The “infamous Internet Superintelligence,” Vox Day, author of “The Return of the Great Depression,” needs no introduction. My WND colleague and fellow libertarian dishes it out on the impending depression, D.C. dummies (down to their position under The Bell Curve) and a dark future. As always, Vox makes this glum stuff fun.
Ilana: Republican President George Bush was as good as if not better than Clinton and Carter at laying the legislative foundation for the minority mortgage meltdown. Comment with reference to the thesis of your book (and mention some other Republicans who’d like ditto-heads to forget their political pedigree).
Vox: Like Carter and Clinton, George W. Bush pushed government programs designed to boost homeownership among low-income families that couldn’t afford to meet the debt obligations they were assuming. These programs were focused on minorities, particularly Hispanics, which is why the four states where the majority of defaults have been located to date are California, Arizona, Nevada and Florida. However, it should be kept in mind that these inept and bipartisan housing programs were not the cause of the core problem; they were merely a consequence of the overall problem of debt chasing a dwindling pool of borrowers.
Ilana: “Too much aggregate savings reduces growth.” “A global savings glut” got us into the depression. So say the money mavens. Unpack this intellectual fraud for us. Why is it important that our readers grasp that Keynes’ General Theory, received wisdom by both parties, is a political theory, not an economic one?
Vox: First, on the theoretical level, it’s incorrect. Second, on the empirical level, it’s simply false. There was no savings glut. It’s not possible for there to have been too much aggregate savings, because even if one doesn’t bother to correct for inflation, the savings rate was declining in the USA and elsewhere around the globe. This should be obvious given the way in which the global debt statistics clearly show that the various Asian economies that supposedly had too much savings didn’t actually have any net savings at all. If I have $5,000 in the bank but have racked up $10,000 of debt on my credit card, what have I saved? It’s an absurd argument, false on every level. The reason it’s important to understand that the General Theory of Employment, Interest and Money is a political theory, not an economic one, is because most of the macroeconomic statistics reported are based on Paul Samuelson’s practical application of it. So, the statistics used are intrinsically politicized and therefore unreliable.
Ilana: You point out that the “Communist Manifesto” calls for the kind of system of credit we already have, and both parties champion. Democratic lackeys are either mortified or mocking when we say “socialism” vis-à-vis BHO (you and I would apply the socialism designation to Bush Babies, too). Comment (with reference to the financial overhaul bill). What other economic edifices and legislation, pending or passed, would meet Marxist maxims?
Vox: There is nothing capitalistic or free-market about the present U.S. economic system. To claim that a central bank monopoly established by the federal government is somehow indicative of laissez-faire economics is ridiculous on its face, especially given that “centralization of credit in the banks of the state” is the fifth pillar of the Communist Manifesto. Other openly Marxist institutions are the FCC and FAA, which centralize the means of communication and transportation as per pillar 6, the death tax (pillar 3), the progressive income tax (pillar 1) and of course the government-funded school system, which is referenced in the 10th pillar.
Ilana: The other day, I watched Newt Gingrich twist like a cirque du soleil contortionist in trying to excuse his support for the Bush bailout, or TARP. He blamed the experts. As you tell it, Nobel Prize winner F.A. Hayek knew and liked Keynes the person, but disliked Keynes the political operative. The economic mast Hayek claimed Keynes “was [not] a master of the body of economic theory,” and that “his main aim was always to influence current policy, and economic theory was for him simply a tool for this purpose.” What accounts for the refusal of establishment “intellectuals,” politicians and media sorts – against all standards of reason – to recognize the same? Is it a case of “No one knows anything”? “Intellectual inertia”?
Vox: It’s partly that. The dirty little secret of politics is that most politicians are of barely above average intelligence and possess very narrow educations. They’re mostly people with IQs of around 120 and a law degree. So, they know literally nothing about economics and lack the capacity to see that what the experts are telling them doesn’t add up. Given those circumstances, it should come as no surprise that they so readily embrace the economic theory that tells them exactly what they want to hear. “Go, thou, and spend, and thus shall the economy be saved. And lo, thou shalt be the savior of thy people!” That’s a lot more palatable than being told that the nation is in dire straits and their careers are in jeopardy due to the actions of their predecessors, and that there’s not much they can do about it. So, they listen to the self-interested parties and blindly go about making the situation worse.
TARP was like something out of “Kafka.” Imagine it were the NFL instead of the Wall Street banks. Everyone would have laughed if the NFL suddenly called a press conference and declared that unless each NFL team was immediately given $20 billion, cats and dogs would start living together and martial law would have to be declared. But because it was the banks, naturally the politicians panicked and started handing over the money, no questions asked.
Ilana: “The Democratic Party’s first candidate” ran, in 1829, on a “fiscally conservative, anti-central-bank platform,” and all but eliminated the federal debt. What was Andrew Jackson thinking? It’s hard to believe that the fear of the inflationary Fed resulted in “the foundation of … the Democratic Party.” Comment.
Vox: Yes, it is amusing that so few Americans can envision an economy without the Federal Reserve given that it is the fourth central bank with which the nation has inflicted itself. The same thing has happened every time. The central bank inflates like crazy, eventually the economy collapses, and the politicians are finally forced to step in and get rid of it. Eventually, people forget and fall for the temptation of cheap credit and the process starts again. Who knows? Perhaps the tea party will evolve into the modern version of the Jacksonian Democrats.