Everyone (or almost everyone) on Wall Street is running around trying to save capitalism from the Madoff scandal, without first asking the question as to whether capitalism is worth saving. (They also fail to ask whether what we've got in place under the iron rule of Lord Keynes is "capitalism," or something that looks, walks, and quacks like a socialist duck.) Consequently, we sent the following blast to the Wall Street Journal today. Lest anyone should think we're ignoring the problems that the UAW is presenting, effectively betraying the legacy of the late Walter Reuther — we're working on our response to their self-defeating "victory" in trying to force the country into a socialist wage-slave system. It's just that the Madoff situation is so obviously the fruit of the Keynesian model that it was difficult to pass up. You always pick off the easy targets first.
The only real mystery surrounding Bernard L. Madoff's Investment Securities scandal is why people are so mystified at how he was able to pull it off. A flurry of articles in today's Wall Street Journal ("Losses in Madoff Case Spread," A1; "In Palm Beach, Investors Assume Worst," A16; "Investors May Have to surrender Gains," A16; "SEC Had Chances for Years to Expose Madoff's Alleged Ponzi Scheme," A16; "Review & Outlook: Madoff and Markets," A18) all reveal a basic lack of understanding of what is really going on.
Madoff's success is easily explained. A Ponzi scheme is, after all, only Keynesian economics in microcosm — if a $50 billion graft can be referred to as "micro" in scale. People have been conditioned since the New Deal to believe unquestioningly in the Keynesian dogma that we can have what we want today, and let future generations pay for it. They, in turn, pass the debt on to their children, and so on. As long as nobody questions the basic assumption — that people, institutions, and governments can continue making promises they can't possibly keep — everything is fine. We only need to keep bringing in new investors/taxpayers to pay out old investors/taxpayers.
The projected deficit in Social Security and Medicare, the national debt, the growing burden of consumer debt (ironically highlighted in "This Year, More Than Ever, It's Tough to Be a Compulsive Shopper," A1), the subprime mortgage crisis (the list is becoming endless) all rely on finding more and more people in the future to bring in to foot the bill for today's expenditures. When fewer people come in than expected, credit dries up, or the social surplus proves insufficient to fund the scheme, the system collapses under the weight of its own illogic.
The alternative is to implement an economic system based on common sense instead of the desire to get something for nothing that underlies Keynes' system. Such a program is called "Capital Homesteading for Every Citizen," from the book with the same title. Increasing regulation and forcing government to do jobs it was not designed or intended to do is not the answer. It didn't work to stave off Madoff’s stunt, and it won't save a Keynesian economy from itself. The only solution is to try something based on the belief that true justice consists only in receiving what you are due, not in sticking it to generations unborn.
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