Socialism pivots upon denial of economic reality coupled with the use of the coercive power of the state to enforce the favored economic policies of the moment, that is up until the real economy fails to prove the state with the means it needs to sustain that denial.
That is exactly what we are seeing in the obligation-related collapses of our various political jurisdictions, whether local, state or federal. Promises were made that could not be kept. Contracts were signed that implied future revenue streams that are just not possible. Powers of taxation were secured that implied that those being taxed would not move away. And on the federal level, money was printed and bonds sold as if wealth came from the printing press.
Up until this moment, on balance, we had sufficient resources and prosperity (assets and income stream) to be able to grow, raise families and prosper, and still pay these growing claims. However the last wave of economic denial was that government could declare (through the Community Reinvestment Act) it had the power to force lenders to sell mortgages to people who not only could not repay them, but who in a pinch had no intention of repaying them, and that such a policy would not have any downside, let alone one that destroyed several trillions of national wealth.
And now we are dealing with an attempt to stimulate the economy by fooling people into thinking that prosperity has returned. They are responding by trading their political (fiat) dollars for gold, silver, oil, wheat, corn, cotton, and anything else that is a real asset.
The economic theories of J.M. Keynes are so entrenched in the leadership/media-elites exactly because, in the words of Prof. Peter Klein [1], his theory gave them a scholarly basis for doing exactly what they wanted to do anyway, which was to spend, spend, spend, to make government as big and as powerful as possible.
In my experience, the ONLY economic theory that is not based in the denial of reality is the causal-rational approach. This is also called the Austrian School.
The Austrians would first warn you to not confuse money with wealth, and that wealth cannot be printed. Secondly, when government intrudes in private economic decisions, it only distorts them and destroys wealth. The more that government intrudes, the less prosperous we will be on balance. There is a debate in the Austrian school as to the proper role of government in society, but it is a universal given that our present government is far larger than is necessary and beneficial for society. It has certainly grown way beyond the size where it only protects us from the violence of others and it now exists mainly to perpetuate itself, no matter what it costs the average citizen in terms of money or liberty.
And in that observation, we come full circle to my observation above, that such presumption of power expands and expands until the resources it can grasp can no longer enable that expansion. Then it tends to collapse because such a power-hungry beast cannot adapt to less power. We see this in Harry Reid’s complaint that we must keep funding Cowboy Poets, and in California’s budget mess, and in the battle over a public unions in Wisconsin.
Our own government has become a more grave threat to the prosperity and safety of our children than any present external enemy. Our own government, in order to see its present policy plans carried out is willing to place our children in economic servitude in order to pay interest on its debt that is held by foreign powers who are not our friends. That servitude will be imposed by continual dilution of our children’s currency and thus a continual transfer of wealth from those who hold it and create it to those who benefit from money printing. To Keynesians, money-printing is the lifeblood of big and Bigger government. Austrians will explain how it destroys liberty and prosperity.
We must restrain government before it restrains us. The core issue at present is government’s ability to create its own operating funds and to make promises that it cannot fulfill, which is a form of credit expansion. To this end, we must end the Federal Reserve’s ability to create money out of thin air. And we must restrain government’s ability to encumber our own future incomes and private wealth.
I don’t know how to do this specifically, but returning to a gold-backed currency would be a great first step. And when that suggestion is made, you can tell by the reaction of the big government crowd exactly what effect it will have.
[1] Keynesian Economics: The Beast That Won’t Die, Will the Decline Continue? Monday, September 14, 2009 by Peter G. Klein, http://mises.org/media/4079/Keynesian-Economics-The-Beast-That-Wont-Die
Amen.... great post