Category Archives: Economics

Commentary, Economics, Biblical Worldview, Book Review

Book Review–Hamilton’s Curse

This entry is part 1 of 9 in the series Hamilton's Curse

HamiltonsCurseThere are times in some of our lives in which we have seminal moments of epiphany where something occurs or some information is presented to us that allow for disparate pieces to fall into place, creating a full and clear picture of how things really are. Some never are able to see the full view, thinking instead that the out of phase vision they have in front of them is all that there really is.

Reading the book Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution and What It Means for America Today by Thomas J. DiLorenzo (New York, Crown Forum, 2008, $25.95) was one of those seminal moments for me. It is an important work of scholarship, definitely not hagiographic in nature, that causes a thinking person to reassess the common assumptions that are fostered in this modern age about the way in which our government should conduct itself. As a matter of fact, it is such a volume that a mere review is an injustice; which is why Camp Director and I are planning on giving you the reader an analysis of the central theme and message of this work in a chapter-by-chapter, back-and-forth dialogue.

Please allow me to begin by conducting a small personality assessment. I am going to provide two lists of words for you. Review those two lists, and determine which list you are more attenuated to. Here we go:

limited, diminuative, divided, lassiez-faire, express, steward, de-centralized, curse, benefactor, master, servant

unrestrained, leviathan, consolidated, interventionist, implied, imperial, centralized, blessing, beggar, servant, master

O.K. then: which one is more to your liking? Unsure? Maybe a little context might be beneficial to you:

Governmental authority: limited or unrestrained

Governmental size: diminuative or leviathan

Ultimate governmental sovereignty: divided or consolidated

Economics: Lassiez-faire or interventionist

Governmental powers: enumerated or implied

Presidential attitude: steward or imperial

Governmental control: decentralized or centralized

Debt as an engine of finance: curse or blessing

States’ role: benefactor or beggar

The People: master or servant

The State: servant or master

You see, if you chose the first list, you are likely a Jeffersonian and an adherent to the original view of the compact between the states. If the latter was your preference, you are likely a Hamiltonian. Most people today, especially those in government, finance and politics, are definitely Hamiltonian.

It’s sadly ironic, really. Hamilton’s ideas of unrestrained governmental expansion, unlimited taxation and central planning were expressly rejected in the formation of the Constitution, but we live with the fruits of his legacy, not Jefferson’s, in our body politic today. DiLorenzo points to this fact in the opening chapter “The Real Hamilton” when he astutely summarizes that even so-called “conservatives” such as Pat Buchanan and Newt Gingrich are Hamiltonians economically and, in many cases, politically. The spate of modern biographies, fawning paeans to a flawed subject, issued on Hamilton verify the adage that the “victors write the history” indeed.

It is because ideas do indeed have consequences. The ideas of Jefferson that helped influence the Declaration and in many respects the Constitution have been overwhelmed by the actualization of Hamilton’s philosophy. DiLorenzo summarizes this succintly: “This battle of ideas–and it was indeed a battle–formed the template for the debate over the role of government in America that shapes our history to this day. The most important idea of all, in the minds of Hamilton and Jefferson, was what kind of government America would live under.”(pp.1-2)

As we journey through the chapters of this work, we will also be taking a journey through the shattered landscape that is the consequence of adopting the Hamiltonian philosophy of governing over against the Jeffersonian vision of liberty.

Commentary, Economics, Biblical Worldview

A Financial Idiot’s Guide To The Economy

The Sinking Dollar

How do you tell if a 6,500 Dow is good or bad?

I know, you tell by whether or not you’re making or losing money.  But that’s not the answer I’m looking for.

We live in interesting times.  How is your perspective on things such as the state of the economy?

To help you put things in perspective, in 1987 there was a stock market crash.  The Dow Jones did not fall as far as other stock markets in the world.  But this was a “correction” that was apparently necessary.  Just a little while after that a recession took place and the then Prime Minister of Australia, Paul Keating, referred to this as “the recession we had to have.”

Well, recessions are not always comfortable events for many people.  But for those of who have been around long enough, a 6,500 point Dow at one time was a significant event.  It was not considered a recessionary number.  In fact it was a boom-time number.

Now, a decade or more later, everyone bemoans and complains about a 6,500 point Dow.  Why?

Because of the starting point that is used.

Complaints about the market assume that the starting point of the assessment is the “right” one.  Not too many commentators complained about the increase in the numbers.  After all, too many people were making money off the higher numbers.

Is this you?  If so, you have a false perspective on the numbers.  You have been conditioned into thinking that increasing numbers is better for you while falling numbers are worse.

This is an idiotic perspective.  Here’s why.   Prices are a ratio between money and goods.  All things being equal, as economists like to remind us, if you have ten gold coins on one hand, and ten bright red apples in the other, the average price is one gold coin each.  Change one hand to 20 apples, then the average price is half a gold coin each (or two for the price of one).  But if you doubled the number of coins while keeping the 10 apples, then the new average price is double what it was before.

Now ask yourself this question:  Under which circumstance are you better off?  Higher prices ($20:10) or lower prices ($10:20)?

This is not rocket science.  This was the older view of economic theory until a perverted group of people decided price theory ruined their ideas of how an economy ought to function, so they either ignored price theory altogether (as C.H. Douglas does in his Social Credit theory), or changed the way price theory is discussed if it is discussed at all (as John Maynard Keynes.)  For more details, see my book Baptized Inflation, available here.

If you are going to maintain any part of the free-market system, you must maintain price theory and the underlying assumptions of free exchange.  If you did all this in the past, you would have argued for a halt to the increasing prices of these past decades.  Rising prices the most important indicator of a manipulated economy.

But many people have instead ignored the warning signs that higher prices indicate, and with a “since you can’t change or beat the system, we might as well join it” attitude have remained silent while the economy has apparently boomed as indicated by the higher numbers.

The trouble is, your price theory when it is right, tells you the exact opposite.  The economy is booming when prices fall.  The GNP maxes out when all the money is allocated to the purchase of goods and services.  The only way it can increase is if there is more money around.  Thus, a rising GNP is not necessarily a sign of health.  It may be a sign of impending disaster.

So, where has your mind been in these recent decades of expanding prices, booming markets, and now the falling indices?  Where is your starting point to make the evaluation if the times are good or bad?  What, in other words, are the criteria you’re willing to use in your assessment of the economy?

More importantly, will your criteria have at its center the idea of just weights and measures — the foundation of a stable, God-honoring economy, and the relevant theory of prices that flows out of that foundation?

If you’re waiting for the next recovery, like many people, you’ve missed the point.  This is the recovery phase now — the return of the market to lower prices. Why on earth would you want prices to go up again?  This is nuts.

So if you don’t mind me asking, what are you waiting for?

God bless you in your activities for His kingdom.   Ian Hodge, Ph.D.

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Commentary, Public Policy Principles News, Economics

Grasping The Size Of The Economic Bubble

The Sinking DollarGary North has written an important and, frankly, frightening  analysis and explanation of the current economic crisis, paying special attention to the banking crisis. The article appears on the Lew Rockwell website and is entitled Ben Bernanke’s Wild Ride (and Ours). North bases his article and his argument on a video presentation, which is in reality an ad on Youtube for an alternative view financial advice blog.

The video demonstrates the absolutely awesome (in the true sense of the word) growth in borrowing from the Federal Reserve during economic crises of the past and present. For those who prefer to belittle North for being a scaremonger on the Y2K “crisis” please note the Y2K precautionary borrowing in the year 2000 on the video. Gary North wasn’t the only one scared

There were many of us who had a hand in IT systems at the time who also thought that Y2K was potentially disastrous. Ask any IT/computer professional recruiting specialist, if you can find one that is, about what business was like during the 1998-2001 period and what it’s like now. Billions were spent to make sure that Y2K didn’t happen. The Y2K borrowing peak is to the current peak(s) as a pebble is to a mountain.

Here’s the video- brace yourselves.

[youtube]http://www.youtube.com/watch?v=pZsY1rFr_yw[/youtube]

The bottom line in North’s article is that he thinks (and he has a very sharp eye on economics) that we are in for an extremely long, deep and disastrous round of inflation; think in terms of Weimar Germany, Argentina and Zimbabwe. Yes, that bad. And not just here. Around the world.

Through a biblical economic lens, and yes the Bible teaches about economics at length, the world has adopted a system which it cannot sustain. Fractional reserve banking which creates money from nothing, fiat currencies backed by nothing but “consumer confidence (read FAITH, thus making the dollar into an idol)” easy credit and bailouts are harbingers of looming disaster, just as promised in the Old Testament.

How did the American economic system, not to mention the world’s get in this condition? The answer to that question is complex but decipherable. We will do our part to help explain it by reviewing some books you should think about reading. We will start by doing a series of reviews of Dr. Thomas DiLorenzo’s Hamilton’s Curse, which explains the fatal flaws of the central banking system and explains how deficit spending for “internal improvements” which some have labeled “Hamilton’s blessing” have helped lead to the present situation.

Economics, Public Policy Radar, Commentary

Our Position On Corporate Bailouts

Public Policy RadarThe Institute for Principled Policy takes the following public position:  We are opposed to the United States Government’s proposed or attempted bailout or loan to the 3 American based automobile companies of Ford, GM, and Chrysler. 

We do not believe that it is the role of the federal government to provide financial oversight, to create a car czar, or to take over control of private industry or business.  To do so would be a major step toward socialism.  This is exactly what Karl Marx advocated the role of government to be.  We believe the role of government is to defend its citizens, to punish evil-doers, and to make good laws. 

The government has laws that cover this type of situation and those are the bankruptcy and chapter 11 laws.  We, however, are open to other creative ideas that could stimulate the purchasing of American-made automobiles, such as reducing taxes of those in the automobile industry including state sales taxes.  We could also support higher tariffs or taxes on imported parts and automobiles in order to alter the competitive balance. 

The problem with this though is that most of our American-made automobiles use many foreign made parts.  We believe there must be better answers to this dilemma than the ones proposed by Congress.  We salute those Republican Senators who are listening to the American people and opposing governmental intervention in the private sector.

Commentary, Satire, Economics

US Economics In One Easy Lesson!

PlayPlay

Podcast: Play in new window | Download

The Sinking DollarKeynsian economic analysts Ma and Pa Kettle explain the economic “bailout.” Note the advanced math and complex calculations which, even now, are being employed by other “economic experts” to prove the necessity of the actions being taken by Congress to “bailout” businesses and banks which should be allowed to fail because of their bad business practices.

The Austrian economist discussing the issue with them is obviously somewhat taken aback by the audacious and revolutionary approach being utilized by these Keynsian masterminds. Their complex mathematical gymnastics overwhelm the more straightforward approach of the Austrian economist.

Prepare for the next Great Depression which we’re pretty certain won’t be so great. (Give the video a minute or two to load. It’s big!)

[quicktime]http://www.principledpolicy.com/blog/wp-content/uploads/2008/11/bailoutexplained.mov[/quicktime]