Tuesday, September 16, 2008

"We have made lies our refuge."

Creation and Destruction.

George Will, following Russell Roberts, following Leonard Read, links Pencils and Politics in the latest Newsweek Magazine. Together they demonstrate that no single human being on earth knows how to manufacture a pencil and sell it at a profit for a dime. And this past weekend the world learned that the most powerful government in the world cannot prevent the destruction of a 150-year old financial institution with nearly $700 billion in assets; its greatness has been swept into the dustbin of financial history. Nearly 50,000 jobs were lost in two days. AIG, the trillion-dollar insurance giant, may be next to collapse. Jeffrey Tucker writes:

Hundreds and hundreds of billions of dollars are on the move, sweeping all before them. And yet take note: it is not war accomplishing this. It is not violence. It is not the result of a planning committee. No election is necessary. No terrorist act took place. There was no government edict.

No one person is in charge. Layers upon layers of decisions by millions and billions of people are the essential mechanism that makes the process move forward. All these decisions and choices and guesses come to be aggregated in a single number called the price, and that price can then be used in that simple calculation that indicates success or failure. Every instant of time all around the world that calculation is made, and it results in shifts and movement and progress.

The Price.

It orders millions of human beings to cooperate in the process of creating a pencil, and it destroys "The Masters of the Universe."

Prices cannot be determined by the government's central planners. They are determined by billions of human beings, making their own plans, enforcing their own decisions, acting on their own values. The price is essentially a reflection of confidence.

It is not healthy for people to have confidence in something illusory. It is good for our economy when bubbles burst. The sooner they burst, the better.

Hopefully, the biggest bubble of them all will soon go "Pffssssssssst...."

Antony Sutton, formerly of the prestigious Hoover Institution at Stanford University, has called attention to the relationship between confidence and the price of our unconstitutional and debased currency:

Our money system, and almost all money systems in the modern world, are based on debt. One person's paper money or book-entry credit is another person's obligation to pay. The system is predicated on the heroic assumption that people will continue to accept another person's debts as an acceptable recompense.

Nobel prize-winning economist Milton Friedman has described the mythical, circular reasoning surrounding "fiat money":

. . . each accepts them [the pieces of paper] because he is confident others will. The pieces of green paper have value because everybody thinks they have value, and everybody thinks they have value because in his experience they have had value.

Sutton answers the obvious question:

What then keeps the Federal Reserve System, which is based on paper debt, in operation? In a word, confidence. The confidence that someone else will accept a worthless piece of paper, created out of nothing and backed by nothing, in exchange for their real tangible objects.

In the final analysis, emphasizes Friedman, acceptance of false weights "is a social convention which owes its very existence to the mutual acceptance of what from one point of view is a fiction."

Lehman Bros. had value as long as enough people had enough wishful thinking.

The "Dollar" (Federal Reserve Notes) has value as long as enough people have enough wishful thinking; as long as they listen to the government's unethical cheerleaders. When morality and reality sink in, the Fed will join Lehman Bros. and Fanny Mae. The sooner the better.

Truly, as a nation of debtors, "we have made lies our refuge" (Isaiah 28:15).

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