Welcome to The Economics Section of StubbornThings

by Cato  8/20/14

You can’t fully comprehend politics unless you have a firm grasp of money, because money and politics are inextricably linked. Money and politics have become a feedback loop in the 21st Century.

Money isn’t voice or message … you still have to say something people want to hear … but money is volume. Your voice no matter how clear and your message no matter how wise will not be heard above the ideological and partisan din without the amplifier of money.

Here’s the working theory:

One can’t fully understand politics if one does not understand ‘money’ in all of its modern forms: as currency, credit, auction value, derivative, and most importantly now as systemic control device.

If progressives shape all politics as redistribution of wealth and money and credit, then one can’t really understand the actions and motives of the Loud Left without understanding the economic and financial policies they espouse. That understanding is necessary to effectively oppose the impact of progressive economics and finance in our century, the material expression of which is ‘the markets’.

I assert as a truism that what one doesn’t fully grasp one is handicapped in defeating.

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The establishment of the welfare state has taken 120 years.

Woodrow Wilson and Theodore Roosevelt laid the groundwork, then called ‘populism’ and aimed at balancing agrarian and industrial power. FDR made the first programmatic inroads of the modern (post WW1) era. Every other president since, including Reagan, moved the welfare state project along a little or a lot, either because they desired that end to some degree or because they had liberals in control of Congress and had to reach compromises.

Keynesian economics built the concept of central bank … Federal Reserve … monetary interference into the American financial system, an idea that has become mainstream and has in the last six years gone to extremes of which Keynes would have disapproved and would have loudly opposed.

We who advocate in academic and public forums, as Keynes might, for severely focusing and reducing the outsized role and impact of the Fed aren’t considered entirely rational anymore, even among conservative audiences. To this I can attest first hand. Yet reinstating conservative principles politically will be impossible so long as progressive economics and the regulations it condones dominate financial markets, will it not?

Financial markets have become infested with just such regulation, most of which is designed to induce systemic stasis; to prevent or slow down the rapid changes that arise entrepreneurially from economic “creative destruction” and financial “animal spirits”. Innovation that proves too fast or too difficult for progressives to respond to … to control and direct toward redistribution and political advantage … they will declare immoral or anti-social and seek to destroy. But their politics are always and everywhere about money.

That same 120 years has seen the very concept of money as reconceived and redefined by Keynesians move to the core of politics. The point has now been reached that the failure of politics will precipitate the failure of finance, and the failure of finance will precipitate the failure of politics, because they are inextricably merged. The failure in 2008 of redistributionist politics in the mortgage markets … the result of progressive attempts to redistribute access to housing credit … what I have labeled “affirmative credit” … very nearly destroyed out entire financial system.

Take all this in and the actions of both Democrats and Republicans on the political side of the equation, and the actions of the Federal Reserve (and all the control boards and commissions and laws, from the FDIC to the SEC to Dodd-Frank) on the monetary side of the equation, become considerably more comprehensible.

What also emerges as financial understanding among conservatives grows, at least this is the hope, is a clearer path for the US out of the sort of progressive bog in which Europe and Japan are stuck and into which we are marching. The hope is for a clearer path in the US back to both free market finance and economics … with an entrepreneurial rebirth … and a renewed politics of what Hayek called “the highest political end”, personal liberty.


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2 Responses to Welcome to The Economics Section of StubbornThings

  1. Brad Nelson Brad Nelson says:

    Mr. Cato is keen to be our in-house Thomas Sowell, so “economics” has been added as a top-level category. You’ll find a sub-menu item for it now under the menu item of “Articles.” All new economic articles (other than blog posts, such as this one) will appear as always on the main page just as it does for every other category. But I’m sure many of you probably haven’t delved much into the organizational structure of this site. So if you want to choose all “economics” articles, or all “religion” articles for that matter, it’s easy to do.

    The plan of this site was always ad hoc, to go with the flow of whatever people wanted to do (other than endless bitching about George W. Bush and how all our problems are really the fault of racist Republicans). I wish Cato all the best and I hope he can do for economics what Rush Limbaugh does for politics; make the complex simple.

  2. Timothy Lane says:

    Teddy Roosevelt was definitely a Big Government fan, a supporter of a heavily regulated economy (despite his reputation as a trust-buster, he did less of it than his successor Taft, preferring regulated monopoly to enforced competition). But he was no fan of the concept of a welfare state, or for that matter of identity politics (he was scathing about “hyphenated Americans”). I’m not so sure of Wilson. In addition, one must note that there was virtually no advance in the welfare state during the Harding-Coolidge years. FDR created the embryonic welfare state, Truman tried unsuccessfully to expand it, Eisenhower did nothing to reduce it because he thought it would be futile (and even created the Department of HEW), and JFK didn’t do much (perhaps because of a lack of time). The real progenitor of the modern American welfare state was LBJ (or, as I call him, Lyndon the Bane).

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