If the Treasury were to fill old bottles with banknotes [and then] bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again,… there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.
– John Maynard Keynes
I’m guessing that the reader actually had to reread the above quote a second time, and even then, say to himself, “Say, what?”
For those not familiar with J.M. Keynes, his theories on economics have been the fundamental guide for governmental economic plans in much of the world, beginning in 1936, with his publication of The General Theory of Employment, Interest and Money.
Mister Keynes was a member of the British Fabian Society in the UK, which is dedicated to the slow conversion of world governments to socialism. His monetary theories were less a question of comprehension of how money works and more a question of an economic means by which world socialism could be created.
In reading this quote from Mister Keynes, we may well ask ourselves, “What sort of crackpot would write such an absurd idea, and why on earth would anyone take any notice of him?”
Well, this can be answered, in part, by stating another of his ideas: that governments should be in charge of the economy, not free enterprise. Mister Keynes suggested that, during good times, governments would tax the populace and save the revenue. Then, when bad times came, it would pour that money back into the system by whatever means were convenient (such as stuffing it into bottles in disused coal mines).
Mister Keynes himself admitted, shortly before his death in 1946, that this idea was flawed, as it is the nature of all governments to spend all tax receipts as soon as they have been collected (actually, in most cases, well before they are collected) and that, therefore, there would be no money available to distribute during hard times.
But then, his objective was never to put governments on a sound economic footing. His goal was to further socialism, regardless of what economic damage was created by doing so.
However, as stated, Keynesian economics quickly became the standard for the world, and understandably so. After all, his central concept was that a government be totally in charge of the economics of a country – a concept that any despot (or would-be despot) would love. For a politician, the very idea that politicians control the ebb and flow of all money in their country would be tantamount to declaring that every day from then on would be Christmas.
As Richard Nixon publicly said in 1971, upon removing the US from the gold standard, thereby making all US paper currency fiat, “We’re all Keynesians now.”
So, whilst Mister Keynes is no longer with us, his acolytes are. Nearly every political leader since his time has been a Keynesian. In addition, typically, the head of national economics in most countries (such as the Treasury Secretary in the US or the Chancellor of the Exchequer in the UK) is a Keynesian. Not surprisingly, the Chairman of the US Federal Reserve, Mr. Bernanke is also a devotee.
So, it is not surprising, given the foregoing, that governments are so freewheeling with the public purse that they tend to create costly new programmes (and expand existing ones) with great regularity, with no plan whatsoever as to how they will be paid for. When times get lean and the purse is found to be empty, they simply borrow as much as may be necessary to maintain these outlandish programmes. In addition, even in hard times, they expand the government itself, adding further burden to the economy. In short, they overburden the system in both good times and bad.
Even the simplest of individuals would reason that to behave in such a manner must ultimately collapse an economy; yet, surprisingly, very few people wish to recognise this. They prefer to be told by the empty suits who caused the problem that they also have the solution to the problem.
And there is an odd sort of logic in this. After all, if we are to trust our government to take our money and hold it for us until we retire, we would like to imagine that they have not lied to us and that we may one day receive that money. Further, if we receive largesse from our government, in the form of entitlements, we would like to imagine that that largesse will continue for the rest of our lives.
Sad to say, these very facts take over our ability to think logically and we instead think wishfully. As long as we are told that “They’ve come up with a solution to the present problem – it’s all going to be okay,” we do not really want to know the details, let alone analyze them.
However, whether we like it or not, one plus one still equals two. (And, more to the point, one minus one still equals zero.) Regardless of what clever-sounding solutions are offered, at some point, the piper must be paid. No amount of money-filled bottles buried in coal mines will save an economy whose debt level has gone beyond what it can repay. At some point, we zero out – we reach an economic dead end.
Regardless of promises from the present-day Keynesians, much of the world has turned the corner of the dead end street, and, whilst we have not reached the dead end wall as yet, it is now within view and we are getting ever closer to it.
We’ll end with another quote, and this one, in my opinion, is quite a bit more sensible than the one from Mister Keynes. It is from… Bugs Bunny. (Yes, really.)
“I like dead end signs. They have the decency to tell you that you're goin’ nowhere.”
If there is a lesson to be learned here, it may be that, when Bugs Bunny makes more economic sense than the foremost economists who are advising the leaders of a nation, it might be time to pull up stakes and move to another rabbit hole.
Tags: austrian economics,