So says “Monty Pelerin” (www.economicnoise.com) in edited excerpts from the original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Pelerin goes on to say:
The U.S. economic problems are real and large, but not unsolvable. A reasonably bright economist, unencumbered by politics, could design a solution rather easily. Pain would be involved, but the option for a solution without pain expired years ago. Any solution must involve pain, including the present strategy of pretend and extend. Addressing the problem forcefully now will result in less pain than continued inaction which will result in a complete and total economic collapse. Inaction only makes matters worse….
The barrier to a proper economic solution is political. Economics provides answers, but politicians must implement solutions. Sadly neither the economics profession nor any other profession can provide an antidote for political cowardice. Politicians got us this deep into the mess and they are unlikely to take the remedial actions required to correct it.
The Economics Profession
Many in the economics profession are no longer willing or able to provide correct answers. They have been co-opted by the corrupting influence of government aptly warned about by President Dwight Eisenhower in his Farewell Address:
The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.
Fame, fortune and power for economists is obtained by spouting the government line. This requires Statist economics of which Keynesian economics has become the standard. John Maynard Keynes was a brilliant statesman and political figure. His brand of economics provided what every politician wanted — a license to grow government and government’s power. Markets were claimed to be unstable and required government intervention to achieve satisfactory equilibrium. Politicians flocked to his new theory faster than the economic profession. It provided the perfect cover for expanding political plunder and vote-buying desired by most politicians.
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Money, something which the economic profession understood, was quickly used to corrupt the profession. Positions of power at high incomes were created for economists who proclaimed the need for government to become further involved in economic activities. Funding was provided for favorable research and to departments which reinforced the need to control the economy. Newly-minted Phds were affected by the corrupting influence in two ways — that was what they were taught and that was what they were supposed to profess in order to get hired and tenured. Keynesianism swept through academia not because it worked but because it was lucrative to profess that it did. It was a rare individual at a rare college who did not succumb to the Statist economics.
Economics quickly became politicized via monetary incentives and penalties. Mediocrity paid better than greatness, so long as you professed the right creed. Few individuals resisted the temptation. Time has not made matters any better. No economist who works for government can be intelligent and honest without conflicting his future employment.
The Political Profession
Politicians, by nature, deal in dreams. Theirs is an occupation built on promises, not results. They are in the “free lunch” business. Their careers are judged in terms of how many goodies they provided to their constituents. Bad news or the concept of scarce resources is beyond their self-conceived job descriptions. Their training is geared toward election and re-election. Once the Santa Claus model of government became popular, politicians had to pander for votes by handing out ever-increasing amounts of goodies.
Politicians live in an unreal world but have convinced voters that they provide the wealth, security and prosperity that voters desire. Enough of the masses have fallen for this siren song that political competition has been reduced to promising more than can be delivered. Each election cycle the vying for votes via “free” goodies ratchets to new lows. The political cycle used to be tax, tax, tax and spend, spend, spend to elect, elect, elect. Now the first act — taxation — is considered too harsh and has been eliminated. Now it is just spend, spend, spend to elect, elect, elect.
We do not suffer from economic problems but from political or government problems which are mistaken for (or lead to) economic problems. No solution is likely because each party attempts to outspend the other. Doug Casey captures the essence of the problem in one paragraph — there is no difference between the two political parties:
In reality, there’s little philosophical difference between the Republicrats and the Demopublicans; they’re really just two wings of the same party. The left wing of the party claims to believe in social freedom (but doesn’t) and overtly disbelieves in economic freedom. The right wing says it believes in economic freedom (but doesn’t) and overtly disbelieves in social freedom. The right wing uses more aggressive rhetoric to build the warfare state, and the left wing talks more about the welfare state but the net difference between them is minuscule. That’s because they share the same corrupt intellectual and moral views.
Both parties compete by promising more than can be delivered. The one making the bigger promises usually gets elected. Politics has become a race to the bottom as politicians attempt to promise their way to the top. It appears as though it doesn’t matter whom we elect in 2012. All that outcome can do is determine the speed at which we go over the cliff.
As Frederick J. Sheehan describes the problem:
Hope may spring eternal, but the presidential victor in 2012 will dictate an economic policy that is stuck in the mud. What then, will break unsustainable imbalances and market interference? Lacking an untoward event, we will wait for the markets to revert. The currency and bond markets cannot be controlled forever. The form and speed of a reversion is unknown. The world is full of surprises. If rising inflation of things (not asset prices) is recognized by the general public, a scramble for stuff would upset the asset price-fixing of central banks.
A “Special Election” is Coming
Ultimately there will be a “special election” called at the convenience of markets. It will not be a political election but rather a day of economic reckoning like nothing seen in our lifetimes. The laws of nature (and economics) will trump the rules of politics.
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
“The most important issue in this year’s election is the economy. Unfortunately, this topic has now been “politicized,” which means that you can’t talk about it without being instantly cheered or jeered by fans of each respective political team…[the truth of the matter, however, is that] the economy is much more important than this year’s election or either political team….The first step is getting past the political blame-game and understanding what’s wrong…. Let’s go to the charts.”
The deficits aren’t going to stop anytime soon. The debt mountain will keep growing…Obviously, the debt can’t keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things….The only way for the politicians to buy time will be through price inflation, to reduce the real burden of the debt, and whether they admit it or not, inflation is what they will be praying for….[and] the Federal Reserve will hear their prayer. When will the economy reach the wall toward which it is headed? Not soon, I believe, but in the meantime there will be plenty of excitement. [Let me explain what I expect to unfold.] Words: 1833
“An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself.” [This article discusses the reality of the current economic crisis and] what is required to revive the economy. Words: 1666
With the U.S. election just months off, political pressures will mount to favor fiscal stimulus measures instead of restraint. Such action can only accelerate higher domestic inflation and intensified dollar debasement culminating in a Great Collapse – a hyperinflationary great depression – by 2014. [Let me explain why that is the inevitable outcome.] Words: 2766
Why are both debtors and creditors willing to build a status quo of massive unprecedented debt? [After all, the delusions of] creditors that debt is wealth and should never be liquidated, and of debtors that debt is an easy or free lunch have been smashed by the juggernaut of history many times before…[and] I think they will soon be smashed again. [Let me explain.] Words: 1150
The U.S. economic recovery has been weak and the looming fiscal cliff threatens to act as a further drag on the economy. Europe is imploding with the chances of a ‘Grexit’ increasing, and Spain’s economy deteriorating and risking contagion. David Rosenberg looks at the state of the U.S. and global economy via 51 depressing charts.
…The US Government and its catastrophic fiscal morass are now viewed by the world as a ‘safe haven’. This would easily qualify for a comedy shtick if it weren’t so serious….[but] the establishment is thrilled with these developments because it helps maintain the status quo of the dollar standard era. However, there are some serious ramifications that few are paying attention to and are getting almost zero coverage from traditional media. [Let me explain what they are.] Words: 1150