The Age of Folly
How about a bit of reality? Not the ridiculous promises from Washington: the absurd talk of "green shoots" while unemployment soars and investment falls; the silly guarantees that GM has a bright future, even as its stock price falls to less than the price of a Snickers bar; the nonsense about how if we spend more and inflate more, recovery will come tomorrow morning.
The war on recession is a flop. Fail, fail, fail.
The full-scale war on recession began in January 2008. Unemployment was climbing and house prices were falling, and George Bush, whose entire persona was the war mode since 2001, decided he wouldn't tolerate declining economic conditions.
That's when the Fed started pushing down interest rates to ridiculous lows and started gunning the money supply as much as possible. Bush put on his solemn/determined face and started talking to the American people about how he was going to destroy this recession monster in its crib.
Now, there are things politicians can do in the face of trends they don't like. If kids aren't learning to read, bureaucrats can cobble together carrots and sticks and gin up the scores a bit for a while. They can have their hirelings shoot consumers of illegal substances and bomb foreigners who don't love America. They can pass out goodies to friends and take them away from enemies. From time to time, they can experience moderate success in these actions.
But the economy? Now, here is a force too big even for the biggest government in the history of the world, which is the US government. That's because economic trends are embedded in the structure of the material world and operate according to laws akin to gravity. They are social laws, if you will, features of the world that operate in all times and all places, and they are generated by the implacable fact of scarcity and the need for a system of production and allocation.
In other words, economic trends are finally beyond the control of the political class. This is the great lesson that economics has been teaching for some 700 years, generation after generation.
As Bastiat wrote, economic laws
act on the same principle whether we take the case of a numerous agglomeration of men or of only two individuals, or even of a single individual condemned by circumstances to live in a state of isolation.
They are unavoidable features of the world, ones which the political class is forever attempting to override. The economy had been on a false foundation for some years, and the housing sector in particular had become wildly overbuilt and rested on bad debt. What can politicians do about this? Absolutely nothing. Economic foundations are built by private investment. Government has no resources of its own to build a foundation. It can only rob people of their property and thereby divert resources from where they belong to where they ought not to be.
When prices of houses started falling, we began to see only the most conspicuous sign of the rot underneath it all. But the political class blamed the symptom instead of the disease, and started trying to prop up prices, which is probably the stupidest thing these birds could ever attempt. It is utterly futile to attempt to change the direction of prices. It is about as successful as attempting to replace the water in one ocean with another or rearranging the order of the planets. It is beyond their capacity.
Bastiat said of the attempts of his time,
Modern reformers! when I see you desiring to replace this admirable natural order by an arrangement of your own invention, there are two things (although they are in reality one and the same) that confound me — namely, your want of faith in Providence, and your faith in yourselves — your ignorance, and your presumption.
It's not just that the attempt to undo economic law doesn't work. It ends up mucking up the system even more, and prolonging the suffering. That is precisely what has happened. There can be no question that we would have been out of this recession by now had the politicians not intervened. But an election was coming and Bush tried to rig the system. Not only that, but after seven years of ridiculous marauding around like king of the universe, he was flush with power and arrogance.
Bush attempted to reverse the economic river by waging a war on recession, about which I was writing back in March 2008:
All this nonsense about digging ourselves out of recession through government intervention began with the New Deal.… But here is the amazing fact: not once has this strategy worked.
By the fall and winter, it became clear that the war on recession was not working and the economy was sinking further. Rather than give up, Bush pushed so hard that he managed to throw us all in the arms of a socialist who knows nothing about economics and has surrounded himself with big shots who affirm him in his ignorance — people like Paul Krugman, who are wedded to antique mythologies about the glories of government power.
And so we live through it again. We see the fools trying this and that with our lives and liberty, promising glorious results around the corner. Well, by now, we've been around the corner, the next one and the next one, and it gets worse with each turn. These people are driving us right into the abyss, and let's be clear that this is not the fault of private investors or savers or foreigners or stock jobbers. It is the fault of the managers of this recession: the government, whoever is or has been in charge, and the Fed that operates on government authority.
They are strangling free enterprise just as surely as a mugger chokes his victim, and with it the capacity for the American worker and producer to do the hard work of restoring prosperity.
We are a generation that proudly shows off its accomplishments in all areas of science, and we preen about our love of facts and our detachment from mythology. Yet our culture is imbued with the most ridiculous faith in government to turn stones into bread, to accomplish miracles with a printing press before our very eyes. This is the age of folly.