Capitol Hill Blue Forums Political Issues Constitutional Issues The Self-Destructive Habits Of Politics

I find it interesting that we have allowed ourselves to become so blinded by the novelty of ideas to the point that we are willing to allow politicians, and even Justices such latitude as to manipulate the Constitution to the point that it becomes relative or simply circumstantial to the period in which we live instead of the foundational principle of law.

Even our esteem of the "unbiased" Courts is not safe from the acts of judicial interpretation, many of which have been novel in their decisions and there have been few that haven’t weaken the original position of the checks and balances that protected this country and its people for the onslaught of usurpation while extending the scope of powers of a growingly centralized government. There has been a slow fermentation, a rotting smell of corruption that has imbedded itself in this government, in the courts and its ineffectual dealings with the issues that its novel political crafters helped create through its "innovative" acts and legislations.

How easy it is for so many to overlook the fact that the Founders took every possible precautionary measure known to the political "enlightenment" to prevent the New Union of States from falling into the same pitfalls, making the same mistakes and rally around the same self-destructive habits that every other government had done previously. There were reasons for everything written in the Constitution, while not perfect, it was far better than anything that had come before...or since. Yet, we now take it for granted as though its principles were void of meaning or the understanding of human nature.

In this New Union of States, the people were to be left alone to explore the extent of their own individual fate and destinies, each with their own capacity to enjoy their lives, their liberty, and the fruit of their labors without threat from an intrusive government. Of course, when politicians began to feel that their ideas were better, that perhaps they should intervene in the affairs of the citizens with a myriad of ingenious and innovative programs, laws, prohibitions and limitations upon the people themselves, the changes they wrought have proven to be far from effective and have not only impeded the advancement of our society, but have caused several major problems that the politicians are all too happy to promise to solve, usually at election time.

The functions and delineations within the Constitution were very cautiously envisioned and clearly defined for very specific purposes, most of which were intended to make it difficult for the government to govern without careful and considerate deliberation. The layers of checks and balances were necessary, in the minds of the Founders, to keep the government in its proper place as a protector of the Rights and Liberty of the individual. The division of authority and power placed very defined limitations on each branch and the government as a whole.

The power of the government can only expand at the expense of the people’s liberty and their well-being. Eventually, of course, as we have seen, the people become subservient to the government itself and reflect that subservience not only in the way they think, but also in the way they conduct their lives. This ability to reach, either directly or indirectly, into the lives of the people was basically accomplished through economic intrusions by the government through innovative legislations, regulations and acts. We have now become subject to a massive host of laws that neglect the first principle of law, which is what will be the effect of such law on the people and their lives.

Today, people have become so accustom to these intrusions that most accept them as the normal state in which to live, without dissent, without questions. In many cases it appears that the people of this country cannot believe they could live or make a living without such intrusions into their lives by the government or that the economy would collapse without the government manipulating it. All business and economic decisions are not even made without first consulting regulations and laws that might affect commerce. It has become all pervasive even in the smallest of businesses everything is affected. In such an over-bearing atmosphere, large corporations have gained a distinct advantage with such a complex cacophony of laws, using them to improve their own competitive standing.

It appears that we continue to follow a path loaded with pit-falls that are completely opposed to our desire and ardent struggle for a better life, we just seem to accept it all as inevitable and beyond our control either as individuals or as a society. For decades the government has entered an area that it is neither equipped to deal with nor was created to control, that area is the economy. The character of government and the character of the economy are two completely different types of structures, yet they have been meshed over the decades in this country because it allows for very specific inroads into our individual lives while allowing for the unrestrained expansion of the government itself.

Economics and government have nothing in common, each should function in very different spheres within society, but it is now ingrained into our lives, our country, and our general society at large that it is hard for people to think of one without thinking of the other. Governments have always sought to control economics, but as usual, our government, like others who have intruded into the area of economics eventually fail to do either with a competence that benefits the general population of the country. Usually, in the end, the government proves only that it can ruin economic growth and thus widespread prosperity. While it is true that it has the power to stimulate economic growth through a fiat monetary system, that growth will eventually end as the monetary system collapses upon itself, as it is not self-sustaining. All prosperity within such a system is based on a particularly deceptive façade that is completely fabricated with debt; even the money itself is debt.

One of the primary determinations that a government has moved far beyond its mandate to protect the People and their liberty is when it moves to control, maintain and manipulate the economy. It assumes not only that it has the power to do so, but the arrogance that it can manipulate the economy to its political will and purposes, thus allowing for a greater degree of control over the population in general. Politicians seem to assume that economic laws are subservient to their will and within their power to control as is politically expedient; it is a fallacy that usually becomes all to evident when the economy doesn’t cooperate. Politicians simply cannot grasp that the economy is based on human behavior or as Mises said: Human Action and it doesn’t lend itself to overt political coercion over long periods of time. I am continually amazed that the people of this country place their trust in political leaders who seem to constantly overlook the consequences of their own political actions.

It is evident that when government involves itself in economic matters that it always, without exception, does so by the means of mandated confiscation, redistribution of wealth and a growing burden of bureaucratic legislations. The government, in such cases, becomes self-perpetuating, expansive and usually grows greedy for more and more resources to support its need to continue its own growth. Politicians usually loose sight of the purpose of government in these cases and the government becomes the world to them. They forget that government is not the purpose of government, that government is only the agent and not the substance of a country. Of course, eventually even politicians learn the lesson, usually the hard way, that it is economics that holds a heavier influence over politics than vice-versa. Economic issues have brought down many more governments than have been conquered through war, yet politicians seem to be slow to heed such historical facts. How many in history have failed to understand the principle that with an increase of government confiscation from production that production is reduced proportionally until economic collapse occurs, it is a law that is immune from all political ideologies. Throughout history, the same signs always point toward the same conclusion that governments tend to use the force of the economy to achieve particular political goals and the only way governments can use the force of a country’s economy is to siphon off the productive labors of its people. Economic deterioration will always lead to societal deterioration which always brings down the government. In every case, when the government resorts to confiscation to achieve its political and social goals it is absolutely impossible for that government to avoid the consequences of its actions.

At some point the people begin to no longer care about the fact that there is a decline in their society, that their government is non-effectual and unresponsive to the most pressing issues facing them. In such governments the burden of empire becomes all consuming to the point that it no longer is recognized by the laws that created it, but by the power that it imposes upon friend and foe alike all the while its foundation of purpose crumbles beneath its increasingly massive walls.

RS, it would seem that your argument completely overlooks reality. The economy cannot self-regulate because it is run by people and people are greedy, avaricious and more than willing to accomplish success for themselves while destroying the economy in the process.

So what is the alternative? Just let the system reach its own destruction? Yes the very very wealthy survive easily. Then 95% of us are left to scramble and pick up the pieces.

No thanks. Your idealism is noteable. It is also a fate worse than what we have. All people are imperfect and their government will also be so. Now lets see what we can do to improve both.

The economy does self-regulate Phil for the very reason that you stated. Governments seek to control those uncontrollable forces and have, throughout the centuries, failed to do so. Every single time a government, whether it is Monarchies, Totalitarians, Socialist, or even our own government attempts to place controls on the economy it invariably mucks up the whole system and in the end it causes untold suffering when its economy plans fail to produce its own desired effects on the economy.

Economics is indeed a science based upon Human Action and there is no government in the world that can control human action without overt and at times, oppressive coercion. It is that coercion that backfires on the plans of government, creating consequences that are far from the intent of that government to ensure an egalitarian playing field on the economy stage.

You hit the nail on the head when you said that government is composed of those, like us, who are imperfect and yet we place a particularly odd faith in their ability to make decisions that they are not equipped to make and control things that are beyond their actual control. The economy, although we have been taught otherwise, is self-regulating and it defies all attempts at political control. The
results of such controls are extremely predictable, even though our
government and its “economist” seem to be surprised at the various booms and burst, recessions and depressions, panics and slumps. Two and a half years ago I informed my clients to prepare for this latest downturn because it is so easy to see what the Federal Reserve is doing and to realize that its actions will have correlating reactions on the economy. If you know the way government monetary controls work it is easy to know the results of those controls. Such business cycles are a direct and predictable result for very specific regulations, policies and controls.

The vast amount of regulation and control by the government, especially for the last 60 years has cause such an incredible disparity between economic classes than any other force. Our economy has been one of the most regulated economies in the world and yet, it has only accomplished the very thing that you state it is suppose to control and prevent. As I stated, when the government seeks to regulate the economy with massive realms of regulation only the wealthy can afford to use those very laws to their own advantage, the playing field in even skewed further and becomes even more restrictive on those who make up the larger part of the population, the working man and woman in this country.

Let me ask, with close to 100,000 pages of regulations entered into the Federal Register each and every year, do you think that it is either physically or mentally possible to apply or even know what those regulations accomplish or the possible harm that they might create? Think bout it, there are those in this government who do nothing but write regulations, to what end? The largest employer in the world is the U.S. government, it is self-perpetuating, wasteful and in most cases absurdly schizophrenic in its structure and operation. How amazing it is that people actually place their confidence in such a bloated and distorted system in areas of their lives that are extremely important, yet their faith seems to remain unshakable that the government offers solutions to the very problems that the government itself creates. I wrote another article that shows how every election over the last 50 years have presented basically the same issues, the same promises and the same political rhetoric from both sides of the political entrenchment parties. Why on earth do we continue to fall for the same charade, every four years the Republicans play their scripted roles on the stage just as the Democrats play their scripted roles and the public buys into the stage play as though it really is making a difference.

I find it amazing that the ones who cry about poverty and the destruction of the middle class are the very ones who call for more and more regulation, more controls that only increase economic divisions and limitations on those who are in poverty or who are struggling to make ends meet. Prior to the “War on Poverty” there was a steady decline in the rate of poverty in this country, since that time that trend has been reversed to such a degree that poverty is rampant.

The most damnable government intervention has been in the way in which this country issues its money. Nothing has directly caused more poverty in this country than the government license of the Federal Reserve to issue fiat money. It favors the wealthy more than any other policy in this country and we continue to place our faith in this system even through, as every other fiat system in history, it will ultimately collapse because it cannot side-step monetary and mathematical law though it has waged a fierce battle against those laws for decades.

I have said it before on this forum, but consider this: a person making, say $50,000.00 per year in 2008 only has the effective purchasing power of $9,030.69 in 1970 dollars; so, in other words, a person who makes about $24.00 dollars per hour in 2008 only has the purchasing power of $4.34 per hour in 1970 dollars. Now, when you consider the same $50,000.00 today compared to the purchasing power of 1913, the year the Federal Reserve Act was rammed down the throats of the American People, then that 50K only has the purchasing power of $2,304.22 in 1913 dollars…pretty sad, wouldn’t you say?

That is real wealth that has gradually been stolen from the American People, our labor today is basically free in terms of real money, or what was real money prior to 1913 and then the real blows of 1933 and especially 1971 when the dollar was made by total fiat. Is it any wonder why the government must mandate the minimum wage? A person making a minimum wage of $5.85 today has the effective purchasing power of $1.06 per hour in 1970 dollars or $42.40 per week in 1970 purchasing power. The vast majority of Americans now live under an intentionally created debt-peonage, for that is the only way to maintain the façade of prosperity under such a system. It is, by every definition of the word, slavery.

If I were concerned about the rift between the haves and have-nots then I would be attacking the very policies that this government has imposed upon this country that, while under the guise of egalitarianism, actually broadens the gap between economic classes. I have news for you, those who are greedy, those who seek economic and political power are very happy over the controls the government seeks to implement over the economy. This managed economy has been intentionally disguised as a free, capitalist economy for decades and it is simply not the case. The current system in this country is nothing more than mercantilist government corporatism that favors the top strata of society over every other strata of economic class.

If anything should have been learned over the past 95 years it should be that the government’s attempts at economic regulations does not nor can it work since such controls are, for the most part, diametrically opposed to the laws of economics. Try as it might, it will always fail and the people that always suffer the most are those who do not directly benefit, as does the top economic strata, from those regulations. In the science and laws of economics, which cover every single action and even emotion associated with every person, in every occupation has absolutely nothing to do with the ability of government to pass legislation or regulate economic forces. Economic laws are constant, they could easily be considered immutable, politics on the other hand is not based upon such constants and therefore politics can have no lasting effects on immutable economic laws. It would be like trying to change the laws of gravity by using political force, it simply cannot happen. Such political influences can affect economics, but in every case that I have seen and studied over the decades it does so with very undesirable results.

It is the height of folly to assume that government can manipulate the economy for social or political goals without damaging the very ones they propose to protect and assist. Economics is absolutely controlled by human behavior and the laws of economics are beyond either political control of even insight. Since economics are based upon human nature and behavior I wonder why we assume that such forces can be controlled with regulatory intervention. When such intervention is placed upon the economy people will always fine away to twist and bend those regulations to their own benefit and that has been the case in this country. As I said, those in position to find loop-holes, to use or legally subvert such regulations will always do so to their own advantage. In many cases, those who pass such legislation are also beneficiaries, either directly or indirectly, since those who are in a position to support politicians will always find a way to do so to ensure an advantage.

All attempts by government to control prices, to create and regulate capital and credit, to fix or regulate wages will always ultimately fail to accomplish the desired effect because government must compel people to do what does not follow and cannot follow the laws of economics. The emotional needs and desires of people are beyond the long-term effects of government coercion though the government may attempt such control over the economy, in which human needs and desires operate, it will always fail to accomplish its stated goals to either protect or influence economic class.

As I stated and as your own words prove, people can no longer even conceive the possibility that the economy is, even with the mountains of government regulation, self-regulating. The only thing that is really accomplished by such regulations and controls is the unfair advantages it provides to the upper classes within the economy. The government always, without a single exception, only intervenes into the economy through an act of confiscation while it totally appears to disregard the laws of economics that will eventually overcome all such attempts.

Although most when most people think of the welfare state as beneficial, the truth of the matter is that it only maintains itself and the problems it is suppose to solve through measures that are directly opposed to the immutable laws of economics. The welfare state is self-perpetuating and must maintain a level of poverty and economic need to sustain its own existence. Those bureaucrats within such systems have formulated their programs with a total disregard for the laws of production, human needs and desires and societal pressures.

As history is an excellent example for us to look for wonderful lessons in all areas of our lives, both personal and social, I would recommend an old book entitled “The New Deal In Old Rome” by Henry Joseph Haskell-1939, it is amazing just how similar our situation now mirrors that of old Rome. As with Rome, the current system that our government is attempting will follow in economic ruin and collapse. The main threat facing this country at the moment, and it is rarely mentioned, is the fiat monetary system. Although I am not really sure why we feel that we will face a different fate than any other societies previously found in history, all fiat monetary systems ultimately fail and the society built upon such systems collapse. Now the main difference between our current system and those in history is that our system is now woven into the global economy. Such fiat systems are subject to mathematical laws that prevent long-term credit-debt expansion due to the fact that eventually the entire system becomes insolvent in exponential and irreversible debt. As I have stated before, everything in our economy is completely built and dependent upon a failing fiat monetary system.

This morning I walked outside to find a caterpillar scrambling around the rim of a flower pot; now I am sure that it "thought" it was actually going somewhere and would eventually get there, but in reality it was only wearing itself down walking in circles. The business cycles we are imposed to are circles created by a system that doesn't seem to understand the immutable laws of economics.

My view Phil has nothing to do with idealism, only the reality of the laws of economics.

RS, you are an eloquent and thoughtful advocate, but I am doubtful of the premise you propose. There is little doubt that at least some of what government does has been mistaken and harmful. Much of that is by design -- those economic interests that have succeeded in dominating government have used the power to feather their own economic beds.

I, however, disagree with you on the remedy. I have no more faith in the "market" as a solution than I do in government. First, we must remember that with very few exceptions, government is run by the same people and forces that hold power in the "market."

So the reality is we are speaking about the same people and forces on both sides of that equation. It is an illusion to think that the same people and forces will do better without "government" when in fact, they are government.

There are some truly fundamental issues that seldom are addressed except by sloganeering and platitudes. Is our system of governance viable? Can majority rule, even when tempered by the constraints of a constitution, ever work?

It is apparent that in today's environment, the answer is a resounding no? The overwhelming power of those who hold power, not only in government but in every level of society means that the theoretical power of the vote is no power at all.

Most people have only a fraction of the background and knowledge needed to make the decisions that affect them deeply. That is not only a function of distorted information systems, it is also a function of the unwillingness of most people to do the work needed to be informed and effective citizens.

Even in the days when our nation was formed only a small fraction of the general population had any idea about what was happening around them. The Enlightenment, which is the bedrock of our system, was known by a tiny elite and the formation of our government was accomplished by men who did not trust the masses to design our governance.

We are today, despite the explosion of "information", even worse off. Most people not only do not know what is going on, they do not want to know.

So I fail to see how removing government restraints and regulations will accomplish any good. As I say, it is an illusion to think of government as distinct from those forces it ostensibly regulates. But more than that even is the abject failure of the people to exercise even a tiny fraction of their liberty and responsibility of self-governance.

RS, IMO you state a very common misconception.

The fact that the economy has some self regulatory characteristics does not prove that the optimal outcome is always reached by relying on "self-regulation." Further, the existence of certain self regulatory mechanisms does not prove that in all circumstances these mechanisms will avoid a transition to chaos.

The economy is similar to many complex natural systems. Which is to say that it is in relative stasis with various influences varying in intensity within that stasis. What we normally see over the long run is the average (or average trend)-- IE stasis.

However, the existence of stasis does not preclude some impact forcing an outlying result far outside the normal range. That is to say that while "self-correction " is normal, it is not prescriptive.

Take the example of the earth and it's natural environment. One could view this as a self corrective system much like you view the economy. On the other hand, the relative stability over long periods obscures the reality that at any moment, a mega volcano, or a huge asteroid impact could destroy our presumed stasis. Certainly, the eventual fate of the Sun will certainly destroy the earth.

Returning to the discussion of economy as a self correcting system... the economy contains many feedback loops that tend to self correct just as my above example of the earth's environment. But the existence of many self corrective feedback loops does not rule out the possibly of the system moving from stasis to a chaos. Alleged global warming provides an example of a possible situation that might descend to chaos.

But aside from the problem of some atypical major event driving the system to chaos, there are more normal problems of system stasis as well.

To illustrate this problem, I will use a more mundane example: children crossing a busy freeway on foot. Now, on one hand one could argue that there is no need to fence the freeway since it is a self correcting problem. IE children who foolishly cross the freeway are killed and provide a learning mechanism for the other children who observe that result. But of course many of us recognize that it may be better to pro-actively fence the freeway, even though that interferes with the educational feedback loop of children seeing other children hit by speeding cars on the freeway.

The economy is like the above example. There are many bad things that can happen. And if those things are allowed to happen, it does have an eventual positive effect from educating people to be more careful. On the other hand, many people feel it is better to pro-actively prevent some very bad (albeit educational) outcomes. The Fed's arranged sale of Bear Stearns is one example, UK's nationalizing of Northern Rock Bank is another example. There a numerous similar example where central bankers have intervened to prevent an "educational collapse."

Of course, it is also true that often the central banks have been somewhat complicit in the initial problem itself. And usually that argument moves back to a discussion of the evils of "Fiat money." But that is another intractable discussion that is a large digression from your topic.

Ardy

What propose is it that despite all the efforts that the government seeks to implement it will not divert or nullify the laws of economics? Therefore its efforts will ultimately prove futile and it is within that futility that harm, great harm is done to those who can ill-afford such consequences.

First, you state that you put no more trust in the market as you do in government when the truth of the matter is that the current markets have been so distorted by the efforts of the government that there is indeed few places to put faith in such systems. You are making my case for me, though you might not be aware of that fact.

It appears that what we are both advocating is to eliminate the undue influences on the market that are presently held by those in places of power. The way to accomplish such elimination is simply to continue to allow the government to erode the foundations of this country’s economic health it will fall flat. My concern however, is the massive degree of suffering this country will face during such a distressful time when the laws of economic and monetary laws once again press their immutable natures.

If you can call this a proposal then so be it, but I like to think of it as a force that cannot be thwarted over a long period of time. The question then becomes what can the people of this country do about it before these immutable laws press themselves upon our economy? I have to wonder why we continue to accept the same type of political candidates that we have accepted for the last 50 to 100 years, those who seem to be bedded down with the very forces that you and I consider part of the problem in this country. The political metamorphoo that has taken place between the two major political parties has been astonishing, to say the least. Both parties are basically the same with minor cosmetic differences that are basically meaningless when it comes to an actual substantial change in the direction this country is heading. Each of the parties cater to the same powers, the same forces that ultimately cause so much harm to the people of this country that I am amazed that so many continue to keep their rose-colored glasses before their eyes.

We have become a majoritarian democracy where the politicians will always cater to the emotions of the majority-voting block to ensure their own place at the politically powerful feeding trough. We have lost the balance of the Republic, which blunted the power of the majority by layering checks, and balances throughout the system. It is now much closer to a democracy than it has ever been, and therein lays the danger of such systems. Every democracy fails because it caters directly to the majority and the majority will always vote itself the benefits that such power imbues until we find ourselves in the midst of democratic despotism voted into place at the expense of any minority opinion. I contend that the current system, that has been gradually imposed upon this country since the 1860s, is not viable, it is nationalistic and centralized that has been compromised through a very direct assault from a corporatist view point, left without enough checks and balances, once found within the Republic, remaining in sufficient strength to divert the corruption of power.

The Framers of the Constitutional Republic sought to place hoops and hurdles in every layer of government to make it far more difficult for any one group or any one interest to gain or control the reigns of power. The problem is that there have always been those who have sought to subvert or side-step such hoops and hurdles to increase the probability that they could eventually control many if not most elements within the government and therefore control the way in which government disperses power. The Framers of the Constitution wanted to place so many inconvenient layers within our government so that it would make it extremely difficult to operate in ways that most governments operated throughout history. They did this to protect this country from the common pit-falls found in every society throughout history, they wanted to prevent the self-destructive bad-habits that tends to cling to the reigns of power, they wanted to separate it not only on a federal level but also through keeping the States, along with each State Constitution and government, as essentially independent Republics within a Republic.

You are right, the power of the vote is now so insignificant that it has become little more than mere exercise of popular civics but holds no real power to make the changes necessary to ensure that the lives of the people who labor and produce by the sweat of their brows are actually meaningful. We have become little more than a feudal peonage, working for the pittances of a now alarmingly debased currency, unable to fully enjoy not only the fruit of our labors but now it seems that most live to work instead of work to live. Most no longer make a living, they struggle under the overwhelming and mounting weight of an economy by government decree that appears to be purposeful to that very end: a productive peonage whose labors are siphoned off for the benefit of their masters.

I am in total agreement with you concerning the lack of knowledge within the general population, they have, after all, been lured into believing what they are fed on a daily basis not only about government, but about the economy as well. They are generally ill equipped to either understand or cope with the harsh reality that is about to befall this country and therein is a great danger.

Concerning the ideals of the Republic, I have found no other system of government that can come close to providing the broadest degree of liberty and prosperity for the population of a country as a whole while providing a substantial balance to the power of a majority to gain control over the country and its minorities. We have, for decades, seen the ideals and principles of the Republic eroded to the point that democracy governs with a majoritarian political market place. There was once a saying in the early States that expressed this opinion rather well: “Freedom from Mobs as well as Kings”, that expressed the truth behind both the despotism of Monarchy and Democracy, either one have the tendency to use power for purposes other than the general common good of the individual or those who hold a minority place in society. While it is true that in the minds of some of the Founders they didn’t trust the masses with government, the system they settled on was actually to prevent a despotic majoritarian government from gaining the immunity of power.

Every government program, every regulation, every act and ordinance is designed for the purpose of enhancing the power and scope of the government itself. While at one time the purpose of government to provide the protection of an atmosphere where the individual could live his life in the manner of his choosing, taking both risk and reward from his actions, his ingenuity and enterprise. The government was intended to be neutral allowing for the greatest expression of individual liberty possible without devolving into chaotic anarchy. While it is difficult to look at the modern American society without heaving in astonishment at the overt ignorance of the population en masse, I still believe that given the opportunity to live in a country where the government was not so omnipresent and omnipotent, they would choose to do so. Yes, the word Liberty really is synonymous with the word Responsibility, but therein is the catch. We have seen the government gradually promote dependence upon the government, one must ask why?

I suppose the point is that there will come a time when we will face the destruction of our society because we have neglected the principles that were intended to prevent such a collapse. We have fallen prey to the forces of corrupt power and a government that promotes the extension of such power. We can start locally to make changes, at least that is what I have been doing for the last few years. I think it is impossible to attack the head of the system, so we must hack away at the lower portions of government, locally and State governments. It will be much more possible to attack the federal leviathan when you have fifty fighting against it instead of a few activists who are vocal, but lost in the crowd.

Ardy:
Ah, the misconception is yours, for what I am saying is that despite all efforts to regulate and manipulate the economy that those forces cannot continue to restrain economic laws over an extended period of time without disrupting the natural forces of the self-regulating economic laws. In other words, how can the government regulate the most important and most influential force behind the economy, which is the emotions, desires, needs and physical requirements of people. Try as they might, the government, through the agency of the Federal Reserve, has attempted to control business cycles for the last 95 years and if you view the results of their efforts you will quickly see a long and consistent record of failures. What I am saying is that not only is the economy self-regulating, but that the results of this self-regulation will always contradict the intervention of government to direct the economy in a way that suits its political goals.

For instance, look at inflation in this country, what do you see? I personally see a relatively flat rate of inflation until 1913 when the rate began to creep up because the Federal Reserve began to interject a fractional system into the country monetary unit, then in 1933, there is another hike in inflation when the government debases the value of coin in this country by 50%, then again in 1971 when Nixon released the dollar/gold peg on the foreign exchange inflation shot through the roof and has continued to rise to the point that our dollar is now essentially valued at 0.05 cents to the 100 cent 1913 dollar.

Self-regulating economies don’t have a bad track record, unlike government regulated economies. In self-regulated economies you will find the natural cycles, up and downturns, but they were relatively short in length and not nearly as disruptive as those found in the government regulated economies, as we have seen since 1920. Those self-regulating economies never lead to chaotic conditions, even when there were economic dislocations and none ever came close to the economic dislocation of the 1930s in this country under the highly government regulated economy of the 20s that led up to the Great Depression.

Let’s face it, the government is neither productive nor creative, nor can it induce, by intervening into areas that it is not equipped to deal with, any positive result in our society. We have falsely come to believe that the government is the foundation of our society and that is not only erroneous, but dangerously erroneous. We now have a government that completely operates on the premise that deficit spending is beneficial to both the economy and eventually government debt, but those who advocate such ridiculous premises since it only continues to aggravate the underlying problems facing this economy. Similarly, corporations don’t favor free-markets, but regulated markets since they allow for far less competitiveness to enter markets.

The point is that regulation; government regulation is a device that seems to limit the economic activities of people in markets. I have read all the books upon which you seem to base your premise on and in everyone that I have read the implication that without government regulation in the sphere of economics that the economy would devolve into chaos, that is simply not true and it has been proven in several economies, even some of the most primitive. First, there is a very distinct different between law and regulation, law tends to deal with general subjects while regulations are far more specific. You will note that long before the government began to intervene and regulate the economy that there were still cases brought before the court for fraud, it was not a matter of government regulation, but the efficiency of the law to deal with such cases. Thus there has always been oversight in matters of the economy even without government regulation and intervention. So too, the economy operated with far greater efficiency without nearly as many dislocations prior to government regulatory intervention.

It is impossible to ignore that there are self-regulating forces involved with personal decisions in the market place economy. It is an absurdity to state that the government can regulate the primary force within the economy as it attempts to regulate the economy in general. Since human behavior is the primary force behind all economies in the world, the governments attempt to regulate the economy while it is impossible to regulate the primary moving force behind the economy does little but hinder the complete action involved in economic cycles. Since private enterprise operates on a completely voluntary basis, it is, if left to the natural laws of economics, not only self-policing, but also self-regulating and, as you said, it is self-correcting. The problems we see is a government that seeks to avert these economic corrections when it’s own policies helped create the mal-investment in the first place with its intervention into economic management.

Even with all the morass of government regulation and intervention, the fact is that despite it all the economy cannot operate outside of economic law. It will self-regulate despite the efforts of government to impose a regulatory mandate upon it, and at times the very imposition upon the economy by government intervention will exacerbate periods of normal corrections ending in massive and deep corrections we now call recessions. By the way, an interesting fact is that our definition of both depression and recession has been conveniently changed over the years, can you guess why? The change of definitions allows the government to maintain a degree of control over human actions regarding the economy. Have you noticed that the government and its agencies have been extremely hesitant in calling this latest “slow-down” a recession; there is a very good reason for that.

The truth of the matter is that you could complete close the government down today and the economy would, after a period of adjustment, reshape and reconstitute itself even without government. The fact is that the economy is not dependent upon government, but government is dependent upon the economy. The only reason that either inflation or regulation persist in this country is that someone [the influential] is benefiting from both, otherwise there would be neither. You will also find the most avid advocates of both regulation and to a degree inflation, will always seek to portray them in the best possible light by declaring that without them we would not have nearly as prosperous of a society without them. That is a blatant and despicable lie.

Have you noticed that politicians and corporatist in particular are extremely favorable toward “easy-money” policies of the Federal Reserve even though those very policies generally are not favorable to the majority of people in this country over the long-term? They will never admit the consequences of such “loose-credit” policies under a fiat monetary system because if they did they would reveal the primary source of both their power and wealth: Inflationary confiscation of the wealth of this country.

Another interesting fact about government regulation can be found in the way small businesses are affected by such regulations. As I said, regulations favor the large, politically connected corporations, but the brunt force of these regulations are felt intimately by small business owners and entrepreneurs. If you take a look at the Colonies and then our early history as a country, you will find that prosperity increased five-fold in this country during that period because, unlike the European countries, our government didn’t involve itself in over regulating the economy. There were no favored monopolies as there were in England, France, Italy, Spain and Portugal. I maintain the same outlook found by the Founders and that is: “the best government governs least, that society is self-regulating and should be left alone, and that the unhampered market economy and free trade are part of liberty and are keys to economic prosperity.”

Have you ever read Cantillon, if not I would enthusiastically recommend his “Essay on the Nature of Commerce in General”, he is credited with the “discovery” of economic laws. Also, some interesting reads can be found in the story of John Law and the Mississippi Bubble, which sounds eerily familiar.

For decades, our government has entered into the economy with regulations that have promoted some of the most dangerous financial instruments in the world, all of which are based solely upon fiat. Take for instance the “Derivatives Market”, at close to $500 Trillion Dollars in estimated value, it is over 5 times the global GDP, this one fact should raise some interesting questions in the minds of not only the politicians, but everyone. Many of these Derivative Contracts are bought and sold without an underlying instrument of support, in other words, there are contracts that are being bought and sold that don’t have one thing backing them except a promise. This whole industry is extremely complicated but also extremely popular and it has been made possible because of regulatory intervention into the markets. It has been said that this single market could bring down the entire economy of the world with minor effort and it would only take one of these dominos falling against another to start a massive chain reaction that would affect every single sector in every economy around the world.

The thing is that legislatures are constantly crafting new regulations and reforming the systems they are intended to regulate. They have a tendency of recycling old regulations with newer face-lifts that few of them seem to understand in terms of the consequences of such regulatory action.

One need not look far to see the effects of a government whose hands are loaded with either misdirected or conflicting policies. I find it mind-boggling to hear people actually defend this morass of government regulation when all they need do is look at the government’s management of just about any area of government to see that they are all idiots. Hell, the government can’t even wage a war without mismanagement, massive waste, and irrational destruction.

My opinion is that the government can only cause disruptions in the economy because it operates, or seeks to operate in ways that are contrary to the natural laws of economics. It has absolutely no power to intervene in the primary force that moves the economy, which is the people in their voluntary association in markets and it constantly misjudges the consequences of its own actions.

Mostly, that is not the role of government regulation. Never the less, the government can and does regulate the sorts of things that you mention. For example, some people desire to have sex with minors. This desire is fairly successfully regulated.



This comment does not correspond to reality as I observe it. The facts as I am aware as I am aware of them are that the economic record since WWII has been one of exceptionally strong growth. And while business cycles do remain, they have been comparatively mild. And certainly more mild than the historical cycles before WWII


I would say that the political goal of government regulation is to have a healthy, prosperous, growing economy. Are you saying that the natural “self regulated economy” contravenes this goal?


From my view, elimination of inflation is not the primary objective of the economy. I agree that there have been phases of mismanagement. I agree that that is a risk of the present arrangement. Never the less, I would propose that if the average person had to choose the standard of living in 1913 and no inflation… or alternatively to have today’s standard of living along with the inflation you mention… people would choose to accept the dollar devaluation and have today’s relative prosperity.

Which track record are you referring to?

Are you referring to the US economy prior to 1913? If so, I think you are factually incorrect.

I do not agree that the 1930 depression was the result of a highly regulated economy. Much of the regulation that was added to our economy came after the 30’s precisely to avoid a repeat of that situation.



I think that it can be both. As an example, government largely eliminated Polio and many other infectious diseases

Where we would differ is which areas the government may be equipped to deal with issues.


I do not know about the debt comment. I do think it has been shown that some degree of deficit spending can be beneficial to the economy. Bush and the alleged conservatives have blow up the concept of beneficial deficit spending far beyond the area where it is safe. (IE Cheney’s apparent opinion that deficits do not matter.)


I strongly disagree with so much of what you are saying.. Of course there are an infinite plethora of personal decisions that are reflected in the economy. Government regulation is aimed at only a miniscule portion of those personal decisions. As to the ability of government to effectively regulate personal choices and preferences… I would say that government is a reflection of society. And that human societies have been shaping human behavior for thousands of years.

Let us take the slave trade as an example of private enterprise and review how it policed itself. Child prostitution is another lovely self regulating industry. I could make extensive additions to the list.


Government policies are sometimes a cause of the business cycle But not the primary cause. All economists would agree that business cycles would exist even absent all the economic policies to which you are objecting.


This is true. What is less clear is whether the result would be an improvement.
Lets say there is no government anywhere in the world. No currency. --- or only individual bank currencies. The money supply is only based upon gold. Essentially if you want to buy a house or a car, you have to pay the full amount in gold.. Would that be an improvement? I doubt it.


I that is a blatantly uninformed opinion..... but hopefully not a despicable one :-)

Let’s agree to disagree about this topic. Any time a discussion turns to fiat money… it turns into an irresolvable discussion.

Yes, and no doubt if we could find some new virgin land like the colonists had… we could do as well today.

The government that governs least is the government that dissolves itself. Is that the best government? I think not.



Very few people today really understand this subject. Mere probability suggests that you are not one of those people. From what little I know, it seems to me you have a few basic misconceptions.

First, let’s consider the 500 trillion dollar size estimate you have repeated. Almost all derivative instruments are composed of two sides. For the purpose of simplicity and illustration lets have an oil future contract of on barrel of oil at $100 set for expiration next Monday. Now the very existence of that contract requires on person committed to deliver the barrel of oil and one person committed to buy that barrel of oil. Each person holds an instrument that is essentially a $100 liability/commitment. You add it together and you have an underlying derivative “value” of $200. Except that these values do not add together… they subtract. So the net derivative value is zero. SO for example, lets say that before the contract closes… we each decide to sell our derivative to the other person. Essentially the contract is cancelled and this apparent $200 derivative value vanishes into thin air.

What would not have vanished is any change in derivative price. So lets say that the price of oil had gone from 100 to 150 over the term of the open contract. Then one side would have lost $50 and one side would have gained $50…. But again, this is a balancing transaction. Plus 50 and minus 50 equals zero. And so in a nutshell, that is why the whole 500 trillion number is completely misleading (not that there is no problem… it just is not a 500 trillion dollar problem)


The next issue here is the “whole industry ….has been made possible because of regulatory intervention into the markets.”

This is simply not true. It would be more true to say that industry insiders and friendly (GOP) legislators have removed and avoided regulation that would have largely avoided current problems.


IN order to believe this, one would have to think that George Bush and Tom DeLay got together and figured out what sort of regulation they wanted . Of course we know the truth is the opposite. The both hate regulation and have done their level best to get rid of as much regulation as possible.


I suspect that less than 1% of professional economists would agree with that view.

That is quite a stretch from economics and the laws that govern economics to sex with minors and consent laws…two very different types of law dealing with two very different subjects that have absolutely nothing in common. We are not talking here about a moral-based application when we talk about economics; economics and the laws that govern economics are moral-neutral. What we are talking about is a vast array of issues concerning human behavior that influences decisions based upon a particular need to maintain a livelihood. These “desires, needs, emotions, requirements” do not fall in the same category as the example you presented, nor does the law that governs either economics on one hand and a moral standard of behavior concerning consent.

You are right about one thing, economic growth has been substantial however, if you look at the price of that growth you will quickly find that it is enormous and has immense portent for our future. The fact is that the business cycles have not been mild; there have been numerous cases where the downsides of the cycles have been very costly, especially to the middle class. There have been numerous instances where people have lost everything in these economic busts. As I have said before, in the 1800s there were about 4 or 5 economic panics, two of which were brought on by the same Bankers whose actions prompted the Great Depression.
There have actually been 3 Depressions in the 20th Century; the first was in 1920-1921, the next was 1929-1933 and the next was 1937-1938. There was sharp Recessions 1923-1924, 1948-1949,1953-1954, 1957-1958, 1973-1975, 1981-1982. 1987. Then there were 7 mild Recessions; 1926-1927, 1960-1961, 1969-1970, 1980, 1990-1991, 1999 and then 2001 brought on by the events of 9/11, and of course this latest economic bust which has not fully played out at this point, this one has only begun. That is not the best record in the world for the Federal Reserve System and Keynesian Economics.


If the political goal of government regulation is to accomplish such things as a healthy, prosperous and growing economy then why does it appear to contradict those aims by the crafting and application of those regulations? Obviously, you didn’t quite grasp what I was saying. I am saying that despite all the good ideas, all the good intentions, and all the regulations that impede the natural flow of economics, that the laws of economics cannot be subverted over a long period of time before those laws impress their power on the economy. We are now witnessing the impression of those immutable economic laws on this highly regulated and managed economy.



I have to say Ardy, that one statement is absolutely the most absurd I have every heard, since a healthy economy always, always depends upon a sound unit of monetary measure or it will eventually collapse under the weight of inflation. Do you know what inflation is or how it is created? History proves that fact time and time again. Progressive inflation is not a normal process of a self-regulated economy; it is however a very destructive part of an economy based solely upon a fiat monetary system as our economy. You obviously don’t understand what you are saying otherwise I doubt if you would have made such statements. Once again you are seeking to make a comparison that is not possible. The point is that inflation is a particularly pernicious plague associated with the issuance of fiat money and since it is mathematically impossible for a fiat system to last for an extended period of time the collapse of that system will always destroy the living standard and the society upon which it is built. The only reason that the living standard in this country has appeared so robust over the last 30 years is that it is built primarily upon credit/debt, like the government itself, it maintains itself solely upon the ability to continue to borrow funds, but that cannot last and is not, nor has it ever been, sustainable. It is also impossible for an economy to be considered healthy while inflation siphons off the wealth of the people; eventually the people can no longer afford consumption…ever heard of consumer confidence? Well, the only way to maintain consumer confidence is when the consumer is able to feel comfortable consuming the only way that a consumer can feel comfortable in consuming is if the value of his money can sustain his life. Look at every single country that has suffered from the effects of inflation, or worse, hyperinflation. I am not sure how old you are, but if you recall the late 1970s to early 80s, you will recall a period of inflation that made it difficult for many people to even make a living, of course, that period was a direct result of Nixon un-pegging gold from the dollar on the foreign exchange and inflation put nearly a death-grip on this country. The only thing that really began to control the 13.5% inflation rate was when Paul Volcker raised the Fed Funds Rate through the roof.

I mean do you realize what happens when the dollar enters negative value? I am not sure where you get the idea that the inflation we are now subject to has no effect on a healthy economy or that the standard of living today even with the debasement of our currency is of no consequence. You don’t have to go back to 1913 and compare that standard of living to see that inflation has eaten away the value, thus the ability to increase your standard of living. Take 1970 when a dollar then would now buy $5.58 worth of products in 2008-dollar value. That is a direct draining of purchase wealth from the American People and where does that wealth go to, it is basically free money that the government and large corporations enjoy. Look around Ardy; it will only continue to diminish under the current system.

Well, now, lets take a look at American between the years 1800 and 1860 when the government kept its hands off commerce. Take a look at the several Republican forms of governments like those during free-market Venice and Amsterdam; they flourished until they adopted central banking. If you want a list and the time periods I will gladly provide them to you, but I would advise you to do the research yourself and find out exactly how those governments operated.


Are you referring to the US economy prior to 1913? If so, I think you are factually incorrect. Actually, I am referring to that period in time. If you actually read what took place during the panics and downturns you will see that they were relatively short-lived events and those, which did suffer from deeper dislocation, had external influences, which created the severity in the first place. The Panic of 1819, for instance lasted a little less than two years. The next in 1837 lasted approximately two years. Now the most interesting Panics were those in the later part of the 1800s and they were basically a forerunner to the manner in which the Great Depression began. The National Banking System used similar built-in inflationary mechanisms and a particular credit-note creation that eventually came home to roost.

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Those self-regulating economies never lead to chaotic conditions, even when there were economic dislocations and none ever came close to the economic dislocation of the 1930s in this country under the highly government regulated economy of the 20s that led up to the Great Depression.

I do not agree that the 1930 depression was the result of a highly regulated economy. Much of the regulation that was added to our economy came after the 30’s precisely to avoid a repeat of that situation.

Strange, Bernake finally admitted that it was the regulations and policies of the Federal Reserve during the 1920s that caused the Great Depression, or didn’t you see that superb moment of truth on C-SPAN? The Great Depression was a direct result of the extremely loose credit polices and regulatory interference of the government. In fact, if you read what took place you will find the same type of inflationary practices that we are now suffering from in this country. Read your history again Ardy, I am not sure where you get your information from but read the Congressional Record of the period between 1920 and 1929. Read the connections between the Federal Reserve and the Bank of England during that period; see what was taking place behind the scenes. I could go into details but it would take too long. Needless to say the Fed, at the behest of the government, instituted an easy money policy that continued to accelerate an inflationary boom. Coolidge had a policy; similar to the one our government holds today, that easy money was good money. His policies reflected this view and he kept pressure on the Fed to maintain its course. His Administration was followed by Hoover who, as it is said, intervened with “a velvet glove on a mailed fist” in other words, industry, businesses and banks would be exhorted to adopt the measures that the government proposed or they would be compelled to adopt such measures involuntarily if they didn’t comply. Of course, we rarely hear that Hoover had been working behind the scenes in government for over a decade by the time he reached the Oval Office, heading up various departments associated with labor. Now at the time. The various acts, regulations and tariffs all combined to create a strain in the economy that eventually broke the bank, literally. Most of Hoover’s policies can be traced back to the Committee on Recent Economic Changes, which he headed. While it is a relatively dry read, it is informative on the actual state of the economy during several years, especially 1929.


Deficit spending is an old, and I might add, crazy Keynesian product that is contrary not only to common sense but the laws of economics. If you want to see a good example of deficit spending by a government look at the French economy prior to the French Revolution, there’s a picture for you. However, the general theory is that government spending increases economic growth, while that is true the trade-off for such growth is high. One Neo-Keynesian finally admitted in a book back in 2000 that: "The U.S. government is best viewed as a big insurance company that also happens to have an army. The giant retirement programs—Social Security and Medicare— already dominate the federal budget; they’ll become much more expensive a decade from now. If we have to pay those bills, and also pay interest on a big national debt, something will have to give." Of course, David Walker, the former Comptroller General of the GAO stated that the U.S. is technically bankrupt and can’t afford to pay its current obligations much less all $60 Trillion in future obligations. Additionally, he stated that the only way this country could possibly dig its way out of the disaster it is facing is if the Government was cut by 75% and taxes were raised to over 150%, but that is an impossibility so what we will face will be, at this point, unimaginable.



Geeze Ardy, when you miss you miss by a mile don’t you? “I strongly disagree with so much of what you are saying. Of course there are an infinite plethora of personal decisions that are reflected in the economy. Government regulation is aimed at only a miniscule portion of those personal decisions. As to the ability of government to effectively regulate personal choices and preferences… I would say that government is a reflection of society. And that human societies have been shaping human behavior for thousands of years.” Once again, I am not talking about the ability of the government to regulate personal decisions, choices or preferences. I am speaking about all the factors involved in the economy that are affected, either directly or indirectly, by human behavior. It has absolutely nothing what so ever to do with how the government does or does not regulate such behaviors. Human behavior is the energizing force behind the economy and when the government seeks to regulate the economy it does so without any control over those variables in human action or behavior. The government has no control over, once again, consumer confidence, it can only regulate the economy to seek to increase that confidence when it is down, but it cannot direct such emotional decisions made by a few hundred million people.


We are talking about the general economy here Ardy, not some contrived association with either child prostitution or slavery as self-regulating industries, both of which were, once again, I will repeat moral issues that do not relate on the level of discussion we are concerning ourselves with at the moment. Each of those issues are apply dealt with on a legal basis in the judicial system and are not economic issues that affect the general population. You do seem to have the ability to swallow camels while you strain at gnats.


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The problems we see is a government that seeks to avert these economic corrections when it’s own policies helped create the mal-investment in the first place with its intervention into economic management.


Government policies are sometimes a cause of the business cycle But not the primary cause. All economists would agree that business cycles would exist even absent all the economic policies to which you are objecting.

Government policies, coupled with Federal Reserve policies are the direct cause of business cycles in a managed economy. I looked at Fed policies over two and a half years ago and warned my clients to prepare for this present economic “down-turn”. Thankfully, most of them listened to me. Business cycles are normal in a normal, unregulated economy, they are quick to correct themselves however, and the business cycles we experience are a direct result of monetary policies that place very definite conditions on the operation of the economy. The Fed creates the problems and then we look to the Fed to solve the problems they have created, it sounds like just as good job security for Bernake as Greenspan enjoyed.

I am not saying that I advocate the elimination of the government, just most of it. It should be limited to its specified and limited authority and no more. The fact that a commodity based specie does not preclude the existence of the lender or the borrower, but the standards on which loans are made and managed are substantially more stable.


Strange, I find that it is exactly the case made by those who advocate regulation and inflation. I hear it everyday on the news as various politicians and government economist, along with some corporate representatives. Look at the current situation concerning sub-prime mortgages; they are railing for much more regulation of that industry when it was already highly regulated. While these politicians and government economist state that an increase of inflation is bad, they maintain that a degree of inflation is okay and not harmful, but what they fail to tell us is that through inflation our money has been debased almost 95% since the inception of the Federal Reserve System. They don’t want the general population to realize just what has been going on over the decades.


Well, I find it totally impossible to discuss the economy without discussing fiat currency. You cannot separate the two because the whole economic system is based solely upon the fiat monetary system in this country.

Actually, the government that governs least is one that is restrained by law, one that abides by the social contract between it and the people called the Constitution. A lawless government on the other hand, well, lets just say that you need not look far to see the results of a government that has usurped its power. Of course, it will ultimately prove impossible for a government to continue to govern outside the parameters of the law. We have seen the extreme expansion of this government, not only domestically but internationally; it cannot maintain its empire for long.

Concerning the Derivatives Market, I better understand it. For a few years I was a Certified Trading Advisor in both options and futures contracts. I began trading in exchanges in the early 80s, and ventured into futures and options in 1984 and then in the 90s I really got hooked when the coffee crop in Brazil and Columbia failed due to a particularly harsh winter. I made a tidy fortune. At that time a coffee contract skyrocketed from about $800 per to over $20K per. In those early years I had a satellite data link that I used for real-time prices from the various exchanges. I can always send you a copy of my Series 7, Series 24 and Series 33 if you like.


By the way, I suspect that the vast majority of “professional economists” take a Keynesian or Neo-Keynesian view of economics, they were trained in that view and usually have difficulty seeing anything else, so has been my experience with economist.

This is what it looked like with little government intervention:


Link

Several of those events led to insurrections, street warfare and hundreds of thousands of people starving and for many of them death.

I am struggling to have a discussion that might lead to my seeing something new or different. I am just not getting that. I am sorry, but you just don't make sense to me.