I’m not the only one to compare today’s American economy with that of the old Soviet Union’s, here’s Ron Paul, writing in the editorial pages of the Wall Street Journal:
The manner of thinking of the Federal Reserve now is no different than that of the former Soviet Union, which employed hundreds of thousands of people to perform research and provide calculations in an attempt to mimic the price system of the West’s (relatively) free markets. Despite the obvious lesson to be drawn from the Soviet collapse, the U.S. still has not fully absorbed it.
The Fed fails to grasp that an interest rate is a price—the price of time—and that attempting to manipulate that price is as destructive as any other government price control. It fails to see that the price of housing was artificially inflated through the Fed’s monetary pumping during the early 2000s, and that the only way to restore soundness to the housing sector is to allow prices to return to sustainable market levels. Instead, the Fed’s actions have had one aim—to keep prices elevated at bubble levels—thus ensuring that bad debt remains on the books and failing firms remain in business, albatrosses around the market’s neck.
He also understands the fallacy underlying the conceit of the Fed–that it can manage and control the economic behavior of over three hundred million economic actors to manipulate things just so:
In many respects the governors of the Federal Reserve System and the members of the Federal Open Market Committee are like all other high-ranking powerful officials. Because they make decisions that profoundly affect the workings of the economy and because they have hundreds of bright economists working for them doing research and collecting data, they buy into the pretense of knowledge—the illusion that because they have all these resources at their fingertips they therefore have the ability to guide the economy as they see fit.
Nothing could be further from the truth. No attitude could be more destructive.
Paul can only say these things because he has no chance of getting elected President. He’s correct on every score, of course, but it does not matter. Marcus Aurelius was probably the last (perhaps the only) leader that approached the ideal of Aristotle’s philosopher king. Organizations do not seek leaders that will tell them the truth. Organizations seek leaders that can cleverly make the lies the members of the organization believe amongst themselves seem true and reasonable and meaningful.
Of all the lies Americans have swallowed, there is hardly one more robust than that the Fed, or the Federal government, can control real economic outcomes (or at least can do so without resorting to violence, a different matter not under discussion here). It is a lie nested in the belief that their government is like Yahweh; all-powerful, all-knowing and all-present. Americans listen to economic shamans advising their next course of action as if they are special oracles of their government god, able to hear his whispers of economic advice. The whole set up is not substantially different from that of the early days of civilization, when agricultural surpluses first allowed societies to afford full-time soothsayers to study stars and goat entrails and the phases of the moon to determine planting and harvesting times. Today’s econometrics is yesterday’s astrology. Neither of them ever did anything more than comfort a fearful public psyche by pretensions of knowledge about what the future might hold.
But I don’ t mind Paul borrowing my ideas. I’ll even allow him to use the phrase I coined (or that I at least think I coined) to describe things as they are about now, “The Politburo on the Potomac”. If I were to pointlessly vote, I’d probably vote for Paul. He seems less bad than all the rest.