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Central banking has been both a blessing and a curse
for capitalism. Socialism is just an out and out
loser.
Capitalism and central bank blessings:
An explosion of real wealth in the world. Just a
hundred years ago the automobile industry, electric
power, flight, radio and many others were all in
their infancy. Competitive capitalism fed by central
banking fueled ever increasing capabilities at lower
costs. True productivity enhancements. Now newer
technologies such as robotics, 3D printing,
artificial intelligence, genetic engineering are
promising a world of abundance that would make some
people believe in a socialist utopia. While some of
our readers decry the "inflation" central banks have
produced they fail to give credit to offsets from
the growth of wealth and productivity.
On a recent trip to Cape Town, South Africa we were
given a tour of some of the "township slum areas".
Electric Power was everywhere, as were cell phones,
air conditioning, and satellite TV. 50 or sixty
years ago, my middle class American upbringing had
only the electric power and primitive telephone
capability. Even though wealth can be concentrated
in the few and the difference between the riches and
poorest in the world can seem incomprehensible, the
truth is the rising tide of wealth is lifting all
ships.
Central Bank curse:
Rapid military expansion with ever increasing
capabilities has led to two world wars and unending
regional conflicts with horrific casualty rates. We
are very capable of miscalculating ourselves into a
global catastrophe. Some say no rational leader
would allow us to go down that road. However the
world has seen numerous irrational ones - or ones
that have a peculiar calculus with blinders to
collateral effects. More important is that rational
decision making is based on accurate information.
Very seldom in a rapidly developing crisis /
situation will complete and accurate information be
available to decision makers.
Central Banker Fallacy:
Central bankers are often the most highly trained
economists in the world. The reality is that
economics is still a very immature science. A lot
of what central bankers do is guesswork based on
incomplete and inaccurate information. Worse they
possess the hubris that they know what they are
doing and have a sense of infallibility. The reality
is that they fail all the time. The secretiveness of
this high priesthood leads many to mistrust them
(including top leadership) and the real objectives
of their machinations.
The fallacies of socialism:
It relies on other people's money. The Robin Hood
fantasy of taking form the rich to give to the poor.
As you take from the rich in ever larger amounts
they lose their incentive (greed) to work hard at
creating the wealth that people depend on for their
handout.
It destroys the individual incentive to rise above
one's station in life. When you see your neighbor
getting paid to do less you start doing less
yourself in the rightful expectation you will be
compensated the same either way. This is a problem
in civil service and some trade unions. The result
is a downward spiral in individual productivity.
Incentive is destroyed, followed by creativity.
Life is inherently unfair. While it is nice to
believe that all humans should be equal, the reality
is that they are far from it. We all have different
sets of abilities: intelligence, athleticism, AND
personalities. Interests are translated into skill
sets that capitalism rewards uniquely while
socialism ignores it completely.
Socialism believes all people shred of unfulfilled
needs would be basically good. The problem is that
people will possess differing degrees of badness no
matter what.
Central Banking and Socialism
One hundred years ago, Thorstein Veblen saw inherent
evil in what he termed "conspicuous consumption".
He derided wasteful consumption for simple
hedonistic pleasure. A problem we are beginning to
see again in our own time. His solution was a
utopia based on rule by engineers who sought to
optimize resources and capital into their most
efficient forms for the good of all. Two great
experiments in government in the last century sought
to achieve this utopia: Marxist Socialism and
National Socialism.
Marxist Socialism decayed in a morass of petty
politics once the iron fist of Joe Stalin became
history. Notwithstanding its eventual collapse from
lack of incentive, its central planning brought it
from feudalism to cutting edge technology in a few
generations.
The more successful National Socialism brought
Germany out of bankruptcy (from a failed central
bank) to just a few mistakes away from true world
mastery. Hitler's version was thoroughly corrupted
by his evil self and followers. While the pre-war
years offered potential, Hitler's regime did not
last long enough to offer much insight. If Saddam
Hussein's version of national socialism can be an
example we can see that socialism demands severe
constraints on individual freedom and occasional
severe punishments to keep in place and maintain
incentive based on pure survival.
Give me free market capitalism any day, just fix
central banking to make it more open - perhaps one
day in the not too distant future we can replace it
with a decision system based on artificial
intelligence.
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jpdell33
06-20-2019 @ 10:54 AM