Ecologists have better tools to predict future economic output than do economists.
Concept of self governing economy is really great but very hard to implement. Self governing is basically dependant on personal conduct. Decision making ability with string character is hard to find these days. Thatswhy, in my opinion it is hard, but if implemented is the best system.