“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”

Little that Keynes had to say, before that or afterward, proved so true. Keynes is dead. More importantly, even when he was alive, Keynes was DEAD WRONG. No competent economist today follows Keynsian thinking. Unfortunately we still have a few living economists who are already defunct (Paul Krugman come to mind?), and politicians, the consummate “practical men,” are still in their thrall. The stubborn fact remains that we cannot spend our way to prosperity.

The fatal flaw in Keynes’ theory of government stimulus was inflation. He assumed that a little inflation was a good thing, and could stimulate growth at no cost. But the bottom line is still the same: government cannot give to one without taking from another. Inflation is a tax, economically no different than any other tax, and not a magic money tree. It is not visibly collected like other taxes, but it removes value from the currency as surely as any other tax removes value from the economy. That is what has made inflation an irresistible temptation to politicians since the invention of politics, and also what makes it so insidious. Inflation takes indiscriminately from those who have savings, and adds nothing to the total wealth of the economy. And by punishing those who save, while sometimes benefiting those who spend beyond their means, inflation discourages the very productivity which benefits everyone. Way back in 1776, Adam Smith explained that wealth is productivity, not gold, not consumption, but productivity. Yet to this day, politicians (being practical men, at least when it comes to getting reelected) promote consumption and punish productivity.

Is it any wonder that we periodically suffer financial crises arising from such misguided government intervention in the economy? Before we legislate our way into an Even Greater Depression, let’s bury Keynes once and for all.

I don’t know who said that first, but we are on the brink of relearning that lessson the hard way. With all of the media clamoring for our attention 24/7, I’m seeing virtually nothing pointing out the many obvious parallels just within the past 100 years. Growing up as baby boomers, we often wondered how the German people could have stood silently by while Adolph Hitler carried out his disasterous plans. Yet apart from the Holocaust itself, most of what Hitler did could be easily compared to the actions being taken by our own government right now. The bank bailouts, the quasi-nationalization of the auto industry, and the massive stimilus programs look very much like steps that Hitler took in his rise to power. (And the inflation that is bound to follow our unprecedented deficit spending may make the Weimar Deutschemark look like a stable currency!) The same could be said comparing today’s actions with those of Benito Mussolini. Yet the only lessons of history even mentioned today are based on complete mischaracterizatons of the actions of FDR. FDR, the president who turned a routine two year recession into a 15 year depression of unprecedented magnitude, borrowed many, perhaps most, of his ideas directly from Hitler and Mussolini. He openly admired both men, and envied the political power which they were able to use to intervene in their own economies. Most of those ideas were initially ruled unconstitutional here, until FDR succeeded in silencing the Supreme Court. But those same interventions are occurring here today, with barely a peep from the people or the media.

Three months ago, it would have been preposterous to suggest that the federal government would take control of the banks. Yet they have done so, and nobody said a word. The nationalization of the auto industry is taking place right before our eyes, and the best we can do is debate whether taxpayer dollars should be used to do it! Instead of defending our freedom, we appear to be clamoring for more regulation.

Apparently when we elected Barack Obama, we bought the “change” message hook, line and sinker. Somehow, despite all the lessons of history, the total and complete abject failure of socialism anywhere and everywhere it has ever been tried, we seem to think that The One can somehow turn that thoroughly discredited concept into a viable model for the American economy. I have great respect for Mr. Obama’s intelligence, but our complex economy is far beyond the comprehension of even the most brilliant central planners. Apparently our socialist schools have succeeded in their mission of whitewashing that incontrovertible (and inconvenient) truth.

I do not believe that we must go through an Even Greater Depression, but we are staring into the abyss. So at the risk of being redundant, I can only repeat, “Those who fail to learn from the mistakes of history are doomed to repeat them.”

We are voting in the midst of an “economic crisis”, brought on by years of misguided government manipulation of the economy. Yet the chattering classes shout out that it’s a “market failure”, and the barbarians promise to save us with a bailout. I have trouble believing that free markets somehow “failed”, when we haven’t had a free market in this country for at least a hundred years, but we seem to be falling for that nonsense yet again. Already we have narrowed the field to two candidates promising bigger government, more regulation, and less freedom. One candidate is unquestionably a socialist, the other is simply the pot calling the kettle black. (He is, after all, the co-author of the “McCain-Feingold Incumbent Protection Act”.)

So when we awake tomorrow, we will have “chosen” our new masters, but what will we have accomplished? We have already allowed the current administration to nationalize the banks. Is there anything we won’t let the incoming barbarians do to have their ways with us? Will we ever again stand up to them and proclaim that each of us was “created equal”, endowed with the “inalienable rights” of “life, liberty, and the pursuit of happiness”? If not, then the barbarians have truly won, and our best days are indeed behind us.

I personally don’t believe that our best days are behind us, but today is a hard day to be optimistic. So skip the lines at the polls, have a second cup of coffee, and think about the things that really matter.

Give Me Liberty