Learning From History
"What is past is prologue." William Shakespeare
"Those who cannot learn from history are doomed to repeat it." George Santayana
The first step of the learning process is a review of the relevant history and identifying what works, what doesn't, what can be changed, how it should be changed, and who can change it. It is sometimes helpful to identify the people who have placed obstacles in the path of progress and those who have misled or derailed the train of human progress.
George Bernard Shaw, a socialist who did not like the lessons of history, attempted to confuse people with a paraphrased quote of his own, "We learn from history that we learn nothing from history." Those who would interpret Shaw's quote to mean that nothing useful can be learned from the past are some of the people who choose to believe, "It's different this time," and includes the people who "can be fooled all of the time." Santayana's quote concerns the concept that history repeats because we either fail to learn the lessons of the past or because enough people choose to ignore the lessons of the past, as Shaw and every other socialist would prefer.
The following includes a few easily observed historical facts and some related lessons of historical significance:
Man requires food and shelter to survive. Man has to act (production or plunder) in order to consume. Neither charity nor plunder are possible unless someone has acted (produced). Production (action) always comes first; without it, no consumption is possible. And no increase in consumption can occur unless it has first been preceded by increased production. No matter the source, the promise of a free lunch has always been a lie. Even the first bite of the apple came at a price.
Man has been present on earth for about one hundred thousand years. Ninety-five percent of that time we lived in caves. Five thousand years ago, the fertile river valleys that are the acknowledged cradles of civilization, gave birth to agriculture which for the first time, made the production of food for more than a few days of consumption possible. Animal husbandry, grain and other food surpluses gave rise to savings which created a need for accounting and the need for the preservation and protection of property. Savings facilitated trade, and trade created the need for money. Accounting records gave rise to written languages. Written languages facilitated the development, preservation, and spread of knowledge through time and over distances. Larger food supplies made it possible for there to be more people. With more people competing for food, the need to protect property from plunder increased. The need for the preservation and protection of life and property gave rise to government.
Ninety-five thousand years of pure consumption produced little or no progress. Savings facilitated the acquisition of capital along with the accumulation and sharing of knowledge which made possible and facilitated the Division of Labor. Civilization depends on the Division of Labor. Capital formation requires savings and requires the protection of property. Plunder and chaos are threats to property and inhibit capital formation.
Plunder comes at the risk of life and limb. The presence of plunder destroys the incentive to produce and the incentive to save. The presence of plunder not only lowers everybody's standard of living, the reduction or absence of savings makes it difficult to the point of being impossible for standards of living to increase. There is no free lunch for the plunderers or the plundered.
Freedom is the ability to make our own personal choices unlimited by the actions of others. The Division of Labor and capitalism depend on the maximum possible individual freedom that does not injure others or limit the freedom of others. Government's primary function, arguably it's sole legitimate function, is to protect individual freedom and individual property rights through the prevention of chaos and plunder.
In contrast to socialism which is the compulsory redistribution of wealth which politicians use to buy the votes of their lower class constituents, charity is a voluntary choice by producers to aid the less fortunate, but worthy members of society. Socialism (welfare) fosters sloth and stifles both initiative and production. Both producers and welfare recipients are victims of political predators. Socialism inhibits savings and consumes existing capital thereby inevitably lowering everybody's standard of living. Under capitalism, wealth begins to grow exponentially thanks to compounding; the converse is true under socialism. Laws that confer benefits on some at the expense of others are corrupt. Turning government into an instrument for plunder is a paradoxical perversion of the reason for government's historical creation that contradicts rationality and common sense. Power corrupts because the temptation to make law that serves only the interest of the lawmakers is almost irresistible and with increasing time in office becomes more inevitable. Socialism is the economic equivalent of cancer. Despite claims to the contrary, power seeking career politicians are the only cause, the sole means of spread, and the sole beneficiaries.
Voluntary exchange is the principle that lies at the heart of free markets and capitalism. Normally, voluntary exchange only occurs when the position of both parties is improved. Each party to the exchange is better off after the exchange or no exchange will take place. In indirect exchange, people exchange their goods and services for money which in turn can be exchanged for other goods and services. Credit involves the exchange of goods and services to be produced in the future. Creating money or credit out of thin air is the exchange of nothing for something; it is a fraudulent exchange and can only occur under the color of law in the case of governments or with the blessing of governments. Sooner or later, every government in history has corrupted their own markets and in turn their economies by corrupting their money and their credit/banking systems or worse, by corrupting both.
As the medium of exchange, money makes possible the widest possible division of labor. By enabling the widest possible division of labor, money is a central part of the foundation of civilization. As part of the framework of savings and part of the capital base, no one in their right mind can want their money to become worth less over time. In order to obtain, gain, or remain in power, there is no limit to what politicians are willing to promise, but there is a limit on how much they can tax. As a result of over-promising and under-taxing, politicians resort to debt and the devaluation of money. History tells us that governments have life-spans averaging several hundred years depending on how rapidly politicians accumulate debt, how much total debt they accumulate, and how rapidly the politicians destroy the value of their country's money.
It is an often repeated lie that money is the root of all evil. The truth is almost the opposite. Government expressed as the rule of law to protect life, liberty and property forms part of the foundation of civilization, but government expressed as the rule of men and invariably converted into an instrument of plunder, is the real root of all evil through its corruption of money. The longest serving currency in recorded history has been gold. The earliest reference to the use of gold coins is about 650 BC. Even the oldest gold coins that still exist show evidence of debasement.
In a pure capitalistic economy with a stabile money supply, prices will constantly fall. The sole cause of inflation is politicians enlarging the money supply by creating public debt, allowing excess bank debt through fractional reserve banking and/or printing money.
People change, facts change, markets and economies change. Why does history repeat? History repeats because governments don't change. It is government that is absolutely determined to ignore the obvious lessons of history. History repeats because career politicians are corrupt and that fact never changes for at least two reasons.
First and foremost, power corrupts. In their desire to win re-election, politicians are more concerned about winning than in discovering or doing what might be right. The longer a politician is in office, the greater the likelihood that he will be corrupted. Power attracts the corrupt. If a politician is corrupt when he first takes office, the likelihood is that he will become more corrupt and that he will progressively corrupt all those around him. Honest politicians pose a continuous threat of exposure to corrupt politicians. Over time, corrupt politicians discourage honest men from seeking public office by erecting barriers that make it almost impossible for newcomers to defeat incumbents. As the second oldest profession, politicians provide the proof that one bad apple spoils the barrel.
The second is also tightly related to politicians' desires to acquire or expand their powers. Laws are easily passed, easily strengthened, but rarely repealed. Reagan was right. Government is not the solution; government is the problem. People who can be fooled into believing that government can provide a solution for even a single economic problem are themselves part of the problem.
In like manner to the redistribution of wealth by politicians to buy the votes of their constituents, laws and regulations that limit individual freedom are corrupt.
The two most important lessons people must learn in order to change history are that term limits are the only means of changing the behavior of politicians and money is too important to entrust to any government. The third most important lesson of history tells us that credit it too important to entrust to central banks which can only be created by politicians and credit is too important to be subjected to the fraudulent practice of fractional reserve banking which cannot be legitimized except by politicians or their judicial appointees acting as surrogates. Credit excesses (the most common cause of inflation and the only cause of deflation when properly defined as a decrease in the money supply) require an unholy alliance between politicians and bankers.
The job of scientists is to discover the truth. Our judicial system is designed to settle disputes. Unlike scientists, lawyers are only interested in winning; truth can be either a casualty or a by-product. Lawyers have an adage/parable that they repeat by way of illustration. "If the facts favor your case, argue the facts. If the law favors your case, argue the law. If neither the facts nor the law favor your case, baffle them with BS." The vast majority of politicians attended law school and are far more interested in winning elections in order to stay in office than in discovering or revealing the truth.
If it is true that actions speak louder than words, then it is true that we should watch what politicians do, especially when it seems to contradict what they say or promise. With these precepts, there are several things that should now be self-evident to any thinking person:
The political party that supports the growth of government with cradle to grave governmental regulation of just about everything is the Democratic Party. Thinking people recognize that government power increases the power of politicians which can only come at the expense of the freedom of the American people. Whether they are willing to admit it or not, every thinking person can/should reasonably conclude that the Democratic Party is anti-freedom.
Headlined by Social Security, the distinguishing characteristic of the Democratic Party is socialism. Politicians have tried to disguise Social Security as an annuity. In a true annuity, the premiums are saved, invested and compounded over time. It is the growing mass of compounded savings that provides the capital that entrepreneurs use to create jobs that allow higher paid American workers to be more productive than lower paid workers in foreign economies. In complete contrast to an annuity, the "premiums" collected under Social Security were distributed to beneficiaries and spent immediately. There were, and are no savings to compound. The exporting of American jobs is in large measure a direct result of the loss of capital and lost compounding related to Social Security. Any reasonable thinking individual has to conclude that office-holding Democrats are willing to sacrifice every American's economic security and jeopardize American economic progress just to increase the chances for incumbents to win re-election. The people who believe, or would have you believe, that Social Security beneficiaries contributed the money through "premiums" whether complimented by compounding or not, are lying to themselves and lying to everyone else. If Social Security isn't a lie, then participation in Social Security would be a matter of individual choice and not be mandated by law for every worker.
Medicare is socialism; it is not an insurance program. In true insurance programs, the annual premiums cover not only the annual benefits, but also provide reserves which can be compounded to cover future benefit shortfalls. Medicare "premiums" not only fail to cover current benefits, but also fall trillions of dollars short of future projected benefits that will have to be paid. The net present value of the projected Medicare shortfall approaches the net present value of the entire private net worth of all Americans. The harsh lesson of history is that as long as participation in Social Security and Medicare is mandatory, the United States can not avoid becoming insolvent. Unless we turn away from socialism, inevitably the United States is doomed to follow the Soviet Union onto the ash heap of history. In a supposedly free country, it is a contradiction of principle to have a compulsory health care system. If participation in Medicare was a matter of free choice for every individual, nobody in their right mind would participate.
Every successful fraud requires a good story. The better the story, the more successful the fraud. Variations of the free lunch are the oldest and most successful fraud stories in history. When it is necessary to baffle them with BS, lawyers like expert witnesses; politicians use economists. The "monetarists" tell us the government can print our way to prosperity. The "Keynesians" tell us the government can borrow our way to prosperity. The free lunch in both is the illusion that credit or monetary wealth can be created out of thin air. Why have governments throughout the world and throughout history chosen the fraudulent economics of Keynes or the monetarists over the demonstrably superior economics of the Austrians? The "free lunch" serves the interests of the politicians in power and their bankers even though it comes at the expense of everybody else. Austrian economists believe in capitalism. Capitalism to politicians is like the sunrise to Dracula. Socialists and Democrats foster an atmosphere of bipartisanship and compromise to avoid real debates because they can't defend themselves from well-aimed fire and they can't stand the light. The beauty of socialistic fraud for the perpetrators is that it greatly lowers the risks of suffering the consequences of overt plunder and almost completely conceals the price by deferring most of the cost to unborn generations decades in the future.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." Thomas Jefferson
In 1913, the Democratic Party created the unconstitutional Federal Reserve. The inflation caused by the Federal Reserve led to the 1929 stock market crash. The banking crisis and the governmental meddling that followed led to the depression of the thirties. Knowingly or unknowingly (half-wittedly), the Democratic Party laid the groundwork for the coming Greenspan depression when Roosevelt confiscated our constitutionally authorized gold coins and replaced them with unconstitutional Federal Reserve Notes.
"Capitalism has raised the standard of life among the masses to a level which our ancestors could not have imagined. Interventionism and efforts to introduce Socialism have been working now for some decades to shatter the foundations of the world economic system. We stand on the brink of a precipice which threatens to engulf our civilization. Whether civilized humanity will perish forever or whether the catastrophe will be averted at the eleventh hour and the only possible way of salvation retraced- by which we mean the rebuilding of a society based on the unreserved recognition of private property in the means of production- is a question which concerns the generation destined to act in the coming decades, for it is the ideas behind their actions that will decide it....Our whole civilization rests on the fact that men have always succeeded in beating off the attack of the re-distributors. But the idea of re-distribution enjoys great popularity still, even in industrial countries. If we wish to save the world from barbarism we have to conquer Socialism...." Ludwig Von Mises 1930
Ronald Reagan echoed Von Mises in 1964, "We have come to a time for choosing; we will preserve for our children this the last best hope for man on earth, or we will sentence them to take the last step into a thousand years of darkness.... history will record with the greatest astonishment that those who had the most to lose did the least to prevent its happening."
Capitalism and socialism are incompatible. A little bit of socialism is analogous to a little "touch of leprosy." The people who subscribe to Keynesian economics are limited to politicians, their bankers and the people who can be fooled, regardless of whether they are Republicans who can be fooled some of the time or Democrats who have been fooled more often.
History is about to repeat as the United States stands on the cusp of another depression and countless Americans are soon to be made homeless just as Jefferson warned. Capitalism and the US economy will always be threatened and endangered as long as a single socialist holds public office. No American's freedom will be safe as long as a single socialist holds elected public office.
Irregardless of your own personal opinions, and despite the opinions of any number of very well known so-called 'experts', these concepts and lessons from history have been confirmed by a surprising panel of historically irrefutable observers.