Blogs » J.Q. Tomanek of Victoria » They boom, we bust

Subscribe


I was commenting on the good Doc’s facebook the other day and mentioned “Why can’t they see it?” After a mere few conversations with another very intelligent person a few years ago, my attention drifted to economics and I was consumed with figuring the whole thing out and was left with “This is simple.” Yes, I had Macroeconomics in graduate school, learned so much on imports and exports, global markets, GDP, and policy, but the simple things were yet to be revealed. Things like “Study history.”

Now, that was something I knew something about. History is ripe full of examples. Take the 1920-1 depression. It was not ended by public projects but by a President that understood he needed to deflate the executive head that he alone knows how to drive the economy and establish a state that allowed the market to dictate who needs what. Rather than executive fiat for large non-needed public works, the system of price controls via profits and loss indicate what scarce resources the citizen desires. If the price is manipulated, via over taxing or inflation through money creation, the people in the market begin to not understand what to supply and business owners no longer know what the consumer really needs. For example, say a President decides to build this huge bridge that is not demanded (meaning not needed). Often he says, “This project will provide jobs.” But the people working this job need to be paid. The money to pay for their employment comes from taxpayers which includes themselves. Instead of allowing the private sector to dictate where these jobs need to be and creating products that are really desired by the casting of votes when you open your wallet at a register, one person or a group of vested members have chosen a certain project for the people. In effect, the people may need more bread or cars and instead got a new bridge that says, “President Ispend’s Bridge.” Instead of providing for the common good, a select group takes advantage of another person’s property. Or here is one regarding inflation. Let’s say the President says, “While I was president, everyone had more money.” This comment, while surely is truthful, only happened by creating more money. The problem with money creation to spread the wealth is that the value of that money decreases. Now that $100 you earned last week is only valued at $90.

What will it take to escape this recession? Well, it surely doesn’t happen by spending and following the misguided principle of running unbalanced budgets. What does history reveal? Check President Harding’s words here:

“We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity. We promise that relief which will attend the halting of waste and extravagance, and the renewal of the practice of public economy, not alone because it will relieve tax burdens but because it will be an example to stimulate thrift and economy in private life.

Let us call to all the people for thrift and economy, for denial and sacrifice if need be, for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic. There hasn’t been a recovery from the waste and abnormalities of war since the story of mankind was first written, except through work and saving, through industry and denial, while needless spending and heedless extravagance have marked every decay in the history of nations.”

This is the road to recovery. Can you imagine a presidential candidate running with this platform and win? Who is the modern day President Harding and when will he stand and lead?