History
Thursday, October 1st, 2009By Author Tex Norton
When my son first entered high school, he was an undiagnosed dyslexic. Because he was having a great deal of difficulty with schoolwork, I met him at our kitchen table every afternoon at 3:15PM to help and supervise his homework. At his public school in San Diego, he felt “abused” if he had more than 15 minutes work of homework. Now at his Prep school in Palos Verdes, he had 5 or more hours of homework per night. Oh, the child abuse of it all! The change was traumatic.
During one particularly difficult session involving history, he blurted “History is easy for you, Dad, you lived it!”
That frustrated observation from a 13-year-old has stayed with me for over 30 years. The more I’ve thought about it, the more I realize the truths it contains. My earliest recollection of a major event is December 7, 1941. I can remember that day as clearly as if it were just yesterday. Since then, I’ve lived through two nuclear bombs dropped on Japanese cities, VE Day, VJ Day, Korean war, Truman’s firing of Douglas MacArthur, Ike’s heart attack, Thirteen Days in October (Cuban Missile Crisis), JFK’s assassination, LBJ’s Guns & Butter (Vietnam and welfare), Nixon’s betrayal of the gold standard on August 15, 1971, Nixon’s resignation, Carter’s misery index, the two Arab oil shocks, and so it goes. These are events I experienced; not just some dry history I was forced to read for a school class.
I happened to be in Frankfurt Germany the day Nixon resigned. A lifelong friend (from kindergarten) and I were watching the televised event at 3AM Frankfurt time. Afterwards, I said “Bob, remember this day. As time passes, we will look back on this day as being benign as future events unfold. The events of the future will totally overshadow what today seems incredible. It will just continue to get worse.”
Today circa mid 2009, we again wonder if it can get any worse. The answer is, of course, yes. We’ve gone from the high road to the low road and are now excavating for the subterranean road. Even though FDR forced us into WWII, we were reluctant to get involved with other folks problems. Today, we now force ourselves into every conceivable and inconceivable situation regardless of whether at home or abroad. No situation is too petty to be overlooked by our nanny state.
What does all this history have to do with the mess in which we find ourselves today? I may have “lived” it but I’m an old guy. The vast majority of readers only know of these events via dry history books. Why even worry about it?
I’m sure you know the old adage: Those that fail to understand history are doomed to repeat it. That’s “why.” The operative word here is “understand.”
Uncle Miltie Freidman chastised the bureaucrats of the 1930s for their failure to provide “liquidity.” So naturally Helicopter Ben Bernanke, a good student of history, isn’t going to let that happen on his watch this time around. One slight problem. Ben apparently knows the history but doesn’t understand that history. If he really understood, we wouldn’t be in today’s mess, or at least he wouldn’t be wasting his time as Fed Head.
What really did happen in the 1920s-1930s? In a nutshell: government interference with what otherwise would have been free market corrections. It all started in the early 1920s with excess credit and cash at below market interest rates. Sound familiar? By the late 20s, most of “the folks” were playing the stock market on 10% margin (meaning 90% borrowed money). Sound familiar? Bernard Baruch observed: “When the shoe-shine boy starts touting stocks, it’s time to get out.” Sound familiar? Has anyone really understood what they supposedly learned?
Frederick Bastiat had a sound-byte for this: “That which is seen versus that which is not seen.” We see plenty; every day. We just don’t try to understand what we see. We don’t even bother to wonder about that which we don’t see.
I never cease to be amazed at readers who complain about capitalism and free markets not doing the job (meaning government must step-in). Slight error in their understanding: We’ve NEVER had free markets or unfettered capitalism. We “see” the results of what attempts to emulate capitalism and free markets but we overlook the government interference in those efforts. We fail to ask what might have happened IF the government didn’t pass this law or interfere with that market condition.
You probably know the story of the broken window. Frederick Bastiat originated the concept and Henry Hazlitt promoted it in his book, Economics in one Lesson. Briefly, a thug throws a brick through a baker’s glass display window. The glass ruins all the baked goods in the showcase. The crowd that gathers first begins to condemn the thug. But then the conversation turns as folks start to observe that now the local glazier has more glass business and that the gas company will sell more gas to heat the ovens because the baker must re-bake the day’s supply of pastries. Of course the local flour mill will sell still more flour to the baker for the needed replacements. So the crowd now wonders if perhaps this is more of a stroke of good fortune for many of the local businesses rather than just a loss for one business. What they fail to take into account, to “see,” is that had the window not been broken in the first place, the baker would have sold the original baked goods and then had money to buy a new sweater or pair of shoes instead of having to use those funds to simply repair a destruction of property. The sweater and shoes actually represent new, positive economic growth instead of destructive replacement expense for the benefit of some other local businesses. How many times have you been told that war stimulates our economy? Isn’t war just another manifestation of the broken window?
We’ve never had a period of free enterprise or free markets; at least not in my lifetime. We’ve always had government looking over our shoulder telling us what we can and can’t do. In other words, “we, the government will tie your hands behind your back, but don’t let that stop you from pursuing your free market business activities.” That is what is not seen nor acknowledged in today’s economy. That is what we’ve not learned from history. We know what has happened in the past but we haven’t learned much, if anything, from it.
If what I’ve written above is true, how is it that we, the United States, have made such fantastic economic progress over the past couple of hundred years? If government has been so intrusive, how did we still manage to succeed?
To answer that, we have to go back to the conditions that existed when this country first started to expand. You’ve heard the Horace Greely admonition “Go West, Young Man, Go West.” The translation of that statement is when the bureaucrat density got to be overwhelming; the folks just moved five miles further west. But today, we have no more West into which to move. The bureaucrat density caught up with us. There is no new place left to go.
Think of the situation where you throw a ball straight up into the air. At first the ball is moving rapidly skyward. But as the ball continues upward, it begins to slow in its upward speed. Finally, it reaches the top or apogee and then starts to fall back down to earth. In our early days, we were the unfettered ball rapidly moving upward. As more and more bureaucrats began to interfere and control our lives, we started slowing down. Finally, the bureaucrat density began to overwhelm us and we started moving backward. Today, we find ourselves at a fast pace in reverse. Can you now see why? Did capitalism fail? Did free markets fail? Or did bureaucrats just tie our hands so tightly that we can no longer function?
Back in the day when we really could just move 5 miles further west, we enjoyed the closest to a free market environment the world has ever known. Today when something goes wrong, the hue and cry is “Government Do Something!” Politicians being politicians are only too happy to oblige.
Which brings us to the current economic conditions and bailout situation. Hanky Panky Paulson rushed to Congress with dire warnings of eminent collapse if the government didn’t “Do Something.” Congress was only too happy to oblige even though virtually 90% of the constituents requested that Congress NOT pass any bailouts. That incredible mistake has just led to more and more mistakes. We now find ourselves bailing banks, insurance companies, mortgage companies, auto companies and possibly even states – can you say California? Where will it end? Will it even end? Can you see any end in sight?
By the way, it’s now over a year later since Paulson rushed his dire warnings to Congress yet the appropriated monies have only been partially spent. Do you see a possible conflict here?
Time perhaps to actually begin trying to understand some history?
Regards, Tex
Linda Brady Traynham says:
October 3rd, 2009
1:19 am
Dear Tex:
Superb explanations with crisp illustrations. I wish I understood the description of “HTML tags I can use” even a quarter as well. The ability to explain history properly is not common in this day and age, another failure of government funding of the “educational” process. Here’s a thought to ponder: what can we learn from the Cavaliers vs. the Roundheads. The Roundheads this time are religious zealots that worship “Mother” earth and “planned” economies. Do you suppose we far more drably dressed Cavaliers can pull this one out in thirty years? Or will Oliver Obama Cromwell win at last?
Richard Marmo says:
October 3rd, 2009
10:32 am
Tex,
Outstanding article. You’ve run into the same problem of living thru history and reading about it that I have in a slightly different area. Modelbuilding.
Modelbuilding, to begin with, has become basically an adult hobby. The reasons are many and could form the basis of an entire article, so I won’t go into them here. Suffice it to say that the models..and here I speak primarily of aircraft and armor…that sell are of subjects from WW-II to the present time. While there are some exceptions, WW-I and Between the Wars are virtually impossible to sell. That time period is literally ancient history.
Same goes for movies. Westerns, which I and I suspect you, grew up on, are almost extinct today. Even when you do get one, almost no one watching them can relate to them in any way, shape or form. What’s replaced western movies today? Comic book heroes, Japanese Animes and Science Fiction.
It makes you wonder if the Terminator movie series is the ultimate destination of society.
Oliver K. Burrows III says:
October 6th, 2009
10:05 am
18 September 2008
The entire world economy came within three hours of complete melt-down. The result . . . an increase in the $100,000 FDIC account insurance limit to $250,000 . . . TARP (with the 32 words in Section 8 that give the Secretary of the Treasury virtually unfettered power exempt from congressional oversight or judicial review) . . . an FDIC that is in the red (i.e., broke . . . overdrawn . . . in need of tapping the Department of the Treasury emergency fund . . . and raising the rate and asking for pre-payment of its fees [called premiums in the real insurance world] to keep its doors open.
Look back at the era of the trusts . . . virtually unfettered capitalism . . . short haul versus long haul on the western railroads and its effects on the farmers. . . Standard Oil . . . and what some call the longest recession in history from approxmately 1873 until 1897. The Panics in 1873, 1893, and 1907 . . . were all monetary manipulations that paved the way for . . . the Federal Reserve.
With or without unfettered capitalism . . . or centralized planning and socialism . . . the end result is the same. Those on either wing of the political spectrum join hands . . . form a circle . . . and all those in the inside get squeezed and the outside get . . . left out.
A watched pot never boils . . . and a sound financial system with . . . a full-reserve system . . . and constant currency value and measured growth . . . make a solid economic foundation.
Linda Brady Traynham says:
October 7th, 2009
5:34 am
Oliver, you deserter! Over here playing with Tex. Great choice. I sit at his feet and sop up his golden words every chance I get.
There IS a choice, as I just wrote you at length. GET OUT OF THE CIRCLE that will be squeezed and diminished while there is yet time. Short of Oliver Cromwell and his Roundheads, or the excesses of the Puritans, though, I think it safe to say that in general those who wish to oppress others are not to be found on the “Right.” (They call us that because we are, but zealots are zealots, and invariably dismal.) Sure, they can be dreary about sin taxes, no dancing (Uh-oh! I’m asking for it!), not playing cards, and such, but they do not want to order your every move, restrict your every choice, command your every movement, and rob you to pay for votes to keep them in office, mansions, and limousines. The moral here is that Thomas Jefferson was correct and shooting was too good for Alexander Hamilton. It doesn’t matter if we’re talking Saxons vs. Normans, Cavaliers vs. Roundheads, Puritans vs. Hester Prynn, FDR against those who produced, or the current disastrous control of Washington bringing to fruition the policies of at least the last 75 years. Always, always, there are those who are driven to control, abuse, punish, and rob…and those of us who just want to live and produce in peace. The best advice I have is to listen to Tex on all things economic, at the very least, because he has a resume and history that surpasses glittering. Tony De Maio is the resident Mathematical genius. Publisher Michael Rough knows so much I gawp in awe, Richard Marmo is supreme in his fields, we have glorious Ring members you have yet to meet…and I wander around being the little Red Hen.
Welcome again to our circle of sanity. Linda
Oliver K. Burrows III says:
October 9th, 2009
9:57 am
I, Ma’am, am not a deserter! I may not have all the credentials of your TTR members, but I have three degrees, have taught as an adjunct college professor eighteen different subject areas in the humanities, science, mathematics, and business at the technical, undergraduate, and gradute levels for 30 years, been a business consultant/owner, have 20 years in information technology, and am an ordained minister. As for being getting out of the circle, whether one is inside or outside the ring, the rest is the same.
I find myself at odds with even the contrarians, because in the end, their focus is just like those forming the circle, that being self-motivated and -oriented. That is not what God called His children to be, and I will not apologize for contending for the Truth. If you do not play with the sharks, you will be eaten by them, and in the final analysis, it is not only important how we live but also how we die. As the apostle Paul said, “For me, to live is Christ and to die is gain.”
Virtually no one in the body of Christ that I know is examining the social/political/economic scenario we are presently facing is taking a wholistic view of events from an accurate historical perspective with even a modicum of knowledge of relevant economic theory. As a result, I listen to and read volumes of claptrap daily from people whose sole/soul position is to make money for themselves at the expense of or without any significant thought or concern for other people either spiritually or economically.
I know when/where I am unwelcome, but I will guard my heart, for out of it flow the issues of life. Parenthetically, I have been asked by the head of my ministerial association to speak for at least two days on this subject next February or March (assuming current conditions remain unchanged, which is problematic at best). You may treat me as the Faulknerian idiot full of sound and fury signifying nothing, but I know what the Word of God says and am preparing to do what I can to help others regardless of the cost personally. As my former pastor/Bbile college professor said, “Today is a good day to die. Make it a God day.”
Linda Brady Traynham says:
October 12th, 2009
2:04 am
Blink? I was teasing you about commenting on someone else, nothing more. You are not unwelcome here, and I would love to hear about your teaching career. This is not a site devoted to theology, but to the effects of economic, sociological, bureaucratic, and political forces on the nation. Your credentials are excellent, but please try not to not to startle sweet little old ladies. If you wish to discuss religious matters seriously (and preferably happily), you know where to find me elsewhere. LBT
Oliver K. Burrows III says:
October 13th, 2009
8:41 am
When a nation abandons a Biblical social/judicial/economic view, it will fail. Historical evidence proves this is 100% true. We cannot achieve success from God’s point of view, which is ultimately the only perspective that matters, while ignoring His principles. My calling is to preach and teach the truth, and to divorce that truth from the social/judicial/economic debate is not what anyone who professes to be a Christian can in good conscience do. I will therefore bow out of any additional commenting on the postings on this Web site not because I do not want “to startle sweet little old ladies” but out of respect for your “rules of engagement”.
The truth is out there, it is very clear, and, all protestations aside, the vast majority of the people (including, sadly, God’s people as well) are going to go down because they believe that a social/judicial/economic solution is achievable (which it is not) and their trust is in reforming the system or surviving the collapse. Individual responsibility does not by definition exclude an “others” view.
Good-bye and God bless.