Capitol Ideas / Easy Money-And Hard
Bethell, Tom
"Capitol Ideas / Easy Money-And Hard" and snakes and became as hysterical as any faith-healer in an Arkansas hollow. Some journeyed to the enemy camp, some scolded American POWs, some became apologists for the invincible...
...I've noticed creeping into the newspapers more and more references to "paper money...
...The reason so many people are turning to gold is that the political and monetary authorities have shown themselves to be totally irresponsible in their custodianship of the paper currency...
...And that is the main...
...A l l this is quite worrying, of course...
...All of the sudden I am alert to the difference between marginal and average effects (too complicated to explain here, but important, even if ignored by the Congressional Budget Office...
...I t _9 probably won't be too late by the time you read this...
...With theory neglected, economic practice is left to the manipulations of left-wing academics, charlatans, professional economists, the eager handmaidens of politicians, just plain ignoramuses, and people like Dr...
...Otherwise, Sideshow is a mere tract of laughable intensity and shoddiness...
...one asked...
...In short, the outlook is bleak...
...Not all critics of the war in Southeast Asia were capable of it...
...Cambodia has become a vast charnel house...
...The printing presses at the Bureau of Engraving and Printing are kept switched on for too long...
...That's why I advise almost everyone these days t o buy gold...
...Soon it became a matter of dogma with the mesmerized that Southeast Asia could be no worse off than under the American military presence...
...The problem that we all face in the coming year, and possibly for the next five years, is that the people in Washington with the economic reins in their hands would most certainly not understand the foregoing reflections about markets, price controls, and planning...
...How do you set prices...
...how do you set prices.., mumble mumble mumble...
...Jimmy Carter, for example, simply would not understand the preceding quotation from Reisman, no matter how long and conscientiously he puzzled over it...
...Even in Washington, D.C., people are beginning to realize it...
...that Robespierre inflated the assignat...
...The amazing thing is that we are all perfectly well aware that throughout history many governments have had a tendency to treat their currencies irresponsibly: that Diocletian clipped the coins...
...It is possible--probable, I more and more think--that we are heading for some not-quite-foreseeable (but nevertheless widely sensed) economic disaster in 1980...
...Some journeyed to the enemy camp, some scolded American POWs, some became apologists for the invincible Communists...
...If this disaster strikes--and it could be triggered by the occurrence of a Khomeini-like takeover in Saudi Arabia, for example--all economic decisions made in Washington would tend to make things worse...
...But how many times have you seen it so much as suggested in the...
...A few years ago, while President Nixon's price controls were still in effect, Newsweek published a cover story entitled "Running Out of Everything...
...There are boat people, and in Laos mustard gas is rained on Men tribesmen...
...6 THE AMERICAN SPECTATOR FEBRUARY 1980...
...and so on...
...Again, how many people understand the consequences of price controls...
...More people do realize this today...
...That, at bottom, is the cause of the energy crisis: a refusal to allow the oil companies to bring us the bad news of higher prices...
...reason why market economies are so much more prosperous than the command economies of totalitarian states...
...Tne reason economic reporters won't mention the true cause of inflation-government-is that they depend on high government officials for nearly all their stories...
...They are living through a crisis of faith...
...Indeed, this vast public unconcern strikes me as constituting a threat to the Republic...
...And it was with many hosannas that they greeted Sideshow...
...nine' and snakes and became as hysterical as any faith-healer in an Arkansas hollow...
...I am convinced, after much surreptitious THE AMERICAN SPECTATOR FEBRUARY 1980 5 observation of the speciesl that most people in the news media don't...
...As Reisman observes, price controls, in addition to creating shortages, "paralyze rational action...
...But I have gradually and reluctantly come to the conclusion that the situation is worse than that...
...Nicholas von Hoffman recently wrote an article for the New York Times Magazine explaining the role the Federal Reserve Bank plays in adding to the money supply, and my impression was that this might very well have been the first time that a whisper of such monetarist heresy had been allowed in the paper in the'1970s...
...pages of the New York Times, or on the network news, that the government has any responsibility at all for the inflation of the currency...
...Despite this industry0 these calculating machines arenever included in any inventory of economic resources and are, in a sense, invisible...
...But the current liberal consensus in the U.S...
...After a large enough percentage of the population has moved the mile or so necessary to escape rent controls (across the Potomac River), the politicians themselves may come to .appreciate the effects of their actions...
...Many dissented honorably and decently...
...A couple of weeks later, Milton Friedman wrote a column pointing out that the editors had failed to realize that price controls create shortages...
...Reisman analyzes the effects of price controls in the field of energy as follows: They bring together at an auction for the use ofoil a trucker needing fuel to deliver food supplies and a housewife needing gasoline to take an extra shopping trip to the supermarket, and they prohibit the trucker from outbidding the housewife...
...The signals of price are not allowed to travel through the central nervous system of the economy...
...Consider, if you will, the price mechanism--the central nervous system of a market economy...
...Alice Rivlin...
...I doubt Tom Bethell is The American Spectator's Washington columnist and Washington editor of Harper's...
...In effect, price controls disconnect those millions of calculating machines called brains, and at the same time transfer a tremendous amount of power to a tiny number of people working in the central planning bureau that is almost certain to appear, in time, as a logical consequence of such controls...
...that it is understood by one person in a thousand, desl~te its simplicity...
...I t took a colossal act of faith to side with the North Vietnamese against the Americans...
...Not bloody likely...
...You may think that I am engaging in a little hyperbole here, and really mean to say that our economic leaders would not agree with what I have said...
...with a picture of an inverted cornucopia on the cover...
...It says something about the current power of fashionable ideas that iReisman apparently had great difficulty getting this well-written and thoughtful defense of market principles published at all...
...It did...
...But those who thought they might fetch the affection of the North Vietnamese are now making heavy weather of it...
...Hardly ever...
...They simply parrot what such officials say--do not have the nerve to challenge it...
...A peculiar feature of the price mechanism is that it works perfectly well even though those using it, businessmen and their customers, could no more describe how it functioned than they Could explain the folkways of Outer Mongolia...
...I laugh out loud when I see such headlines as "France Raises Taxes To Forestall Recession" (the joke is that without taxes there would be no recessions...
...rice controls create a wide range of destructive effects, which have been lucidly explained by George Reisman in an excellent volume entitled The Government Against the Economy (Caroline House...
...We've had paper money for quite some time, but only in 1979 have people begun to describe it as such...
...This book is a h o / t u b for the aching conscience, and if it does not offer new gods to pant after, at least it gives fresh reason to fear and revile such Lucifers as Kissinger and Nixon...
...Rent controls were imposed here in 1975 and not one new apartment building has been constructed in the city since then...
...Nor would the chairman of the Senate Budget Committee, Ed Muskie...
...The current attempt to punish the oil companies for bearing these price-tidings by imposing a "windfall profits tax" is comparable to the punishment meted out to messengers in the Middle Ages for bringing bad news to the royal presence...
...Ummmmm...
...clings pitifully to the belief that this government is different: that this time, the cause of inflation lies not with government officials, but with greedy businessmen or greedy labor unions or "market imperfections," as chief inflation fighter Alfred Kahn suggested before he was awarded the job at which he has failed so dismally...
...Price controls make it illegal to act rationally...
...Mouths gaped open in response...
...About a year ago a friend told me about a group of Chinamen visiting Capitol Hill...
...The media in the 1970s has prided itself on its adversary stance toward government...
...The reason for this oddity is that the price mechanism continually avails itself of literally tens of millions of very elaborate calculating machines which work about 16 hours a day...
...Despite his furious conjuring with documents and the bugaboos of his fellow adepts, no intelligent reader will doubt that the party preeminently responsible for Cambodia's destruction is the party that invested eastern Cambodia with troops, coerced the Cambodian army to truck supplies to them, and then brought in (continued on page 39) C A P I T O L I D E A S EASY MONEY AND HARD Nineteen seventy-nine was the Year of Economics as far as I Was concerned, the dismal science quite agreeably matching my pessimistic nature...
...Thus, when the price mechanism is under attack, as it is today-with worse no doubt to come in the form of price controls--there are very few people around capable of mounting the appropriate defense...
...How many people reading this could confidently answer the curious Chinamen...
...The ultimate emergence of hard money has of course long been predicted by gold bugs and others, who have always been condescendingly dismissed as "nuts...
...between the cause of inflation (too much money printed) and its effect (price increases...
...It would take a special sort of genius to prove Shawcross's case that the people who fought Communism in Southeast Asia were responsible for its ravages, and Shawcross is no genius...
...This is not because people are stupid, but because they rarely think about something that is invisible, hence taken for'granted...
...This small number of brains working at central planning can never function with anything like the efficiency of the millions distributed throughout a market economy...
...The Washington Post has been just as bad, recently running a series of huge and utterly absurd articles about the effects of inflation--higher prices-without so much as a minute's consideration given to the cause...
...Go out and buy gold before it's too late...
...In short, I go around boring people to tears, such is the general level of indifference to economic theory...
...South Vietnam is a conquered and pillaged country...
...Many disagreed with the war on legitimate grounds, and without suffering the delusion that Hanoi's war of conq.est was a war of liberation...
...Rather, they really don't understand the effects of government intervention in the economy, and believe that it is sufficient to have good intentions (demonstrated by administering occasional punishment to the productive sector...
...Well, do you think government officials are going to say that they cause inflation...
...It's not that they are particularly enthusiastic about the Soviet model (although I have always thought that Carter's comment, made on February 12, 1979, that "I don't have any inclination to condemn the Soviets as a people or even as a government" deserved more attention than it received...
...They are called brains...
...In fact, I think I'll take my own advice and do just that...
...They by Tom Bethell were eagerly trying to learn all they could about capitalism, their great new discovery...
...Now they are more and more vindicated with every passing day...
...I draw Laffer Curves on paper napkins, patiently p6int out the difference between tax rates and tax revenues, quote Jude Wanniski (who is a tad optimistic for my taste), lecture people on the diff e r e n c e - b i g difference...
...This could well be an ominous development, implying as it does the perception of a new form of money--hard money...
...they called for an American defeat--"Ho Ho Ho Chi Minh, the NLF Is Gonna Win...
Vol. 13 • February 1980 • No. 2
