Wednesday, April 14, 2010

Economic Thinking

In-Depth by: L. Carlos Lara | Wednesday, April 14, 2010


This Article is excerpted from Chapter 2 of How Privatized Banking Really Works by L. Carlos Lara and Robert P. Murphy, PhD

The most important fact behind the "new idea" unveiled in the previous chapter is that our efforts to help ourselves, our families, our businesses, and ultimately our country, rests entirely on our ability to see the nature of our problem with complete clarity. Without this understanding as a primary step, it is impossible to take the needed actions toward correcting the problem. Therefore, the problem must be fully exposed and made comprehensible to as many people as possible, and as quickly as possible.

So let us begin to decipher this mystery and point to some obvious observations. First of all, we must make a rather bold statement which we will set out to prove in the chapters ahead. What we are dealing with is a deeply hidden and cleverly designed scheme crafted by the few in political power, past and present, to systematically defraud the nation of its wealth. It is a direct assault on private property. This is our bottom line. It is the crux of the matter. Absolute power always resides with those who control the money. Over the course of history great families, kingdoms, and institutions have struggled with one another to gain this control. Today, in virtually every major country across our globe, governments lay claim to this centralized this power.

In our own American experience, our federal government has an exclusive and absolute monopoly on our money. Once it was made possible to tap directly into our pocket books with the passing of the 16th Amendment (the Federal Income Tax Law) in 1913 and the establishment of a Central Bank (The Federal Reserve System) in the very same year, the challenges of making a living and accumulating wealth changed forever for all citizens of the United States. The search to find a way of escape from this bondage has become the hard struggle of every individual citizen since then.

Over the past several decades, the results of these two significant laws have led to widespread economic frustration and confusion to society. The need for financial assistance to create strategies for the protection of one's wealth, or just to be able to process the endless forms and filings which are mandated by government, has grown exponentially. Today there are approximately 746,000 licensed financial representatives in this country representing over 7,000 banks, nearly 1,000 brokerage firms, and 2,300 insurance companies. The numbers of public accountants and lawyers are legion. Yet with all the benefits of professional assistance in navigating through a maze of tax laws, the fine print of financial products, and investment prospectuses, the individual person, more than ever before, feels betrayed and vulnerable. Dreams of financial security and prosperity evade U.S. citizens at every turn. The tax and debt burden has become unbearable. Eventually all this takes its toll and causes the individual to lose hope and forces him to succumb to even more dependency and subservience to government.

Clearly, advice offered by many in the financial services industry is not providing the help that is most needed because it merely scratches the surface of the real problem. A person's undisciplined money management or lack of time to expertly research every aspect of money decisions may be the culprit in many cases. However, the real problem stems from a completely different source.--It is Government Intervention and, especially, Current Monetary Policy, which is at the core of this money problem. Every individual, especially the financial advisor, has the responsibility to know specifically why and how the 1913 tax and banking laws are systematically stripping away the value of our dollar, creating boom and bust business cycles, and keeping the individual citizen in bondage.

Only by being armed with this truth is the individual able to properly assess the root of the evil and not fall prey to misinformation touted by leading financial experts, media financial personalities and especially our leaders in Washington. It is in knowing exactly how they do it that solves the riddle. Without this proper knowledge the individual is left with perpetual confusion.

Obviously this mystery needs to be uncovered and disclosed. More importantly, the problem needs a solution and that will necessarily involve a certain degree of deliberate thinking in order for it to be solved. However, here lays the first huge obstacle. Unbelievable as it may seem, the overwhelming majority of people here in our United States simply do not think. It's true! There are unfortunately numerous statistics that prove this sad point every day. The underlying facts reveal that over half the American population is dependent on some form of government support. Therefore, the power and sway of the voice of government has made real thinking virtually unnecessary for many. For others, thinking is simply inconvenient. It requires time and effort. Of course, we are referencing "sound thinking," independent thinking requiring concentration and contemplation. A person thinking soundly does not easily jump to conclusions about what pours out of the media, and especially out of Capitol Hill. In a society such as ours, sound thinking has become extremely rare, even in the information age when real knowledge has grown more accessible to the layman than ever before in history.

We must, therefore, reverse this trend and take up this discipline in small doses of course; otherwise we will never do it. Like any other discipline, a certain amount of time must be set aside each day for this practice until it becomes habitual and the starting point is reading a book. Yes, you read correctly, reading! In his great book, "Thinking as a Science", Austrian Economist, Henry Hazlitt makes it clear that our thinking is mostly formed by our reading so that we should select and read only the most informative books on the most enlightening subjects. Additionally, he stressed that "the great thinkers of the past improved their innate powers, not by the study of rules for thinking, but by reading the works of other great thinkers, and unconsciously imitating their habitual method and caution." (1.) Likewise we also must read and hone our thinking by selecting the subjects most worth our thinking time. And, since our primary subject matter is "economic man," we strongly suggest to the reader that he can do no better than selecting the subject of economics.

Why economics? Unlike any other subject, economics deals with an essential and pressing aspect of life, which is man's need to make a living. No subject of the 21st century seems to occupy more of the political limelight than economic questions and their answers. The present financial crisis is of course a major incentive for the serious study of economics. A more daunting reason is the understanding that governments and rulers are also very much involved with these same questions; however, their decisions regarding economic policy can be a matter of life and death---liberty or serfdom. For self-preservation, we should be knowledgeable in the basics of this very important subject. The Mises Institute and the Foundation for Economic Education are excellent sources for obtaining a valuable reading list, and both are absolutely free of charge on the internet. There is even a Mises University on iTunes. They are great places to begin this basic discipline.

The reader, however, must understand clearly that an academic approach to economics is not essential in order to understand our current economic turmoil. Nor is scholarly status necessary for learning how we should go about fixing it. It is not necessary to delve into the complexities of economics at the more sophisticated levels of the science. There is no need to become enthralled with statistics, confusing graphs, charts, models or complicated accounting calculations. These all certainly have a place in the study of economics, but not for the requirement we speak of. It is rather to suggest that the study of economics be undertaken in order to gain a firm grasp of certain key "economic principles" that are universal in their application. The subject of economics deals principally with the production and distribution of goods. Questions follow having to do with the motivations to produce those goods, what goes into their production, and even why goods are referred to as "goods." Additionally, the study of economics answers questions as to who gets what, how prices are determined, and how the market operates. It is a broad and all encompassing science which by default presents questions and answers pertaining to public policy. This unique characteristic is one of the main reasons why very early in its historical development, economics became entangled with socialists' ideas. In fact, it can be said that socialist ideas have greatly altered what is often taught today as economics. Our reading, therefore, must be selective and deliberate.

The study and understanding of economic principles is of primary importance, an effort not to be taken lightly. These underlying economic principles can be said to be indisputable regardless of "school" or persuasion because they are derived from fundamental conditions, which are universal. In this respect they can be said to resemble the laws of physics and chemistry. They are foundational concepts and have been made known to all peoples, in all places and at all times. However, given the state of what we may refer to as our "national ignorance," these economic principles have never been given much thought by our present generation--they either have been forgotten or altogether abandoned.

Message of Hope

"No one can find a safe way out for himself if society is sweeping towards destruction. Therefore, everyone, in his own interests must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the results."


Ludwig von Mises

(1881-1973)


For this reason, you should mark your calendar for July 16 & 17, and join us in Nashville, Tennessee for "A Night of Clarity."



Featured Speakers

Thomas E. Woods, PhD, holds a Bachelor's degree in history from Harvard and a Doctorate from Columbia. He is a resident scholar at the Mises Institute and the author of nine books. His most popular book to date was the 2004 New York Times best seller, The Politically Incorrect Guide to American History. He is also the author of the 2009 New York Times best seller, Meltdown. His newest book on Nullification will be released in June.

Richard M. Ebeling, PhD, is professor of economics at Northwood University. Recognized as one of the leading members of the Austrian School of Economics, Dr. Ebling is a past President of the Foundation for Economic Education and the Ludwig von Mises Professor of Economics at Hillsdale College. He is the author of several books including Political Economy, Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition, and Austrian Economics and the political Economy of Freedom. He is presently finishing an intellectual biography of Ludwig von Mises that will be published autumn 2010.

Paul A. Cleveland, PhD, is adjunct scholar at the Mises Institute, Professor of Economics at Birmingham Southern and author of several books including Understanding the Modern Culture Wars and the newly released Unmasking The Sacred Lies.

Robert P. Murphy, PhD, Economist and adjunct scholar at the Mises Institute, is the author of several books, including The Politically Incorrect Guide to Capitalism. The Politically Incorrect Guide to the Great Depression and the New Deal, study guides to Ludwig von Mises' Human Action and Murray Rothbard's Man, Economy and State, and co-author of the soon to be released How Privatized Banking Really Works.

R. Nelson Nash is a Consultant and best selling author of Becoming Your Own Banker: The Infinite Banking Concept, one of the most creative financial strategies of this century.

You will not want to miss this exciting two day event in Nashville, Music City U.S.A. The hosts and invited speakers of "A Night of Clarity" are devoted to exploring these economic relationships and providing a path for us toward liberty. In addition to these known Austrian speakers and economists, there will be a book signing, cocktail reception and dinner (with Q & A with all the Economists) all to take place on Friday July 16th. The following day, Saturday July 17th, features an Austrian Theory Workshop based entirely on the new book How Privatized Banking Really Works and covers the famous Hayek-Mises Business Cycle Theory. This event is open to the general public and student discounts are available. Hope to see you this summer at "A Night of Clarity." Finally...all of your unanswerable questions ANSWERED!



L. Carlos Lara, Manages a Consulting firm specializing in trust services, business consulting and debtor-creditor relations. The firm's primary service is working with companies in financial crisis. Lara is the co-author of the soon to be released book How Privatized Banking Really Works.


Notes____________________________________________________

1. Henry Hazlitt, Thinking As A Science, E.P. Dutton & Co. New York, NY 1916, Re published by The Mises Institute

2. Frank Chodorov, The Rise and Fall of Society, 1959 Thomas Nelson & Sons, Toronto, Canada, Re-published by The Mises Institute

3. Ludwig von Mises, Human Action, The Liberty Fund Translated from the German by H.E. Batson The Mises Institute