Yesterday we hung
our Canadian correspondent out to dry by publishing his comments on Keynes . .
. with his permission, of course. We
wouldn’t want to offend those aggressive Canadians who would then swarm across
the border to take bloody revenge, crying havoc and letting slip the dogs of
war.
Since we survived
the first one, however, here is the second half of the comments, just as pithy
as the first, and leaving that wild, aggressive Canadian spelling in place. We left off yesterday with the observation
that if the definition of “money” is determined by the State rather than the
parties to a contract, the State effectively controls all economic activity.
Plus, if the
State can change the definition at any time (e.g., by changing the value or saying something else must be used
to fulfil a contract), then nobody ever knows where he or she stands. Has full value been given and received? Has the contract even been fulfilled? Is it even possible to complete a transaction
if the terms of the contract keep changing?
Believe it or
not, and we won’t name names, but we have had a series of run-ins with an “economist”
who insists it is impossible to buy capital on credit because the interest on
the loan will take all profits, so the transaction, if just on his terms, can
never be completed. Of course, what this
“economist” is doing — and we assure you he is a real person and that is his
actual position — is confusing the cost of capital, return on investment, past
savings, future savings, price, value, and a whole raft of other things. The real problem is that he’s a Platonist and
thinks ideas have an existence separate from the human mind, while we’re
Aristotelians and know that ideas are abstractions that cannot even exist without
people to think them up, so we’re right and he’s wrong.
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| "Let me give a ridiculous and impossible example." |
But back to
Keynes, money, and our Canadian correspondent’s comments on Keynesian monetary
theory based on the slavery of past savings. As he (the Canadian, not
Keynes) pointed out, “The yellow rocks view of capital, or the fiat money view,
is comparatively sane in relation to Keynes’s view on compound interest.” But that doesn’t finish off Keynes, not by a
long shot. As Keynes declared,
Now it happens that £40,000 accumulating at 3½ per cent
compound interest approximately corresponds to the actual volume of England’s
foreign investments at various dates, and would actually amount to-day to the
total of £4,000,000,000 which I have already quoted as being what our foreign
investments now are. Thus, every £1 which Drake brought home in 1580 has now
become £100,000. Such is the power of compound interest!
Of course, Keynes
neglected to mention the unimportant fact that when Drake brought home the
proceeds of his piracy, there was no one with whom or which he could deposit
his £40,000; commercial banking had not become reinstitutionalized, there were
things like taxes, confiscations, the English Civil War, and a bunch of other
things that precluded the fantasy of depositing funds and just letting them
grow.
In Drake’s day there
were only three things in general you could do with cash until the invention of
central banking and the Industrial Revolution.
You could hoard it (no interest), spend it (ditto), or buy land (and get
rent, which is “interest” from land . . . and you can’t keep buying land with
the rent on land because new land doesn’t come into being on demand . . . so
you spend it, not get interest on it).
Keynes’s example, then, was a ludicrous fantasy that assumed all income
is reinvested, and none is consumed . . . contradicting Adam Smith’s first
principle of economics that “Consumption is the sole end and purpose of all
production.”
And Our Canadian’s
Comments?
So, the neighbour comes back after finding
some yellow rocks so you can get together and build the fence. Except, I
invested my yellow rocks while he was gone. Compressing time to illustrate the
example, now to put my investment to use, instead of building one fence, I have
to build 100,000 fences or the equivalent; regardless if anyone wants or needs
this production. Easy, we just have to advertise and condition people to want
infinite material goods. Never mind if they are unhappy pursuing such things,
or that we are destroying the environment we depend upon. The symbols, call if
a golden calf, created by the compounded yellow rocks must be served.
It’s a difficult time worshipping the
compounded golden calf. But you and the neighbour come up with an idea while
commiserating about the difficulties of following the logic of such expert
economists as John Maynard Keynes. Why don’t we wreck our fence, and then
rebuild it; that’ll use up some of the compounding ‘capital’. Not enough? Let’s
burn each other’s houses and rebuild them. Tada, much compounding used up,
although sorry that your wife got in the way while I was sledgehammering the door
open. No prob, your kid got stuck in his room when the fire blocked the exit.
Hey, we can use up more capital for funerals; and lookit that GDP go up; this
is great; maybe we should get entire countries burning each other and killing
wives and kids.
As for Keynes championing immorality, he comes clean in this essay:
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| "Look what I got them to swallow this time!" |
Perhaps
it is not an accident that the race which did most to bring the promise of
immortality into the heart and essence of our religions has also done most for
the principle of compound interest and particularly loves this most purposive
of human institutions.
I see us free, therefore, to return to some of the most
sure and certain principles of religion and traditional virtue – that avarice
is a vice, that the exaction of usury is a misdemeanour, and the love of money
is detestable, that those walk most truly in the paths of virtue and sane
wisdom who take least thought for the morrow. We shall once more value ends
above means and prefer the good to the useful. We shall honour those who can
teach us how to pluck the hour and the day virtuously and well, the delightful
people who are capable of taking direct enjoyment in things, the lilies of the
field who toil not, neither do they spin.
But beware! The time for all this is not yet. For at
least another hundred years we must pretend to ourselves and to everyone that
fair is foul and foul is fair; for foul is useful and fair is not. Avarice and
usury and precaution must be our gods for a little longer still. For only they
can lead us out of the tunnel of economic necessity into daylight.
His statement is like a junky saying I just
need one more hit of cocaine, or the rush that power brings for politicos; and
then it is time to stop. Like the character says in the Jane’s Addiction song,
‘I’m gonna quit tomorrow’. Except of course tomorrow never comes.
To keep doing the Keyne’s drug you just have
to believe the essence of our religions is compound interest. Nevermind logic,
nevermind what the good books say. Up is down; Jesus worshipped moneylenders
etc. And now “we must pretend foul is fair and fair is foul; avarice, usury
must be our gods for a little longer”.
According to Keynes, not only does the state
have the right to re-edit the dictionary, the words don’t have to make any
sense; just as up is now down, the new definition of fair is foul.
Anyways, time to stop the madness with the
Just Third Way, decentralize power, mind Lord Acton’s dictum.
And, so you know this is Authentically
Canadian, he closed with:
😢Sorry, got a bit carried away.
We’re not.
#30#
