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Fredkc
20th August 2010, 01:42
The Hubris Of Government (http://www.lewrockwell.com/orig11/pento1.1.1.html)

by Michael Pento

The allegory above [see full article - Fred] discusses the dangers of quackery, whether medical or economic. Right now, economic quackery – in the form of Keynesianism – has overtaken Washington.

American consumers are trying their best to deleverage. In terms of the story, the patient is actually trying to lose weight. But the government is blocking deleveraging and trying to boost consumption. They are forcing food down the patient’s throat. According to the Flow of Funds Report, households reduced debt at a 2.4% annualized rate ($330 billion) during Q1 of 2010. Meanwhile, the federal government was piling on debt at an 18.5% annual rate ($1.44 trillion). Since every dollar of government debt is a promise to tax the private sector in the future with interest, this public-spending spree effectively negated the Herculean efforts of the private sector to return to a sustainable path.

That’s where the arrogance of Washington is really apparent. Scores of millions of American consumers have made the decision that reducing their debt burden is in their best interests right now. But a few hundred individuals in government believe they know better than the collective wisdom of the entire free market. By leveraging up the public sector, they have used their power to confiscate our savings. In short, they are forbidding us from following the common sense path to fiscal health.

Unlike their forbears, modern-day Keynesians do not argue just for mollification in the rate of deleveraging. They seek to significantly increase debt levels in an effort to boost the aggregate demand in the economy. Apparently, only once the mythical recovery takes hold due to government spending, printing, and borrowing does a discussion of deficits become appropriate.

The US has persisted under this theory for close to a century, though with a declining quality of life. Unfortunately, the patient has now gone critical. Curiously, the world has yet to fully recognize our precarious condition, even as they provide us with life support. Washington is now entirely dependent on the reserve currency status of the dollar and the continued hibernation of bond vigilantes. Without these supports, the United States would face complete economic arrest. Rather than allowing the American people to get back on our feet, Washington is stuffing us with even more debt. It’s almost as if the feds are daring our foreign creditors to pull the plug. As a consequence, I predict that just as Dr. Keynes killed his patient, Keynesian economics will kill our economy.