Tuesday, January 31, 2012
Rollback by Thomas Woods
I read everything by Thomas Woods. He’s so prescient and knowledgeable, I trust him completely. So when I saw his latest book, Rollback, I knew I had to read it.
He begins by painting the very gloomy picture that is reality. Simply put, we are in too far to escape the coming financial crisis with no pain. To put it in stark terms, the US Federal Government is on the hook for $111 trillion in liabilities. The entire world economy is $65 trillion. The money simply is not there. Massive changes must occur.
The crisis began with third-party payments for health costs. To get around government wage controls, businesses enticed employees with “free” health insurance. Eventually, government became involved in the health insurance business through Medicare. Since consumers are separated from the prices of health services, costs have skyrocketed.
Government got involved with housing as well. In order to foster fairness, Fannie Mae and Freddie Mac actively campaigned for the loosening of mortgage requirements. This would help their bottom line as there would be more mortgages to buy up, repackage and sell, and would make the politicians feel like they were helping the little man. Combine that with a Fed that was practically giving money away. This led to astronomical increases in housing. Mortgages had to get more and more creative to keep up. Eventually, the government created bubble burst and we are left with the consequences.
This leads Thomas Woods to take on the Fed. The Federal Reserve’s mission is ostensibly to maintain the value of the dollar. However, it has been also given the competing mandate to to maximize employment and minimize price inflation. This creates a “flexible” currency open to political manipulation. Has it succeeded in either of its missions? According to Woods and many studies, no. Since the Fed, in essence “prints” money by what is euphemistically called “Quantitative Easing” more money ends up in circulation leading to the feeling of prosperity, but actually causing wealth-destroying inflation. In an economy not tinkered with by the federal government, prices would fall, savings would be protected, business would get clear business cycle signals, and the economy would continue to grow unimpeded by the manipulations of politicians. He advocates a return to the gold standard which would take from the hands of our betters their ability to artificially create booms in the economy.
Woods even turns his magnifying glass on the sacred cow of the military. The military’s effect on our economy is rarely discussed. But Woods shows how once again, through the federal government’s intervention in economic matters with the huge military budget, our economy has been damaged. Not only has the bidding for defense contracts opened the door for corruption, it has distorted the market in a myriad of ways, leading once competitive industries and businesses to grow fat and lazy feeding from the trough of unsupervised government handouts.
Republicans and conservatives have fallen victim to the belief that we must continue to pour billions of dollars into our national defenses. Yet traditional conservatism has held that military buildup and foreign intervention to be the antithesis of conservative values. “Mr. Republican,” Senator Robert Taft, as quoted by conservative stalwart Russell Kirk says, “War would make the American president a virtual dictator, diminish the constitutional powers of Congress, contract civil liberties, injure the habitual self-reliance and self-government of the American people, distort the economy, sink the federal government in debt, break in upon private and public morality.” While Ronald Reagan sent our government heavily into debt with military spending in order to bankrupt the Soviet Union, no such plan is called for today. Our adversaries today owe loyalty to no state and can cause real harm with relatively little funding. Our massive build up in military might only encourages the use of these expensive resources and has led to a global military presence counter to our Founding Father’s vision of America.
What about the idea of “Good Government?” Doesn’t the government ultimately have our best interests at heart. No. Woods demolishes the myth that government regulations and laws have served to protect us better than the free market would have anyways. Reality cannot be legislated away, and oftentimes, the government ends us doing more harm than good. He cites places where child-labor was outlawed and the starving children turned to prostitution instead. Is this a “Good Government” that “helps” the poor by making their lot worse? We see this in our own country through redistributionist policies. While taking from a producer and giving to a taker will result in the vote of the taker, it doesn’t necessarily make the taker’s life better. In fact, he finds it difficult to produce a social program that does not cause net harm. He goes onto make compelling arguments in the areas of private charity, the disaster of federal education programs, the myths of monopoly power, the harms of regulations, the myth that we need government funded science, and the truth about the war on drugs. Each of these discussions destroys the notion that we need a large government “for our own good.”
So what is the plan? Rollback. Although he know there are solutions possible, they are not politically viable. In the meantime he suggests the following:
1. Social Security/Medicare opt-outs
2. Budget cuts across the board
3. Currency competition - allow contracts enforceable in other currencies or gold
4. State nullification of unconstitutional laws
5. Repeal Amendment which allows 2/3 of the states to repeal federal laws
6. Self-education - READ
7. Break the media monopoly
8. Jury nullification
9. My personal favorite - Free State Project - “Supporters of freedom would pledge to move to a state with an eye to influencing its political life in the direction of liberty.”
11. Debt repudiation - the US Federal Government actually defaults and restructures!
This book is so packed with facts and figures, too numerous to list. It is a common sense approach to our looming crisis. How I wish everyone took up the call of self-education and read this book!