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A call to end the passing of blame when it comes to the dismal performance of the US economy.

by /Danny de Gracia II

“No politician is any longer interested in the question whether a measure is fit to produce the ends aimed at. What alone counts for him is whether the majority of the voters favor or reject it.”

–Ludwig von Mises

“the prophet is considered a fool, the inspired man a maniac.”

–Hosea 9:7

In June 2010, Deputy Secretary of the Department of Housing and Urban Development Ron Sims remarked, “This summer is sure to be a Summer of Economic Recovery.” Along with Sims, numerous other elected officials – including several local Hawaii politicians – insisted that the massive injections of taxpayer monies into local communities would certainly manifest in the form of recovery by the end of Summer 2010. As we know now the “Summer of Economic Recovery” never actually happened.

Congress’ plan to boost aggregate demand through “shovel ready projects” across the fifty states and the Federal Reserve’s attempts to entice investors into floating stock prices by buying back treasury bonds both failed to accomplish any substantive benefits for the economy as a whole except for increasing the prices of commodities and consumer goods, triggering higher household spending on food and worst of all, creating little or no new private jobs. With interest rates at near zero, Congress pushing the budget from month to month and the national debt skyrocketing past $14.7 trillion dollars, the number of options – or more appropriately, Ponzi schemes – left in their toolbox is running out. As a sign of extreme and final desperation to prolong the inevitable ruin that comes from government intervention, the Federal Reserve has begun what insiders have termed “Operation: Twist” in which some $400 billion in short-term debt will be “twisted” (or swapped) for long-term debt as a means to drive up bond prices and flatten yields through artificial scarcity. Without the benefit of a crystal ball or a time machine, allow me to say now: this plan won’t work either and will make things worse.

Our economy can’t recover and won’t recover because the very things driving the financial crisis – inflation and cartelized government control of the money – remain firmly in place. Market corrections can’t occur because to our policymakers corrections mean loss of political power and realignment of resources. Said another way: if you are allowed freedom to buy what you want, save what you will, and do whatever is best for your company’s balance sheet and your personal pocketbook, you will de-throne special interests and the career politicians they control. Ultimately however, history shows us that markets always reveal in the end that too much government means too little for everyone. The Weimar Republic, Soviet Union, Yugoslavia and Zimbabwe all learned that lesson and sadly I fear, so will the United States.

What terrifies me the most is not the fact that our government is running out of Ponzi schemes to patch the faltering economy together but rather that government will never run out of excuses for why we ended up where we did. It is important that our young children be taught the truth about inflation, debt, big government (which is actually cartelization) and how these things destroy a nation. If our children are to build a better future, they will only be able to do so through accurate knowledge of what makes an economy work and why it crashes. What will follow at the end of bad government will be worse government if our children do not learn the truth now. Our children need to know that free markets mean free people.

In the Weimar Republic, corruption and cartelization resulted in the worst hyperinflation crisis of the early 20th century. Anyone who has studied history or economics has seen the proverbial “barrels of cash of a loaf of bread” that resulted from their government’s poor policies. But as the Weimar economy and social structure went down, establishment politicians and their court intellectuals deceived their population into believing the fault for their decline rested with foreign intrigue and internal betrayal. The Dolchstoßlegende – “Stab In The Back Legend” – was one of many lies perpetuated by the Weimar Republic among its people which said they were so “exceptional” that blame for their downfall had to be the fault of others. This Weimar “exceptionalism” ultimately mutated into what would later become Nazi Germany.

Here in America, as our politicians point fingers at everyone but themselves while all the while proclaiming American “exceptionalism” history suggests that we could be positioned not for a freedom breakthrough but a tyrannical paradigm shift. America is indeed exceptional, but exceptional only to the extent that her markets and people are free from government. I’m reminded of what Ronald Reagan said to a group of schoolchildren in 1988: “America is great because America is good. If America ever ceases to be good, America will cease to be great.” We ought to take these words to heart and make sure our children learn what is right and never repeat our government’s mistakes again.

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Danny de Gracia is the economic policy adviser for Grassroot Institute and is an elected member of the Waipahu Neighborhood Board. He holds a master of arts in political science from SouthwestTexasStateUniversity. Contact him by e-mail at degracia@fas.harvard.edu.