The Monday Jan 2nd Detroit Free Press’s Nation and World section has an article by AP writer Martin Crutsinger titled “Frugal living bad for the economy.” Frugal means managing one’s money wisely. That headline then suggests that profligate spending would be good for the economy. But isn’t that just what our media pundits and politicos said was the cause of the crises? Irresponsible citizens and bankers and lenders spending foolishly? Foolish spending was bad for the economy before and now that people are wiser well, that’s bad for the economy also? They want to have their cake and eat it too.
If you think that logic was bad, how about this total disconnect from reality:
“Economists call it the “paradox of thrift.” What’s good for individuals — spending less, saving more — is bad for the economy if everyone does it.”
You may have to read that again. What’s good for individuals–all of them–is bad for the economy. In other words, the economy is something apart from and superior to all the individuals who comprise it. The economists are reifying the concept economy, treating it as an entity, a particular concrete to which the good of individuals must be sacrificed.
This I submit is how the mind of a cargo cultist (Keynesian) works: there are all these people doing all kinds of things and somehow wealth/jobs is produced; when the wealth/jobs stops coming we see people doing different things and this is bad; one of those things is spending less money so we must get those people to spend more money again and the wealth/jobs will return. That this is the mindset of our leaders is truly frightening.
But in fact, this isn’t even about the economy. Consider the sub-title of the article: “Americans start saving just as U.S. needs them to spend.” Substitute the words ‘the government’ for ‘U.S.’ and you will have the truth. It’s about saving their own hides over which our government panics. As supporting evidence consider the original $700 billion that congress couldn’t wait to give to Hank Paulson. It was pure hush money for the mortgage and lending companies. There is no way the banks and other lenders were going to be hauled before a House or Senate hearing and raked over the coals like the auto execs were. The American public would have learned that the lenders were just doing Congress’s bidding. This could not be permitted and wasn’t. This was a bailout of government and Keynesian economics.
Contrary to Keynesian economics, it is not consumption that spurs production. It is production that creates wealth, which money represents, and must come first. Man must produce the things he needs to survive and to do so he needs to be free from the coercion of other men, thus the need for rights respecting governments. Having produced these things he can trade them with others thereby spreading wealth. But he must produce them first. He cannot wave a fist full of money in the air hoping that food, clothing and shelter will plop down on him from above. Nor can he throw money on the ground expecting a factory with jobs will sprout up. Life doesn’t work that way.
If President Obama doesn’t want to go down in history as the overseer of America’s second Great Depression, he needs to discover that man’s mind–not money–is the creator of wealth and to function it needs freedom, not controls, and the only system that can provide it is not socialism but capitalism.