Thursday, January 14, 2010

Laissez-nous faire!

The following is an extended quotation followed by a few comments:

Since "economic growth" is today's great problem, and our present Administration is promising to "stimulate" it -- to achieve general prosperity by ever wider government controls, while spending an unproduced wealth -- I wonder how many people know the origin of the term laissez faire?

France, in the seventeenth century, was an absolute monarchy. Her system has been described as "absolutism limited by chaos." The king held total power over everyone's life, work and property -- and only the corruption of government officials gave people an unofficial margin of freedom.

Louis XIV was an archetypical despot: a pretentious mediocrity with grandiose ambitions. His reign is regarded as one of the brilliant periods of French history: He provided the country with a "national goal," in the form of long and successful wars; he established France as the leading power and cultural center of Europe. But national goals cost money. The fiscal policies of his government led to a chronic state of crisis, solved by the immemorial expedient of draining the country through ever-increasing taxation. 

Colbert, chief advisor of Louis XIV, was one of the early modern statists. He believed that government regulations can create national prosperity and that higher tax revenues can only be obtained from the country's "economic growth"; so he devoted himself to seeking a "general increase in wealth by the encouragement of industry." The encouragement consisted of imposing countless government controls  and minute regulations that choked business activity; the result was a dismal business failure. 

Colbert was not an enemy of business; no more than is our present Administration. Colbert was eager to help fatten the sacrificial victims -- and on one historic occasion he asked a group of manufacturers what he could do for industry. A manufacturer named Legendre answered "laissez-nous faire!" ("Let us alone!"). 

Apparently, the French businessmen of the seventeenth century had more courage than their American counterparts of the twentieth, and a better understanding of economics. They knew that government "help" to business is just as disastrous as government persecution and that the only way a government can be of service to national prosperity is by keeping it's hands off. 

Would you believe this is from an L.A. Times column? It was published in 1962, written by Ayn Rand. 

What was true in the seventeenth century was true in the 18th, 19th, 20th and remains true today. Whatever prosperity the U.S. of A. has achieved in its short lifespan has been in spite of the government, not because of it. Though there are myriad examples of "government help" I just want to mention one item to be watching for: The aftermath of the bailout/stimulus spending.

Over a trillion unproduced dollars have been created out of thin air in order to save institutions that are too big to fail. In conjunction with this "salvation," another trillion of "stimulus" has been created in order to keep the people working. The inevitable result of this action will be inflation and even though the Fed will attempt to forestall it, significant inflation will come. In fact, the first harbinger has already arrived and you can see it in the "good news" on Wall Street. 

Here's how it works: At the moment the bogus money is created out of thin air, it has the same purchasing power as the money that is already in circulation. This means that the biggest beneficiary of the phony money will be whomever gets to use it first. Wall Street and the bankers are very close to the top of the feeding chain so they'll get to take advantage of the funny money at full value, or near full value which means that the "fat cats" literally get the fattest prime cuts of the new money. But as this uncapitalized cash begins to trickle down through our economy, inflation begins to take its toll  because bad money (meaning money that is worth less) drives out the good money (capitalized money). 

And who gets stuck holding the worth-less money? You guessed it. . . we, the people. You don't have to believe me -- in fact, I want you to prove me wrong. Here's how to do it: Make some notes about pricing on a couple of dozen of your most commonly purchased items -- fuel, utilities, groceries, clothes -- whatever you think you need in life. Watch as the prices of these items climb. Your paycheck will increase too ( as will your taxes) but it will rise after your expenses rise, not before. In other words, we, the working people get caught with the worth-less money.  Compare your commodity notes in January 2011 and January 2012 and you'll see a significant erosion of the value of your dollar. Usually, this happens so slowly we don't even notice the robbery that's taking place but sometimes it's like an explosion. Either way, as the money inflates, the gap between the Wall Street "haves" and the Main street "have nots" will grow larger and larger. Count on it. As this government assistance progresses you can count on greedy capitalism getting the blame for "oppressing" the poor as the gap grows ever wider. Less prosperity, a bigger difference between the haves and have nots, and the government will say once again: "Hi, I'm here to help."  

That's just one reason why we should be collectively shouting: Leave us alone!

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