I’d like to wish everyone a safe and happy Thanksgiving. May you spend it with your family and friends, enjoying this annual American tradition with fresh turkey and stuffing. I’m thankful for the wonderful people in my life, my health, and my good country. For my friends who may read this, I hope you’re well and that we see each other soon. God bless.
Have you observed global capital markets over the last few weeks? CNBC recently ran an article describing the death of the euro, Europe’s common currency. This is a result of a sovereign debt crisis that now intimately involves all of Europe’s largest countries. American stocks are fluctuating wildly, and the American economy grew at just 2.0% annually last quarter, revised down from 2.5%. Unemployment is stuck at 9%, while government debt increases at the fastest pace ever. What gives?
For counsel, one is wise to consult with the great Austrian school economists, Ludwig von Mises and Friedrich von Hayek. In 1912 Mises published The Theory of and Credit, in which he extended the law of supply and demand to money (including the loanable funds market). Using this powerful application of economics’ most fundamental law, Mises went on to argue that price information – that is, cost in terms of money – was necessary to establish a well-ordered economy, if not modern civilization itself. Hayek applied Mises’ insights to the Great Depression, and explained how credit expansion by government distorts price information, eventually leading to economic bust. In particular, credit expansion impairs entrepreneurs’ ability to forecast, the rational basis of which (prices) has been rendered undependable by the (government) increase in the money supply. This, simply stated, is what our Federal Reserve does best. To be sure, the Austrian critique is a subtle and devastating argument against government economic intervention in every form.
But is this too confident an assertion? Were Mises and Hayek overreaching?
Think for a moment about the millions of economic decisions made every second of day. Is price not a major determinant in what you choose to purchase and in what you accept as remuneration for your labor? (In the case of my desire for a Ferrari, it is the only determinant.) If by magic all prices jumped 10% tomorrow morning, wouldn’t we make different choices than we make today? Could you afford a new wardrobe, television, and apartment if you were to win millions of dollars in the lottery? Yes, to answer each question; self-evidently so. People take into account prices when buying groceries, trading stocks, and making business decisions. Investments in the future are made on the basis of profit-and-loss projections, given a certain interest rate (i.e., the price on a loan). Economic choices hinge critically on price.
After this contemplation, we come to understand why Mises and Hayek regarded spontaneously generated price information as the only rational basis for economy in a modern society. Price information signals to society what is productive, what is valuable, and what it can afford. Business seeks profit, workers higher pay, and consumers less costly goods. Arbitrary prices set by government decree are artificial, and lead to shortages and gluts. Only free people engaging in voluntary exchange generate genuine price information that allows society to organize its industry.
There’s one Republican candidate running for President of the United States who champions Austrian economics, and Mises in particular. This candidate is Ron Paul. For the record, I believe Paul’s foreign policy is not only stupid but dangerous, and I would never support him for President. Dr. Paul is also notable for advocacy of complete drug legalization – heroine included. The folly of his little crusade aside, Merriam Webster Medical Dictionary defines a drug as “something and often an illicit substance that causes addiction, habituation, or a marked change in consciousness.” Hmm. Counterfeiting is certainly illicit. Governments have clearly proved themselves addicted to printing money. And the inevitable price distortion and resulting bad decisions are a “marked change in consciousness” from the previously sober consumer and businessman.
Why all the chaos with economies lately? The analogy is borrowed from an unlikely source. As the classic PSA put it: “This is drugs.” Crack! Sizzle! “This is your economy on drugs.”
As a conservative, you may hear from time to time that you need to modernize your views. “Universal healthcare is ubiquitous in the developed world with one exception: America.” “Of course the bank bailout was necessary. Did you want the world economy to ‘collapse?'” “College has gotten too expensive. In Europe, college is free. Americans shouldn’t be in such college debt.” In word, we could summarize this smarmy attitude as Follow Europe.
It’s interesting to consider these entreaties, which have been prevalent for at least a decade (see here Foreign Affairs article from 2001), in the light of recent events.
The Death of the Euro declares the U.K.’s Express. Discussions of a “Euro breakup” at MarketWatch. England’s former Prime Minister Tony Blair warning of “catastrophe” if the euro collapses. German and French relations strained due to dangerous debt levels.
What caused this, exactly? Why is Europe in such economic and political turmoil? Simply put, Europe’s poorer countries (Greece, Spain, Italy, Portugal) have been ripping off its richer countries (France, Germany), while Europe’s older generation has been looting from the younger generation. Their central bank has been bankrolling these injustices for years by keeping borrowing costs artificially low. Technocrats dwelling in Brussels have infiltrated most aspects of society, centralizing authority in a government to make their lives as leisurely as possible. Now that giant Ponzi scheme is unraveling, falling prey to the same market forces that doomed socialism and communism.
While Europe loses one aspect of its stability at a time, we look from slightly behind. America’s debt is rising massively, at the cost of the taxpayer and benefit of the bureaucrat. Government spending has increased at its fastest peace time record, and the trajectory of debt is through the roof. In the last several years, states have challenged federal authority in enforcing immigration laws by state means. The federal government has presumed what one describe as “audacious” authority in health care, including assuming tremendously important personal decisions, and representing one-fifth of the nation’s economy.
We now know the wages to be wrought for behaving like Europe: chaos, instability, rioting, and austerity. America yet has been lucky to escape European-like violence. The “Occupiers” have not flourished into a legitimate political movement. We are still, today, a center right country.
But things, political things, must change if this is to remain so. We must shrink our government and abolish certain agencies. We must begin to pay back our debt. We must reign in our entitlement spending. We must simplify the tax code. We must keep a stable dollar. Precisely to avoid further instability, and possibly widespread violence, we must endure the austerity willingly. This is easier than it sounds because, in reality, we’re living in it right now. To ease our economic woes, the government would have to do nothing but pull back.
There are many people in this country who want nothing more than a respectable, smart, and experienced man (or woman) as president, but are not adamant about the candidates’ core beliefs. Many of these people are barely partisan. To take the most obvious example, in Mitt Romney Republicans have an exceptionally fine person who has excelled academically, in business, and in politics. I feel confident suggesting that Mitt Romney will leave this earth one day having accomplished more than 99.999% of all human beings in public life. Yet he also instituted the most progressive healthcare system in the country – that is to say, retrogressive and injurious to individual liberty. His policies were emulated by the Obama administration to craft Obamacare. He has attacked other Republicans for daring to speak frankly about entitlement programs. He has declined to denounce the bank bailout, and refuses to come down hard on Bernanke, distinguishing himself with the utterly milquetoast Jon Huntsman in this regard.
Formidable as Governor Romney may be, his track record and debate tactics suggest the mind of something other than a conservative. To be sure, while Governor Romney is indeed an American technocrat (see his 59 prescriptions for a healthier job market) he is not a Brusellian technocrat; and, given the powers of the presidency he would not go as far and as fast as the Europeans. But we need another mastermind – period – like we need a hole in our collective head.
The next president will have to confront and conquer a domestic and international economic crisis, not to mention a full cadre of complex international affairs, including a dangerously compromised Middle East. America needs a principled leader who respects the Constitution and reminds citizens how our government is intended to act. By virtue of his grave lapses in judgment on the economy and, generally, the role of government in a free society, Governor Romney does not deserve the conservative’s endorsement in the primary season.
Title: NYYRC November Meeting
Location: WNRC, 3 West 51st Street b/w 5th & 6th avenue
Link out: Click here
Description: Join us for our last meeting of the year!
3 West 51st Street b/w 5th & 6th Avenue
Guest Speaker: To be announced shortly.
**WE WILL BE COLLECTING WINTER COATS FOR THE NY CARE COAT DRIVE** Please bring any coats you no longer wear.
Members and Non-Members welcome, First event or coming alone? Let us know and we’ll introduce you around!
Business attire required. No jeans, sneakers, hats, sweatshirts, etc.
Join us in the Pub afterward for drinks, food, and discussion. Cash Only
Start Time: 19:00:00
End Time: 20:30:00
Nov 29th- NYYRC Annual Fall Celebration
Join Fellow YRs for our Annual Fall Celebration with 3 hours of Open Bar, plenty of Hot Hors d’oeuvres for everyone and a Discount on your 2012 Membership!
3 East 40th Street b/w Madison and 5th Avenue