Friday, October 10, 2008

Phil Orenstein's "Barack Obama Is Herbert Hoover"

Phil Orenstein posts a first-rate blog at Democracy Project, my previous blog home. Phil makes the point that Herbert Hoover raised taxes, regulation and public works in response to the stock market crash, and he is concerned that if Obama gets elected, he will do the same thing. Phil is right that increased socialism, taxes and government intervention would prolong the psychological malaise and harm the country in the long run. Those who feel that Senator Obama cares about humanity might consider that Herbert Hoover, who oversaw the birth of the Great Depression, had similar policies to Obama and, like Obama, saw himself as a "progressive" who loved humanity. Hoover's successor, Franklin D. Roosevelt, prolonged the deprivation caused by Hoover's socialistic policies. By the commencement of World War II, 11 years after the stock market crash of 1929, the depression was not over.

At this point in time, the country has painted itself into a corner. We can choose among (i) a major correction, unemployment and firm bankruptcies followed by a new round of inflation, (ii) hyper-inflation and the dislocation that it would cause and (iii) long term stabilization of monetary growth via a gold standard.

The source of the current problem is the Federal Reserve Bank and big government. Inflation has been causing a decline in innovation, a decline in real wages and transfers of wealth from production to Wall Street and banking for the past 75 years.

Ultimately, the field of economics and "economists" are responsible for this in the sense that they have provided the ideological cover for the looting of the public purse in which the banking system has engaged. Economists claimed that they knew how to manage the economy via the Fed, and now they have turned out not to have known. A banking system that requires massive subsidies and monetary inflation does not function. This is the product of the economists who run the Fed.

The economists who are responsible for the current situation have scoffed at the gold standard, calling it a fetish or nonsense. Alan Greenspan started out in life supporting the gold standard, but then realized that he could become more famous and successful by advocating Keynesianism, and he did so.

Is a trillion dollar subsidy to the banking system superior to a gold standard? Might we not conclude that the Federal Reserve Bank is an antiquated fetish?

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