The Road Less Traveled

In economic circles, the views of Lord Keynes reign supreme and are the conventional wisdom of the day. A very simplified part of his economic theory is that increases in the money supply do not cause inflation. Instead, he argued that the government can use borrowed money to stimulate the economy and to generate income for the citizenry. He also claimed that government debt doesn't matter. His theories are the basis for the government stimulus program and for the ongoing effort to continue providing unemployment benefits to the unemployed and to continue bailing out failing industries. Keynesian economic theory gives the government the theoretical justification to expand the money supply, expand federal spending and to entice more and more people to feed at the public trough.

At the polar opposite of the economic spectrum, an Austrian economist by the name of Ludwig von Mises argued that debt does matter and that prosperity can't be created with borrowed money. Mises also argued that increased taxes result in a decrease in economic activity. But his views are ignored by most of the economic community, the political establishment and the mainstream media.

Like the little girl who saw that the emperor was naked, a relatively few people agree (with Mises) that endless borrowing and spending by the government will result in either a hyper-inflation or a massive deflationary depression. But it's not comfortable to be in the minority and to be on the opposite side of the popular perception of the times. How can so many really smart people not see what seems so obvious? The best reason I can think of is that it's easy to believe whatever everyone else believes. And it's difficult to believe anything that is ridiculed by the intelligencia of the day. But what we believe will dictate what we do or fail to do. And it will dictate whether we take steps now to avoid or at least to minimize severe losses as a result of a potential economic Armageddon.

Check out the great insights available at the http://mises.org

Vern
www.vernonjacobs.com
www.offshorepress.com