Voting (and Spending) Our Way to Catastrophe 15 comments
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"A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine."
-- Thomas Jefferson
"Democracy consists of choosing your dictators after they've told you what you think it is you want to hear"
-- Alan Coren
Lately, I've been predicting some pretty catastrophic stuff – like the United States defaulting on its debt, and the failure of the world's major currencies. And every day that passes seems to bring us closer to the inevitability of those predictions.
None of this makes me happy, by the way; I would really like to be wrong this time.
At any rate, I have received a great deal of gratitude and praise for my theories, but I have also been inundated with comments like, "You're stupid," and "You're immature," and "No way," and "Gold is bad," and "Go back to Russia." And things like that. Which is all fine, I guess.
Look, I've been writing for a long time, and yes I think it's reasonably safe to say that some of my theories are radical. And, of course, if a person decides to promote radical theories, he better be ready to absorb some heat for it. Luckily, over the years I've pretty well inured myself to the barrage of criticism that descends upon me like a swarm of ravenous mosquitoes every time I publish something, and I guess I owe my proverbial calluses to a simple maxim: popular people get elected because they regurgitate the status quo, whereas dissenters get ridiculed because they challenge it.
Now, does this mean dissenters are always right? Of course not, but I'm hard-pressed to think of one technological, medical, social, or academic innovation inspired or created by mere popularity. And I find it equally difficult to count the number of breakthroughs that have erupted from the minds of dissidents.
"But," you say, raising your eyebrows and sticking your finger in the air. "Einstein was popular." And that's true. But it doesn't diminish the veracity of my conclusion; popularity is rarely an ingredient in progress, and even then, it's not causal. I would wager that Einstein's popularity (or lack thereof at the time) didn't inspire his special theory of relativity.
Every day, I watch Barack Obama speak and I find myself as impressed with his style and eloquence as everyone else seems to be. But then I hear the "substance" of his messages and I cringe. For hundreds of years, classical economists have been trying to save us from ourselves, warning us that -- regardless of their intentions -- governments don't solve problems, they create them. So why do political leaders keep making such bad decisions? And more importantly, why do we keep putting so much faith in our elected officials?
It's simple, really. Most people make poor decisions, because most people are like children. Allow me to illustrate my point by asking you a simple question: which is better for the human body – broccoli or ice cream? Now, if we put 1000 children in a cafeteria, and we give each of them one bowl filled with broccoli, and another bowl filled with ice cream, what do you think is going to happen? And what if we perform the same experiment every day for a year? Would the results differ? Probably not.
Now let's talk about some common behavior exhibited by "adults." Adults smoke. They drink too much. They abuse drugs. They don't educate themselves. They play video games all day. They talk on their cell phones while driving. They spend incomprehensible amounts of time, money, and energy watching pornography. Yes, adults do lots of stupid and unproductive things.
I'm in quite an analogous mood right now, so I wonder if you might indulge me as I offer yet another hypothetical. Let's say the economy is suffering one of the worst recessions in a century. And let's say you're a dyed-in-the-wool free market economist with an I.Q. upward of 160. Let's also say you want to be elected to the office of President of the United States. Are you going to tell people that, in order to get out of the recession, the government must do nothing? Are you going to tell people that it's better for the government not to print money? Are you going to tell people it's better for the government to reduce its debt? Of course you're not – at least not if you actually want to get elected. Why? Because people want ice cream, not broccoli.
If you want to be a politician, you must lie. You must promise the people that the government will do something – even if you know that anything the government does will only cause more damage. For the last century, this is precisely the recipe that has caused policy maker after policy maker to implement programs that have damaged economies and currencies time and again. And the resultant peaks and troughs are neither purely cyclical, range-bound, nor predictable. Debt has increased exponentially. Productivity has collapsed. The charade has been maintained through burgeoning easy credit and an ever-expanding amount of currency. The economy is a top, forced to spin faster and faster by politicians eager to be elected, but eventually the laws of physics are going to tear the entire thing apart. The conditions we face are unprecedented on so many levels, and I am afraid the catastrophe is looming.
I certainly welcome any criticism I get, because approaching the truth is far more important to me than defending a broken theory. Yes, I want to be wrong, but more importantly, I want to know why I'm wrong. And yet I fear I am not, because the old rules aren't working anymore, and most of the counterarguments fail to provide much substance.
So I will continue to dissent, because it is a dangerous time to be an empiricist.
Disclosures: Paco is long gold, DXO, and UCD. He's getting excited about the recent rise in Treasuries, but he hasn't acted on that excitement yet.
Copyright 2009, Paco Ahlgren. All Rights Reserved.
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> In a Democratic Government (which is still the best type overall)
> what is the solution then that will get the general public to support
> eating the Broccoli?
Only the indigestion and malnutrition from a steady diet of too much Ice Cream. Fear not. After the trillions in stimulus package(s) lift up the economy only to see it tank again in a few years, either the current administration will embrace austerity, or we'll have a new "tough love" administration.
I'm not yet in the camp that sees this happening quickly though. Not saying it can't. It certainly could. But it could also happen over the course of years, even decades. The wild card is government. They're everywhere, they're in control, and (as we're seeing right now) they're capable of doing lots of stupid and destructive things.
Also, I sense that my probability on a secular turn around is higher than yours. The probability is low, but it's there and it's growing. You and I both know that a secular turn around requires that a democratic majority return to the classical liberal / libertarian views of the founders, and while we don't see that in the electorate today my sense is that we ARE seeing growth in the number of people considering those values.
It's quite disturbing for me that the future for my kids doesn't look all that bright at the moment. But my advice to them is the same today as it would be at any other time: Be productive. Save. Invest. Protect your investments. Watch what government is doing and act accordingly. In all actions, remember always what is most important (family). And live life such that, at the end of each day when you stand in front of the mirror, you like the person you see.
(I'm enjoying your novel, BTW. I think I have the good guys figured out but the antagonist still has me in suspense!)
> In a Democratic Government (which is still the best type overall)
> what is the solution then that will get the general public to support
> eating the Broccoli?
I would consider a republic a better system than a democracy. In a republic, a kid may choose nothing but broccoli while the others enjoying the sweet. In a democracy, chances are, he will have to take (at least some) ice cream because the other 501 kids prefer it.
www.house.gov/paul/tst...
And at this moment in the downfall of the US democracy, formally a republic, as a saver living within my means all these years, I am forced to take on huge debt to pay for other people's extravagance.
SOB.
On Feb 12 04:24 AM Phiota wrote:
> In a Democratic Government (which is still the best type overall)
> what is the solution then that will get the general public to support
> eating the Broccoli?
Talk about tough love when you're the one living in the back of your car & hoping you get to the church before the food pantry runs out.
SOB
On Feb 12 08:01 AM Tetrapod wrote:
> On Feb 12 04:24 AM Phiota wrote:
We are all debating economics and taking a world view...adding comments that are based on a working understanding of money and politics. We add facts and historical events and we enjoy a great debate with the general view that the financial world will have to undergo some kind of major metamorphosis.
The folks that really impact us are the "people" who are expecting government to continue to give them "ice cream" and will not tollerate any attempt to increase taxes (revenue) or reduce and programs (spending) . They are all fully expecting future benefits like Medicare/Medicaide and government pensions to be there just like they are today.
Now we get to the frightening part... a 1999 Gallup found that only 76% of adult americans knew that the earth revolves around the Sun. The stat was similar for Great Britain and Germany.
So while we all debate the timeline and possible shape of future money, does anyone really think this will happen without serious civil unrest. What do you think will happen as the "average" adult realizes they are truly screwed and react in panic and fear. The herd will also vote in anyone that says the right thing while hoarding food and refusing to pay their taxes.
Put another way....do any of us truly think that when all this comes to pass, we will be able to jump in our gas guzzling cars and drive to the grocery store that will be filled with the freshest good and luxuries we desire...and drive home again jto our big houses ...ust like today?
Personally, I would love to hear what the rest of you are doing to prepare for this distinct possibility. Let's call it the ulitimate hedge becuase if we prepare in some way and are wrong...we laugh about how bright we all were...and if we are all right (and we can't all be wrong) we survive as fully intact as possible.
We all know and forcast a coming tidal wave...we just don't know exactly when or how deep the water is going to be!
For years, apathy and inertia kept those of us that saw disaster coming from doing anything to stop it. We drove by the industrial buildings as they were shuttered, didn't see any new places opening up and hiring, yet assumed all those employees were out making comparable wages-even when in our hearts we knew they weren't.
We sat idly by. Did nothing, rarely spoke to our elected officials and usually went back to the polls and re-voted for the SAME guys-even if we knew they were setting us up. Just easier that way.
We played with our newest technology, manufactured AND developed elsewhere. Ignored the headlines that have been continuously announcing hundreds of thousands of layoffs since Jan 1, 2000, and chose to believe that "high tech" and science jobs would save the country. Even as we spoke to fellow citizens and thought to ourselves, 'that guy couldn't figure his way out of a wet paper bag".
Now, all the hundreds and thousands of little things have come to a head, and it is accelerating.
Close your eyes and imagine what your city would be like if government or union pension payments stop for a couple months. Now imagine what it would be like if food stamps are halted for a couple months.
If you don't see people following their nose to the smell of food, then killing you to take it away to feed themselves or their kids, then you are a fool.
Yes, some of us have been preparing, but space & money are limited, so we pray for a fast anarchy. I'm scared, I have been.
This isn't going to end pretty, no matter how hard we hope. And of course, the old saying, "hope in one hand, crap in the other, see which fills up first".
Democracy can be taken to many extremes. In our current system we elect politicians to police politicians. This is like having the fox guard the chicken coop.
I would rather have an upper federal chamber of unelected members ie totally non democratic. With only reforming powers and no executive power, populating such a body with people who do not need to be re-elected and so do not need to 'dress up the truth' and succumb to lobby groups would be a major advantage.
In Bitain it was called the House of Lord's which is being torn down because it is "undemoratic and old fashioned". It is being replaced with just what the world needs more of. Elected politicians. This is a shame because for the last three centuries it has done a marvelous job of containing elected politicians and rejecting a large number of their more horrifying excesses and obviously stupid legislation.
People are so proud of the current system that they are blinded to it's weaknesses and unable to effectively challenge it. Democracy has become a mantra, rather than a part of our system that needs to be justified and tuned like any other.
We don't elect the judiciary. We don't elect the police. We do need to keep our politicians honest, but why on earth do we elect more politicians to do this?
Let's have a new system to create a truly representative senate. As a starting point I suggest choosing people at random as they are born and appointing them for life. This would give us a true cross section of society and people immune from lobby groups and populist re-election pressures. They would be TRULY the american people.
This is hardly a fully refined idea, just trying to stir the pot. I expect to get flamed mercilessly for this post. But eh.
How about simply a return to a constitutional system? The original democratic republic concept with the federal government subservient to the "shareholders", the states?
Personally, I distrust my state and local governments far less than I do the feds.
People can't handle the truth and politicians don't know the truth because they are spoon fed the BS of special interest groups and lobbyists. The reality is that the Obama economic team is hastening the collapse of our economy through its gravely misguided policies and conflicts of interest. I voted for Obama and I still believe he has many of the qualities we need in a leader at this moment in History, but his selection of Geithner, Summers, Gensler, Goolsbee, and others is creating a disastrous situation for our nation. But politicians will go on tv and crow all day about the "stimulus" this mega-sized porkbarrel legislation will bring our country and most of us believe it because we want to believe it will solve our problems.
Keep up the good fight.
Nik
RON PAUL was probably the tough love this country needed.