The Habitual Deceptions of the Political Class

The Daily Reckoning PRESENTS: Psychics, fortunetellers, faith healers, and politicians all have something in common. Can you guess what it is? Vedran Vuk explores…

THE HABITUAL DECEPTIONS OF THE POLITICAL CLASS

Many fools, eager to part with their money, have wasted their time on psychics. Any extremely useful talent or skill will be immediately identified by the market. If psychics really existed, we would not need to search far and wide for them. We could simply examine markets that would most likely attract psychic “talents.”

Consider gambling in casinos. Any person who actually possessed psychic abilities could live the life of a gambler and read people’s minds at the card table. There would be no educational degree required and no special skills necessary other than psychic ability. However, do we actually see people with psychic abilities in casinos who never lose? No, of course not. If psychics are not present in an area of the market where their “talents” would produce the biggest payoffs, then they do not exist.

Some would argue that psychics would want to obfuscate their skills in order to keep gambling or to avoid persecution. However, it would be to the benefit of psychics in a free market to reveal their skills. People with such skills would be instantly hired by any company or government in the world as advisors. The bidding would be extremely high for psychic talents. Since psychic advisors for companies do not exist, the market has shown that they are in fact frauds.

Fortunetellers are also notorious cheats. The free market would place these people in politics predicting the fate of world leaders and nations. One could make a fortune in sports gambling as well with fortune telling ability. If you could truly see the future, your options would be endless. The stockbrokers of Wall Street would all be fortunetellers instead of educated speculators.

Fortunetellers read your palm for a few dollars. This shows that they are definitely not maximizing their supposed potential. Why would the market give them such a job with their skills? Some would say skepticism. This cannot be true because the market eventually selects what works best. If something works every time, the market accepts it as legitimate. Even in the presence of many fraudulent fortunetellers, the real ones would emerge at the top of the market through competition. From that point, fortunetellers could enter whatever financially maximizing field that they desire.

Faith healers fall into the same category as psychics and fortunetellers. The market chooses what works. If these healers worked better than modern medicine, the healers would be at the top of the market while modern medicine would become obsolete.

Skepticism as the reason for faith healers not having prominence does not hold up here either. The market chooses what works especially in life and death situations. When a person has cancer, there is no room for skepticism. A person must choose the option that works best. That option is modern medicine. Faith healing is rarely used because it does not work. If people were healed better by faith healing, anyone with any sense would go to these faith healers. But, the market has already proven the better choice is modern medicine.

Last is the myth of politicians. There can be no such profession in a free market. Politicians do not arise through free market competition. Politicians, inherently, must influence and coerce their way to the top.

Even heroic politicians like Ron Paul have not achieved their positions through free-market means. Ron Paul is one of the finest men ever to serve the House of Representatives. But even Ron Paul explains that he does not view himself as a politician but rather an educator. Among his colleagues, his performance is not evaluated in the same way the free market evaluates employees in a private company. Indeed, he is not considered “successful” by the standards of conventional politics. If Ron Paul were not to get re-elected, it would not be because he was a bad congressman. In politics, the one who is most successful in using deception and coercive wins. In a free market, the person who performs the best for others in the framework of voluntary exchange wins.

Thievery and chicanery are essential in this political process. The free market relies on voluntary agreements. A voluntary agreement is an agreement that mutually benefits both parties.

A politician cannot help one person without first stealing from someone else. This forced redistribution is anti-free market because the redistribution is not voluntary. People have already voted for their desires on redistribution and charity through their own bank accounts. The charitable offerings voluntarily approved show true desires.

This theft by the government is necessary to achieve the most power and influence. Theft is dishonest. Hence, being a “good” politician must also always be dishonest and involve theft.

The free market rejects theft. Murray Rothbard excellently drew the connection between thieves and the government in Man, Economy, and State by saying,

“If governments budget their revenues and expenditures, so must criminals; where a government levies taxes, criminals extract their own brand of coerced levies; where a government issues fraudulent or fiat money, criminals may counterfeit. It should be understood that, praxeologically, there is no difference between the nature and effects of taxation and inflation on the one hand, and of robberies and counterfeiting on the other. Both intervene coercively in the market, to benefit one set of people at the expense of another set. But the government imposes its jurisdiction over a wide area and usually operates unmolested. Criminals, on the contrary, usually impose their jurisdiction on a narrow area only and generally eke out a precarious existence. Even this distinction does not always hold true, however. In many parts of many countries, bandit groups win the passive consent of the majority in a particular area and establish what amounts to effective governments, or States, within the area. The difference between a government and a criminal band, then, is a matter of degree rather than kind, and the two often shade into each other.” (Murray Rothbard, Man, Economy, and State)

Government spreads further deceit through the predictions of the Federal Reserve and the Congressional Budgeting Office. If these groups are so accurate, why do they not work? Why do financial companies constantly search for further answers to trends in the economy when people such as Alan Greenspan are supposedly so prescient?

The market searches for further answers because the CBO and the Federal Reserve are constantly wrong. They are amateurish fortunetellers. When they predict something generally correctly, they are hailed as geniuses to the Nth degree. However, we all know that more times than not their predictions are horribly incorrect.

When these economic forecasters claim that the war in Iraq or Hurricane Katrina relief will cost a certain amount, they are telling you no more truth than a palm reader. They looked into the face of the problem and then guessed the kind of future it holds just like a palm reader does with his customers. How did President Bush determine that the Katrina relief would cost exactly $200 billion dollars?! There is no actual proof of this cost. The cost can only be determined when private enterprises have negotiated all deals necessary for repairs. All of these deals cannot be simultaneously calculated.

The war in Iraq is similarly laced with numerous calculations which could only have been picked out of a crystal ball. Former Bush economic advisor, Larry Lindsey, claimed a cost of $200 billion. Congressional Democrats put their two cents in by suggesting $93 billion. White House Office of Management and Budget Director, Mitch Daniels, guessed $50 to $60 billion based on the First Gulf War. If apples were oranges, the First Gulf War costs compared to the new Iraq Debacle would matter.

In a CBO letter to Congress dated September 30th 2002, the CBO pretends to even calculate the amount of ammunition that will be used each month during different levels of the war. This is as bad as old Soviet style economic calculation. The CBO even admits, “CBO has no basis for estimating the number of casualties from the conflict….” If you can’t estimate casualties, how can you possibly estimate the amount of ammunition to be used?!

Economic calculation in its many different forms ranging from $50 to $200 billion can never hit the mark. Only the market determines the true cost of anything. Predictions on ammunition spent and durations of war are as good as the predictions of a fortuneteller. The future is unknowable by both fortunetellers and economic forecasters. The market determines all future and final costs.

The future is impossible to see or calculate. This has been proven through the market by not empowering fortunetellers and palm readers. Economic calculation of future events is similarly impossible. Error after error has shown the mistakes of economic calculation. Why does then it persist? Because the free market is not involved in the process. No one is replaced in the government for making mistakes on budgets. There is no profit incentive. Without the incentive, any number is thrown out to satisfy particular groups or political motivations. The incentive of coercion is the only extant incentive in politics. With coercion, the act of theft and misinformation about the future is proliferated to the masses.

Regards,

Vedran Vuk
for The Daily Reckoning

Editor’s Note: The true cost of the war in Iraq: Since March 2003, the monthly cost of the war in Iraq has risen from $4.4 billion to $7.1 billion. That means the war will cost $266 billion more than originally projected – and ultimately hit $1.2 trillion. But what else can we do? As a declining empire, it seems that the only thing America has left to offer in a globalized economy is the soft warmth of her protection.

Imperial financing rarely pays off – and in our latest book, Empire of Debt, we detail how the government’s irresponsibility has bled into society. Get your copy here!

Let’s see how our major trends are holding up…

The days of cheap energy are over. Kuwait confessed that it has about half the oil it once claimed. And like a fat lady in the pastry section before a snowstorm, China is buying up oil reserves wherever it can find them – in Nigeria, in Ecuador, and in Syria.

Meanwhile, wealth leaks rapidly out of the West and into the East. Bloomberg tells us that China’s economy grew at 9.9% last year, overtaking France’s in total output. That puts China in the number five position, just behind Britain, Germany, Japan and the United States. Economists expect China to run past Britain this year. Then, it will be snapping at Germany’s heels.

The U.S. Empire loses ground against China and the rest of Asia, too. Its domestic economy grew only about a third as fast last year, and not half as well. China is growing, albeit in a reckless and dangerous way, by building more productive capacity. That’s real growth…growth that can add to its wealth. America, on the other hand, is “growing” by consuming its wealth, like a man who sells the family business in order to buy a beach condo. He seems richer. He feels richer. He gets a new girl friend and a tan. At least, he looks healthy and happy when he arrives in bankruptcy court.

“The American economy heads into 2006 with a full head of steam,” claimed the empire’s chief executive. Neither war, nor high oil prices, nor hurricanes could keep it from its rendezvous with destiny, he went on. He is surely right; but how much destiny does a decadent empire have?

According to the LA Times, polls show that half the public “thinks the economy is in bad shape and that Bush is doing a bad job of managing it.” One survey showed that 30% of the population believes the United States is in a recession. And the bankruptcy figures show that for many people, the United States might as well be in a slump; they don’t seem to be able to make ends meet. After energy, health care, and housing cost increases, they have less than nothing left over. But at least they have plenty of that! They spent more than they made last year. And now comes news that Ford is getting rid of another 30,000 decent-paying jobs.

Oh Alan, Alan …what have you done? You have lured a whole generation into a debt trap from which they cannot get out. Debt service, as a percentage of income, is at a record high. Even with Mom and Dad both working, family expenses exceed income. What can the lumpenhouseholders do but pray for a miracle…file for bankruptcy…or cut back even more?

And what can your successor at the Fed do? The poor man is already checking out helicopters. He figures he might have to drop $100 bills from the air in order to keep America’s bubbles inflated. He’s probably right. A credit expansion must be followed by a credit contraction. Under Greenspan’s leadership, credit expanded in the homeland even faster than waistbands. Now, the big trend is in the other direction. In terms of real money (gold), asset values all over the world are going down. They may be going up in local currency terms, but gold is going up even faster.

Yes, gold is still edging up toward $560 an ounce. Yes, the dollar fell yesterday. And yes, the latest experiment with paper money is beginning a new phase. It was relatively simple for a central bank to shepherd a paper money when it was rising against real money; the bankers could simply print more of it. Everyone was happy. Now, we will see what happens when the paper money falls. Will investors be so ready to loan out dollars? Will they buy Treasuries at today’s low yields? Will housing prices go up when yields rise? Without higher house prices, how will consumers continue consuming?

Alan Greenspan entered the Fed with room to maneuver, for Paul Volcker had broken the consumer price inflation of the ’70s. Gold was going down. Consumer debt was less than half what it is today, while asset prices were low. And the esteem in which central banking was held was – let us say – moderate. All he had to do was to make money easy to get. But poor Ben Bernanke comes upon the scene with everything running against him. Money has been too easy…for too long. People already have too much credit, too many debts, and too many expenses. But Bernanke – battling a forest fire with a woodpile – plans to give them more. We are already pulling up a comfy chair and buying popcorn; it will be fun to watch the show.

[Ed. Note: No matter what the Fed and the mainstream analysts say about the American economy’s resilience, growth and recovery – and no matter what kind of “proof” their accountants cook up – the real numbers tell the story. And that story is that we’re in trouble.

More news from our currency counselor…

Bill Bonner, back in London with more views…

*** What’s wrong with El Paso? We don’t know. But according to Local Market Watch, it’s the cheapest major city in the United States to buy a house. The typical hovel in the Texas border city costs only $127,000. In Santa Barbara, California, by contrast, it will cost you $573,000.

We visited El Paso many years ago. We don’t remember it. But it couldn’t be that bad.

Advice to Daily Reckoning readers who live in Santa Barbara: Sell and move to El Paso. Put the left over money into gold. Let us know how it works out.

*** A reader writes:

“Please make a movie with Empire of Debt being the script and include the likes of DeLay and Abromoff. It would be a hit!”

As a matter of fact, a dedicated DR reader has been shopping the idea of an Empire of Debt documentary around Hollywood for us. We will be sure to keep you posted on any progress.

*** The French are getting fat. According to a study reported in the International Herald Tribune, if the French keep porking on the pounds at the current rate, they’ll be as fat as Americans by 2020. The French are determined not to let that happen. They’ve begun a national campaign to stop the “epidemic” of obesity.

It is still rare to see a really fat person in France. In America, you see people who can barely walk everyday and think nothing of it. We feel sorry for them. The French are more judgmental, more demanding, and more critical. They are likely to turn up their noses. “Fat slob,” they say to themselves – or even out loud. Even though health authorities advertise it as a disease, the average Frenchmen still regards it as moral and esthetic failing.

But why are the French getting fat? Probably the same reasons Americans got fat. More wives now work. They no longer have time to shop daily for fresh vegetables or to cook them properly. Meal times are shorter and less regular. People eat whatever is fast and convenient.

But that is just the strange and perverse nature of the pursuit of happiness in the modern world. People work harder, longer…so that they can enjoy the rewards of their labors and a better life. Instead, they get fat and die young.