Armstrong Economics Blog/Economics
Re-Posted Sep 25, 2017 by Martin Armstrong
We need to open the door to the future but that is only possible by understanding the past. Paul Volcker back in 1979 in his Rediscovery of the Business Cycle “Not much more than a decade ago, in what now seems a more innocent age, the ‘New Economics’ had become orthodoxy. Its basic tenet, repeated in similar words in speech after speech, in article after article, was described by one of its leaders as ‘the conviction that business cycles were not inevitable, that government policy could and should keep the economy close to a path of steady real growth at a constant target rate of unemployment. … But it was not until the events of 1974 and 1975, when a recession sprung on an unsuspecting world with an intensity unmatched in the post-World War II period, that the lessons of the ‘New Economics’ were seriously challenged.”
It gives me no please to point out all out problems. My objective is straight forward. If we understand what is unfolding and why, then we can apply the correct solutions rather than turn toward more government authoritarian control. Make no mistake about this, we are in a battle for our freedom. This era of “New Economics” was set in motion by Karl Marx who advocated that government could control the economy and thus create Utopia. While Russia embraced the Communism of Marx, the West adopted his position trying to be just a little bit pregnant. We rejected everything that Adam Smith discovered and the Invisible Hand, rushing into Socialism for it empowered government rather than the private sector and Laissez–faire.
Our crisis therefore originates with government. Of course we need government which provides a stable rule of law and is benevolent rather than authoritarian. This is a battle to the death of Marxism which in all its various flavors empowers government which seeks to turn people against one another in order to retain power. Because government just keeps growing consuming an ever larger portion of GDP, it has sharply reduced economic growth which is now colliding with the new age of technology reducing employment. Constantly arguing class warfare and pretending that they can raise the minimum wage as if this will somehow benefit society, only furthers the dangers we face ahead. The rising taxation upon labor creates the incentive to replace workers with robots. Even the government is trying to replace soldiers with robots. This is a trend that is on all sides. Russia has its robot soldiers, and the USA has been following suit. Using drones carrying machine guns is a dangerous development for they can be turned against the people in civil unrest. Those who think that would never happen need only look at Barcelona where the Madrid government just sent in 16,500 soldier to invade Catalonia and stop any Independence Referendum.
Unfortunately, we are in a battle for our freedom and that of our posterity. Governments are broke. Everything is moving against them from every possible angle. They borrow with no intentional of paying anything off and are blind to the trend they have been caught up in. How can we make them see that this is not going to work nor will it end nicely?
We need to stop the borrowing, we need to drastically reduce the size of government and various departments should be PRIVATIZED because government is incapable of managing anything. At least then any pensions offered would actually be there for private companies cannot default and then refuse to prosecute themselves as does government. There is simply no checks and balance when prosecutions are a political decision and judges are political appointments. When paper money first began, it paid interest to entice the people to accept it. Then we adopted the idea put forth in this New Economics was that government could “stimulate” by borrowing and that would be less inflationary than printing. This became the Quantity of Money Theory, which has been proven to be complete wrong.
While Draghi has expanded the money supply for almost 10 years, deflation has prevailed. This entire idea of borrowing would be less inflationary is just insane. We have reached at time 70% of the entire national debt was composed of accumulative interest expenditures. So the money never went to build roads, schools, or help the poor as politicians pretend. So we are only fooling ourselves. Taxes have risen as deficits expand because government thinks inflation is the danger. They have been systemically reducing the standard of living and job creation.
Until we are ready to review this theory of “New Economics” and deal with it, our future is doomed. If we cannot start a dialog, there is no hope. The press is bought and paid for and is no longer truly free to protect our rights. There is hope, but only if we start to push the right issues.