You Cannot “Fix” the Economy, Mr. Obama.
Not in a hundred days.
Not in a thousand.
haven’t directly claimed that you
[see left column]
that’s what the news anchors are saying is at the
top of your to-do list. Such distortion is typical when they
have to interpret a complex story for an audience the average
mental age of which is about twelve.
But neither have you corrected this impression we have of your
intentions. Unless and until you do, then, I’m not being unfair
in reviewing the reasons why you cannot “fix” the economy
because, for all I know, you might agree with them.
To begin with the obvious, the economy is not a machine that
wears out and breaks down and so must be “fixed” or
“jump-started.” It’s not a car, truck, or train that will
collide with another or career off a cliff unless a skillful
driver grabs its steering wheel. The economy doesn’t have
moving parts that loosen and fall off and so need “rescuing.”
Neither is it a morbid organism that must routinely be “infused”
with fluids or “shocked” or otherwise “stimulated” back from the
brink of death. But such are the controlling metaphors of the
The economy is not “fixable” because it’s not breakable, like a
machine, window, or bone. It is, rather, a complex social
network of human beings. We do not relate to each other
as machine parts (or organs) do to each other.
One way we relate to each other is economically. We cooperate
and compete in the pursuit of our ends by exchanging things of
value, both directly and indi-rectly. That is, we not only
barter (which depends on a double coincidence of wants), but
also calculate costs and benefits in money prices that reflect
the supply and demand of what we want and what we offer in trade
for what we want. Our relationships harm us, not when we
“break” something, but when we err about them, both
cognitively and morally.
To make matters worse, our moral errors often compound
relatively simple intellectual errors often because we do not
wish to recognize the latter as such. Our
propensity to believe what we want to be-lieve, which often takes the form of
trying to get something for nothing, can (if we do not
strenuously countermand that propensity) inspire the silliest
evasions of the facts.
Even if you abstain from using any of the crude metaphors listed above,
Mr. Obama, your proposed “actions” cannot be neutral toward that vital
flow of information about supply and demand, but will rather interfere
with and distort that communication, so that we will, on the basis of
the prices we encounter, infer shortages where there are gluts and gluts
where there are shortages. Your policies will be no more
market-neutral than is the considerable direct command of scarce resources the
government already exercises. Through the coercive taxation and
regulation that underpin its myriad “programs,” the federal government
under your leadership will continue to attract factors of
production—land, labor, and capital—away from where market forces would
have allocated the, i.e., their socially optimal employment.
For reasons of politics, you and your prede-cessors, and your counterparts
in every other coun-try, have in effect demanded that economic reality
conform itself to various visions of “emergency” or “social justice” or
“national greatness,” in which terms you have sold your reality-denying
platform to the masses. What they have not been told is that in every
case, politics spawned the very problem that politics is called upon,
once again, to solve.
And you will find no shortage of economists, even some sporting Nobel
Prizes, who will ratify your vision by telling you that money is indeed
something a political leader may create out of thin air, following what
is now a tradition going back to the previous great depression that
stood economic science on its head. Since they covet tax-payer-funded
grants as do members of every other class of academics, they see no advantage in
calling for, say, the abolition of the Federal Reserve System and the
return to the gold standard, which would, of course, set inconvenient
limits to what messianic presidencies can do.
And so professional politicians, inspired by their ethical vision, find
in academia the intellectual cover they need; and professional
economists defer to the democratically elected
ethical leader, thereby shifting
the moral burden of asking tough moral
questions. In other words, a dialectic of evasion of
intellectual and moral responsibility permits the politician and the
professor to take in each other’s dirty laundry. That’s what I meant
above when I said that our relationships can harm us, not by “breaking”
anything, but fostering cognitive and moral errors instead of exposing
and repudiating them.
I fail to distinguish your proposed creation of three million make-work
“jobs,” for example, from “workfare.” It will exchange an arbitrary
number of chits called Federal Reserve Notes (FRNs), printable at
governmental whim, for the labor of millions on “green” and
“infrastructure” projects. Bureaucrats, who can no more calculate how
much of what to produce than could the hapless Soviet Five Year Planners
of yesteryear, will direct the whole thing. I’m sorry, but I lack the
audacity to hope for better results. There are simple intellectual
errors at root here, but your political vision will occlude your vision
One of your suggested lubricants for “tight” credit markets, to take
another example, is continued federal borrowing that “crowds out” other
borrowers, but at an unprecedented level. Here again, no Wall Street
genius is going to put his career on the line by suggesting that you
hold up this insanity to your face and meditate on it before going
forward with it, even though it lies within the scope of their
professional competency to do so. He would much rather serve as the
“public citizen” economist trotted out on the financial news networks to
drape an intellectual cloak over your vision’s shoulders.
What we are witnessing is the spectacle of well-established
people—politicians like yourself and academics like many of your
advisors—reinforcing each other’s subscription to the myth that the
taxpayer is actually directing his own self-mulcting through duly
elected representatives. That is, he is only taxing first himself and
then his grandkids for his overspending of every year’s tax revenue, depreciat-ing his own currency in the process. After all, what exactly
is the taxpayer borrowing and what is his instrument? Treasury bills
denominated in dollars incarnated as FRNs? The latter may still
function as money, but they are obviously as substantial as the Cheshire
Just the other day, during the first hour of Niall Ferguson’s PBS
special, The Ascent of Money, I heard the former Federal Reserve
Chairman Paul Volcker attempt to distinguish a con game from the
Fed’s allegedly honorable confidence game (his term) that we all
participate in. He seems to have realized immediately that
“confidence” was absolutely the worst word choice he could have made,
for the “con” in “con game” is but a contraction of “confidence.” The
attempt was so clumsily unsuccessful I’m surprised it survived editing.
Earning a living off another’s trust does not make one’s enterprise a
“con.” Only certain knowledge of the latter’s unsustainability, which
the con artist assiduously keeps from his victims, makes it so.
Taxpayers are indeed losing “confidence in the credit markets.” Rather
than conclude, however, that credit markets dealing in the fiat
currencies of central banks are not worthy of confidence and ought to be
replaced forthwith by commodity currencies, you have allied your
goals with those of the central bankers (all of whom profit from the
scam) by shoring up those existing markets by whatever political means
Paul Volcker has certain knowledge of that the game is unsustainable,
and that makes him a con man. Just why
are you proud to tell America that you get economic counsel from him?
As reality sets in, con games collapse, almost instantly. We will
accept dollars in payment only as long as we can pay others with them.
The day we cannot do the latter is the day we will not do the former.
Your policies threaten to hasten that day because they do not touch what Mr. Volcker inadvertently called a “con game.”
No, you cannot “fix” the economy, but you can impede the operation of
market forces—people making deals, that is, being productive of
solutions to our individual and common problems—that alone would allow
it to reform itself on a sound basis. Impede it you will, however, if
you are merely going to vary the theme that your predecessors have
sounded, and thereby further distort price signals, misallocate
resources, and potentially hyperinflate the currency.
Intellectually you must know that
government does not own anything it did not acquire by force or the
money by offering Treasury Bills that the government can honor only by
more such borrowing is an un-sustainable, not to say fraudulent, en-terprise, regardless of how many people participate in this racket;
FRNs without a corresponding increase in the production of goods and
services must decrease each note’s purchasing power, thereby diminishing
every fortune denominated in dollars;
Social Security Act of 1935 has never been a genuine “insurance” plan,
but rather a Ponzi scheme that dwarfs Bernie Madoff’s (both in magnitude
and, since participation in the latter was voluntary, turpitude).
Intellectually, you must know, at least subcon-sciously, these and many
other kindred truths, but politically and psychologically you seem
incapable of entertaining them explicitly. Help is available, how-ever,
and here is my suggestion: the next time you are moved to “reach across
the aisle,” why not give Congressman Ron Paul of Texas a call? He is
eminently qualified to bring these implicit com-monsensical truths to
your consciousness and deduce their implications. You will, of course,
draw your own conclusions about his counsel, which would be informed
largely by the same principles that inform this essay. At least when
the ill consequences of your proposed policies reveal themselves, you
will not be able to say that nobody told you so.
You cannot “fix” the economy, Mr. Obama. What you can do, but have no
intention of doing, of course, is help liberate the American people from
the economy’s greatest enemy, namely, the state, to preside over which
you have fought so hard. As the state is rolled back, the deformed
economic relations to which so many defective metaphors refer will
reflect once again our nature, our relationships, and our property.
What is more likely, however ironic and tragic, is that in the name of
restoring America’s “greatness,” you will only catalyze her descent into