Wednesday, February 17, 2010

Dear Government - Breaking Windows Won't Work



With all due respect to the President and his economic egg-heads, these academic block heads have made things have only made matters worse and prolonged the inevitable. I beg and plead any of them to examine the great works by Henry Hazlitt, and especially his first few chapters of Economics in One Lesson. Maybe the New York Times can resurrect his works from when Hazlitt used to write for them, seeing as it would probably bump up their circulation (can't get any worse).

The President is surrounded by Keynesians academics who don't understand how capital theory works, how/why an economy expands, or even what actually creates asset bubbles that eventually pop through monetary policy. But, since they are not familiar with the Austrian Business Cycle Theory, these faux cconomists and bureaucrats will continue to spin lies about saving or creating jobs.

Essentially, they believe in breaking windows and pointing to the glazier who will be getting more business because of their window breaking policies. The present day "stimulus" is the exact application of the broken window parable and the logic behind it tells us why it won't work. You cannot take from one part of the economy in order to prop up another. You cannot have the government destroy or crowd out capital and then wonder why the private sector capital formation dissolves or goes somewhere else. I encourage folks to read about the “Broken Window Fallacy” made famous by Henry Hazlitt and Frederich Bastiat. The government is just breaking windows in order to “stimulate” the economy. It won’t work and never has.

A depression has NOT been averted, but rather postponed. The asset bubbles form through excessive drinking or getting hammered on monetary booze and alcohol. Then, the bust/recession/depression comes in the form of an economic hangover which is comparable to someone puking when they cannot continue drinking. What the President and the Keynesians economists advisors (Christina Romer, Jared Berstein, Larry Summer, Tim Geithner, et al) have done is try to cure us with “the hair of the dog” and keep us drunk instead of going through the necessary dehydration/withdrawal symptoms necessary to put us on firm footing. “Malinvestments” are still rampant in our economy and the bad debt has not been liquidated.

A second type of depression like we saw in the 1930s might have actually be more pleasant than what is coming our way. I believe our government has planted and even fertilized the seeds for a possible hyper-inflation or hyper-depression (high inflation with negative growth). That is possibly the most frightening thing of all. Will the President be honest if and when that event occurs or will it be more window breaking that our Keynesians turn to for help? You decide.

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