Deficit spending means a debt owed to someone, whether it is owed to a foreign entity or to ourselves. Money borrowed must be repaid. Selling trillions of dollars in Treasury bonds to China or to anyone else means we are borrowing with the understanding that we will repay the debt. Ultimately, if the spending becomes too reckless, our lenders will begin to seriously question our ability to pay, and to express concern over the falling dollar with which they will be repaid. After all, what good is being repaid on a debt when what you are being repaid with is essentially worthless? Where Obamanomics is such a radical departure from Keynsianism is the size of the deficit – it is virtually inconceivable that it will ever be paid back. The rhetoric coming from the president and his administration that such spending and deficits are “unsustainable” and ”unacceptable” ignores the fact that they continue to spend and increase the deficit with even more programs and projects, all the while declaring that this is the most certain path to full recovery and “sustainable job growth,” etc., etc… It is all utter nonsense.

To be fair to Mr. Obama, those who blame him in full or in part for creating the “Obama Recession” are as foolhardy as their counterparts who blame Mr. Bush. One must also understand that had Mr. McCain been the current occupant of the White House, the situation would be very much the same because of the prevailing mentality among the political elite that only government is big enough to solve such dire economic problems. And, while the actions taken by both Mr. Bush and Mr. Obama have certainly contributed the worsening of the situation over the long term, neither one bears full blame for its cause. They do, however, deserve blame for failing to clearly see the best path toward a solution, which is letting the natural laws of economics and human nature work instead of propping up a bubble with fiat money and regulations aimed at benefiting the politically well-connected to the detriment of everyone else. Bad regulations and monetary policy brought us to this place, and more of the same is quite obviously not going to help. Whether the entities favored by the proposed new regulations and legislation are big Democrat donors or big Republican donors is immaterial. Those with money and access to power will benefit to the detriment of the rest of us, no matter how flowery the language of “hope” and “change.”

According to the AFP, Mr. Obama “stressed that the actions taken by his government had ‘helped to stem what could have been a disastrous situation for the economy,’ adding that ‘we are starting to see stabilization and indeed some improvement.’” Accordingly, one might be inclined to argue that ballooning the national debt to $12 trillion, and attempting to force passage of a national healthcare bill along with a Cap-and Trade tax bill piled atop of unfounded – and unfundable - government obligations already at $106 trillion is the actual disaster. Indeed, the vast majority of the blame for that unfundable debt of $106 trillion does not belong with Mr. Obama but, rather, with his predecessors going back to President Johnson. Regardless of who gets the blame, however, is the sad reality that the figure of $106 trillion is proof that these government obligations are inconceivable to the rational mind, and adding the current U.S. national debt of $12 trillion to this figure simply makes the further point that the government itself is insolvent, because even if every man, woman and child in this country were taxed at 100% for a decade, that amount could never be paid off. Hence, Mr. Obama defers to Mr. Bernanke’s strategy of monetizing the debt and massively inflating our currency in doing so – the epitome of Keynesian theory. Sure, the Treasury will be able to pay off the numerical figure of its’ trillions in debt bonds with “dollars” created out of thin air, but those dollars won’t be worth anything by the time that happens. Massive inflation only benefits the party who has to pay the debt. Everyone else suffers.  (Continued...)

President Obama once again demonstrated his utter lack of understanding of the basic principles of economics during a meeting with his economic advisors on Monday. He chooses to blindly follow the misguided and discredited theories of Lord Keynes, among others, given him by his advisors. It is also most unfortunate for this country that the entire cadre of the presidents economic advisory team seem incapable of objectively analyzing the Keynesian model that they are so attached to, for if they could only extricate themselves from this “third way” paradigm and experience a few moments of economic lucidity, it is highly possible that even they could begin to fully understand just how utterly disastrous Keynesianism has been for the global economy in general, and our economy in particular. Unfortunately, they ignore the continued warning signs that keep popping up and continue to dig the United States ever deeper into this economic black hole that threatens to suck the very life out of what remains of our economy, and will ultimately take what remains of our liberty with it.

Let me be clear: what we are presently witnessing in the ongoing economic crisis is the natural laws of economics giving their referendum on Keynes. The current national unemployment figure of 10.2% simply underscores the point. In short, Keynesian theory suggested what has been called a “third way,” not fully capitalism and not fully socialism. It sought a system where the government, both through the power of the central bank and intervention through regulation, legislation and manipulation would be able to bring about a condition of perpetual prosperity, an end to recessions and economic cycles of boom and bust, and end to the bubble economy. The problem with the theory is that the very controls and manipulations demanded by Keynesians to “grow” and “sustain” the economy are the very things responsible for the creation of the economic bubbles and the business cycle, precisely because these things violate the natural laws of economics. Mises, Rothbard, Hayek and others have proven this time and again. The natural laws of economics correlate with human thought and action, and these things are wholly incompatible with bureaucratized central planning boards and central banks fixing prices, wages and interests rates at values much different than those the free market would deem proper. Attempting to isolate these things from the reality of the marketplace in essence creates the bubbles that are bound to burst at some point because they are at odds with the market, with the decisions and choices producers and consumers make on a daily basis.

Keynesian theory has been the driving force behind the economic policies of the industrialized world since the early twentieth century. Keynes’ model economy was viewed as having evolved beyond capitalism, thus noted above as being a hybrid between capitalism and socialism. It advocates corporatism. It is therefore by its own admission decidedly not capitalism. Those who prefer to cast the blame for the current economic mess on unrestrained capitalism are flat out wrong and woefully uninformed, because there has been no unrestrained capitalism in the United States – ever. Sure, we came fairly close up until 1913; however, once the Federal Reserve Act and Income Tax Acts were passed and the Constitution amended through the ratification of the 16th Amendment, all hopes for true capitalism were indeed dashed.

Mr. Obama and his advisors like to remind us how they inherited this economic crisis from the previous administration. There is nothing untrue in that statement. However, for anyone, especially a well trained and educated economist, to lay the whole blame for this mess at the feet of the Bush Administration without taking into account the overwhelming number of far more important factors that are truly the root cause, is disingenuous, dishonest, and grossly insulting to those of us who have studied anything other than Keynes, as well as an affront to the common sense of anyone who takes the time to question the current scenario and really think it through. Those economists who regurgitate the official government talking points and try to put a positive spin on the current course of action undermine their own legitimacy in doing so. It is simply incredible that so many of these economic advisors are so quick to declare unrestrained laissez-faire capitalism the root cause of this crisis when they know full well that the prevailing Keynesian school of economic thought that has been driving economic policy for the better part of a century is itself specifically defined as being something that is not capitalism. There is far too much at stake to play semantics and talk out of both sides one’s mouth.  (Continued...)

Michael Moore the millionaire Marxist is at it again.  Everyone knew it was only a matter of time until he came out openly Marxist, and with his latest piece of pro-Marixst propaganda, Moore does not disappoint.   In the film, “Capitalism, a Love Story,” Moore seeks to illustrate how capitalism has failed and thus socialism is the only viable system by which a sensible and advanced people may prosper. Unfortunately for Moore it is clear from viewing many of his previous films that he doesn’t know what capitalism is. It is also clear that while Moore may well indeed have a true empathy for those financially less fortunate than himself, he has no intention of spreading his wealth around. Why? Because, in his own words, he is just like us. A recent interview with Larry King revealed the following exchange:

Moore: Who's got the money? And whoever has the money has the power. And right now, in America, tonight, Larry, the richest 1 percent have more financial wealth than the bottom 95 percent combined.

King: You're in that 1 percent, though?  (More...)

In a speech aimed at further demonizing Wall Street by once again failing to accept that government also bears responsibility for the much of the ongoing financial meltdown, President Obama declared, “I have always been a strong believer in the power of the free market. I believe that jobs are best created not by government, but by businesses and entrepreneurs willing to take a risk on a good idea.”

It is one thing to utter such words in a speech, and yet something entirely different to put them into action; and to date, all of Mr. Obama’s actions relative to the economy have been wholly manipulative and hostile to the idea of free market capitalism. To be fair, Mr. Obama is certainly not alone in his hostility toward true free market capitalism, for since the inception of the Federal Reserve in 1913 U.S. economic and monetary policy have been overwhelmingly interventionist and inflationary, building an faux economy with a fragile basis in easy money, easy credit, fiat currency.  (continued... examiner.com)

On March 18 in an almost perfectly orchestrated sequence of events that make conspiracy theorists like myself froth at the mouth, while the vast majority of Americans were obsessed with the feigned “outrage” by Congress over $165 million in bonuses paid out to AIG executives that they (Congress) themselves knew of and apparently approved in their passing of the co-called “stimulus” bill that not one of them read prior to voting on, a far more important and potentially catastrophic event took place almost without notice. Only a few patriots bothered to report it, and among those who did even fewer either bothered or were able to adequately and accurately explain it's meaning for us and for the future of our country.

What it means to say that the Fed's balance sheet assets will increase from $1.9 trillion to $4.5 trillion must be understood in the proper context, that being, that the neither the Fed nor the government has anything close to $4.5 trillion with which to purchase any assets. The reader will recall that the Treasury has been conducting auctions on a regular basis whereby it auctions off U.S. debt to whoever will buy it. And, just recently, Secretary of State Clinton made a special trip to China to assure them that the U.S. will make good on it's debts held by foreign entities and encourage them, particularly the Chinese, to continue to purchase U.S. debt. Considering that the U.S. government is in fact bankrupt, in order to embark on this bold new policy endeavor, the Fed will print $1 trillion dollars now, and certainly more later, with which it intends to purchase said “toxic assets.”

Through means of vastly increasing the amount of currency in circulation by printing it literally out of thin air, the dollar must necessarily become grossly devalued, its purchasing power will be greatly reduced and the unfortunate result will be hyperinflation of the kind mentioned in the examples above.

If allowed to continue, this policy will ultimately result in the total collapse of our monetary system, likely followed by a collapse of government. What will follow next is any body's guess. It is most unfortunate that those who currently wield political power so stubbornly cling to the same failed theories of interventionism that they predecessors also clung to. Indeed, at present how many times have we been told by those in Washington that because the current financial situation has deteriorated so rapidly that it is necessary to “change” capitalism in order to “save” it.

The fact of the matter is that we are in this current financial mess because they have already “changed” it. What was changed from the first half of the 20^th century was the almost universal adoption of a policy of active interventionism by western industrialized governments, based upon the misguided and now disproven theories of Keynes. Interventionism, it was posed, was to be neither true capitalism nor true totalitarianism, but rather, “as a third solution of the problem of society's economic organization, stands midway between the other two systems, and while retaining the advantages of both, avoids the disadvantages inherent in each.”³ In fact, all that interventionist theory has really accomplished is the mass deception free peoples, and the unsubstantiated and wholly unrealistic promises of “lasting prosperity” or “permanent” prosperity. An appeal to common sense would instantly reveal the impossibility of a permanently prosperous economy as the interventionists would define it.

In a very general sense, interventionism means government meddling or coercion upon the various aspects of the economy in order to effect specifically desired results. An example of a desired result is the buzz-word, “total employment,” sought by the governments of almost all industrialized nations whereby the government over-regulates and thereby influences various industries by a variety of means to “stimulate” the economy along a path of what it hopes to be a permanent state of growth, production and consumption. Yet what is missed by so many supposedly brilliant economic minds is the inescapable fact that wherever government intervenes, whether by passing mandatory “living wage” laws, price controls, or whatever, the immediate effect is to artificially raise the costs of production – and therefore raising the costs of the goods produced for consumption - above what the unhampered market (you and I) would wish to pay. If the price of the good becomes too high and consumers buy less of it, the costs of the producer increase further and ultimately end in higher unemployment. Thus, the means employed are entirely self-defeating relative to the intended goal. The law of unintended consequences thus manifests itself – what the interventionist policy sought was higher employment, but what resulted was higher unemployment.

Typically this result prompts even further interventionism on the part of the government as it seeks to correct the unintended consequence of the original policy. For example, in the case of price controls, the next move may be to decree that as the cost of the good to too high to attract consumers, then the price of the good will be fixed even lower. This still leaves high costs for the producer, who will be forced to either go out of business (because his revenues do not exceed his costs) or to seek redress from the government. Again, the typical response from government would likely be to fix the costs of those commodities employed in the production of the good to be produced. However, it becomes immediately apparent that the size and scope of the original policy has just been expanded instantly and exponentially, for in fixing the price of these commodities the government must continue fixing prices of others and mandating more and more controls over many aspects of the overall economy. Thus, interventionism, if not abandoned when the law of unintended consequences becomes apparent, must always lead to increased bureaucratic control incompatible with free market capitalism.

A worse form of interventionism, however, is the one that has been employed by the Federal Reserve since its creation in 1913: the policies of so-called “easy money.” The name is an irony in and of itself, for in the end there is nothing “easy” for those who suffer the results of massive credit expansion (creating money out of thin air), deficit spending, and inflationary monetary policy. Indeed, the fundamental underlying cause of the current fiscal crisis, and the thing that has enabled all of the other factors to come together to form this perfect economic storm that threatens to bring this nation and possibly the world to its knees is these misguided interventionist policies of massive credit expansion and inflation. And now, as the nation waits for results of an ill planned and mostly ineffective “stimulus” bill to be manifested, the Fed has been loaning money to banks, buying debt and printing money behind the scenes, almost unnoticed. What they do now, they do in relative obscurity, but the effects of their actions will certainly be felt in the years to come. With trillions upon trillions of dollars being newly created, printed, and injected into the financial system the short term effect may well be a temporary recovery. The effects of the massive inflation that will result have yet to be accurately estimated, as nothing on this scale has ever been attempted. The closest situation to ours was Weimar Germany, and the results, as we know, were not good. Inflation is bad policy to be sure. Just how bad it will ultimately be, and how devastating effects will be remain to be seen.

Change is coming whether we want it or not.  In fact, it is already here.  The nation’s financial system is in turmoil.   The nine largest banks in the country have all but been nationalized by the federal government, the markets are scared and showing it; and, the possibility of a long and deep recession is beginning to put pressure on average folks who are trying to find what all of this means for them. To be sure, everyone will have to more closely watch his or her finances and strive toward a more frugal, long-term outlook. 

While economists are still in general disagreement as to how long, how deep and how significant this recession will be, we are even now witnessing rising unemployment, a lack of credit, and the Fed leading the charge toward hyper-inflation as they crank up the printing presses and create money out of thin air. And while the miscreants on Capitol Hill speculate, hypothesize and hold hearings and point fingers of blame for the current mess, the specter of authoritarian socialism looms over this republic, but the only people who seem to want to acknowledge this fact are those on the right – and no one, most certainly no one in government – seems to be taking us seriously. Indeed, of those who are even willing to acknowledge where we are headed, few will admit that we have already been on our way, ‘fellow travelers,’ so to speak, for quite some time.

To better illustrate this fact, I shall endeavor to point out the glaringly obvious with the help of Karl Marx. The following are what Marx in his Communist Manifesto deems as 10 essential elements to achieving socialism:

1. Abolition of property in land and application of all rents of land to public purposes.

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance.

4. Confiscation of the property of all emigrants and rebels.

5. Centralization of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.

6. Centralization of the means of communication and transport in the hands of the State.

7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.

8. Equal liability of all to work: Establishment of industrial armies, especially for agriculture.

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

10. Free education for all children in public schools: Abolition of children’s factory labor in its present form: Combination of education with industrial production, etc.

Marx also notes:

“Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionizing the mode of production.”

Certainly no one would be foolish enough to suggest that the United States has already gone full-blown “commie.” But, one would have to be a fool to deny the fact that our government and politicians have been moving us steadily toward socialism by their insistence on more and more social and entitlement programs, giveaways, and interference in the economy and our personal lives. Even a cursory glance at the list above ought to raise a few red flags (no pun intended…). Of course the US has not met all of Marx’s essential requirements to facilitate socialism, but the groundwork has indeed been laid.

That said, here is something the average citizen should understand but does not: government is force, and every time government increases the amount and extent of its interference in the economy, in our social relations, in our commerce, it usurps our liberty little by little. It is unnoticeable at first, as such usurpations seem incremental; until suddenly the nation wakes up to realize that it is no longer free, that liberty has been sacrificed for empty promises of physical and economic security, and that the people have received – and will only receive – nothing for the sacrifice of their liberty. People don’t understand this because they have only been taught that government is good and benevolent and that its most noble purpose is to help the people on their way to success. Over the last several decades the general perception of what government is vis-à-vis what it ought to be has shifted decidedly in favor of bigger government and the welfare/nanny state.

The Federal Reserve and Federal Income Tax Acts both of 1913, the New Deal and Great Society and all the social-welfare programs contained therein, and, yes, the extraordinary consolidation of executive powers through the Department of Homeland Security and the Patriot Act are just some of the more glaring examples of government interference and interventionism. Certainly one cannot omit the government forcing the nation’s nine largest banks to “participate” in its bailout program, by which these banks taken federal money under coercion and the government assumes what it terms as “observer status” with a non-voting seat on the board. This sounds innocent enough, except for the fact that it is highly probable that at future board meetings the “observer” from the government might offer “advice” or “suggestions” to the controlling officers of the institution as to the government’s position on a particular course of action. Such situations easily conjure up images of the Soviet Political Officers or KGB officials inserting themselves into the everyday business of the citizenry.

It is noteworthy that this is not where we are headed – it is where we presently are. So, what of the future? What will define what is rapidly becoming our American Socialism? Will it merely be an iPod and a cell-phone in every child’s book bag, enrollment in the new national healthcare program, and annual re-distribution checks sent out from the Treasury to those too “poor” to contribute, or will it devolve into something even more sinister? 

The great economist Ludwig von Mises wrote a great deal on the subject of government encroachment in the economy of nations, and we and our “representatives” in Washington would to well to heed his warnings. Mises concluded that government meddling in the economy, interventionism, can only lead to socialism, and that socialism cannot subsist unless it takes on an authoritarian nature, which is its tendency. 

In his essay “Middle-of-the-Road Policy Leads to Socialism (1950),” Mises wrote, “There are two methods available for the transformation of capitalism into socialism.” The method by which the US is moving toward socialism is, according to Mises, “…the method of the Hindenburg plan, the originally German pattern of the welfare state and of planning. It forces every firm and every individual to comply strictly with the orders issues by the government’s central board of production management. Such was the intention of the National Industrial Recovery Act of 1933, which the resistance of business frustrated and the Supreme Court declared unconstitutional. Such is the idea implied in the endeavors to substitute planning for private enterprise.”

Mises continued his remarks on British and German socialism relative to the United States: “The United States embarked later than these other two countries upon this decline, and is today still farther away from its end. But if the trend of this policy will not change, the final result will only in accidental and negligible points differ from what happened in the England of Attlee and in the Germany of Hitler. The middle-of-the-road system is not an economic system that can last. It is a method for the realization of socialism by installments.”

The devolution of a nation into socialism has as much to do with economics as with politics. Government intervention in the market in the interest of enforcing “fairness” or in striving to manipulate such conditions as to create artificial conditions to continue an economic “boom,” leads to ever more widespread encroachment and manipulation to perpetuate artificial “boom” conditions, because it cannot be otherwise. If government implements price controls for one commodity it follows that the new condition will affect the production of that commodity to where its components must be strictly regulated and controlled, thereby expanding government intervention into areas of the economy never intended by enactment of the original policy. This is the law of unintended consequences, which itself is the result of the short-sightedness of policy makers and economists who look to the immediate solution or fix for one aspect of the economy or one class of people (farmers, middle class, etc.) without taking the time to think through the potential long-tem affects of their brainchild, and whether and to what extent those affects would be beneficial or not. 

Government is force and money is power and the two, force and power, should never be allowed to become concurrently subject to the arbitrary whims of government officials, bureaucrats and spineless and corrupt politicians. Should such a thing occur, as it has recently here with government acquisition of the nation’s nine largest banks, a republican form of government and rule of law will not long endure such temptation and tyranny. 

Socialism is coming no matter the outcome of the presidential election, and in many ways it is already here. The only way to stop it is to un-elect it by re-forming the ideological and socio-economic outlook and understanding of the people. In other words, demonstrate to the masses how government deceit, corruption and misguided planning, subsidy, welfare and other interventionist policies set about to ruin a solid free-market system that works best when simply left alone and unencumbered by government nonsense and politics. Given the current state of the economy and the possibility of what is to come with a pro-socialist majority in both Houses of Congress and occupying the White House we can be sure that things will get worse before they get better. Ironically, for that we might actually be thankful soon, for in our need to gather evidence and data to present and make our case against socialism to the people, government will have largely done our work for us. All we need do is present what they provide, which should be sufficient.