Sitting Ducks: Why the Tea Party Movement Is Vulnerable to Economic Charlatans, Ignoramuses, and Statists
Remnant Review (Nov. 22, 2010)
Ellen Brown is a leftist. I have hammered away at this since October 8: 52 original criticisms, followed by 30 responses. Still, her followers could not believe it. They sent me outraged letters. Poor Max Keiser publicly challenged me to defend myself. How did I dare say such things about his favorite anti-FED expert?http://www.garynorth.com/public/7289.cfm
On November 20, she pulled the rug out from under Mr. Keiser and all the rest of the Greenbackers. She published a glowing article on Bernanke, the Federal Reserve, and quantitative easing 2. This will save the economy, she said. The world should follow Bernanke's lead. Hard to believe that she wrote anything this preposterous? Writing preposterous things is her specialty, as I have been trying to show. Read about the "new, improved Ellen Brown" here:http://www.garynorth.com/public/7286.cfm
For weeks, I kept saying she is a wolf in sheep's clothing. She is "putting the shuck on the rubes." Just three days after my final response to her 30 responses to my criticisms, she came clean. She wants a welfare State, and Bernanke is providing the free money. So, hooray for Bernanke!
For regular readers of my columns, this will not come as a shock. But her victims now must now face reality. They trusted her. She was the brilliant lawyer who was leading the charge against the forces of evil! They have now been sold out: lock, stock, and barrel.
Here is the problem. Well-meaning conservatives are unfamiliar with economic logic. They have no understanding of how the free market works. They think they are free market people, but they are ignorant. So, they are easily deceived by leftists and statists who come in the name of the free market, but who want votes to make the state bigger. They get sucked in by rhetoric. Some supposed conservative writer seems so sincere. He must be correct. He says he is in favor of America. He says he is for the little guy.
He may be an ignoramus. He may be a charlatan. He may be in way over his head. But his followers cannot see this, because they have no way to judge what he is saying. They are ignorant of the simplest principles of economic theory. They are easy prey.
One of the problems that faces every economist is that he discovers this sad fact early in his career: logical argumentation seems almost useless in persuading people of the falsehood of popular economic propositions. People are committed to a particular way of looking at the world, and this way is only rarely what the economist regards as the economic point of view.Mercantilism Lives!
This has been true from the beginning. If we date the advent of modern economics with the 18th century Scottish Enlightenment, meaning such figures as David Hume and especially Adam Smith, we discover that it took decades for intellectuals in the English-speaking world to become convinced of their basic argument, namely, that the mercantilist policies of the 17th century and the 18th century led to reduced economic growth.
The argument behind Adam Smith's Wealth of Nations is this: when an individual is allowed to pursue his own economic self-interest as he sees best, society prospers as a result. Smith argued that individual self-interest is legitimate, and that when the legal order allows each individual to pursue his self-interest, the increased productivity of his actions leads to greater wealth for everyone concerned.
We think of this today as the normal way of defending economic liberty. But it was not the normal way of defending economic liberty prior to the middle of the 18th century in Scotland.
The mercantilists argued that the wealth of nations is based on economic productivity, but only productivity directed by the government. They argued for government intervention in order to stimulate exports and increase the flow of gold into the nation. This is the proper way to increase national prosperity, they taught.
Smith argued that this increase in the supply of imported gold does not increase wealth whenever this increase is based on intervention in the economy by government officials. He argued that the freedom of the individual to pursue his own interests is the key to national wealth.
Unfortunately, this argument took over half a century for leaders in the British government to accept. Only in the middle of the 1840s did the British government finally repeal the infamous corn laws, which had kept the price of domestic food higher than would have been the case had tariffs and restrictions against food imports never been legislated.
Despite the fact that Adam Smith's Wealth of Nations has been in print constantly since 1776, we still find that a large number of conservatives believe that tariffs and import restrictions are a positive benefit to the economy. There have always been supporters of tariffs, although very few of them have been professionally trained economists. The economic point of view was hammered out by Adam Smith and his successors in terms of an analysis of restrictions on imports. Modern economics has always begun here. The person who is opposed to free trade across national borders reveals himself as a non-economist. There are very few of these people in modern academic life, but there are a few, although they have very little influence.
In contrast, among the voting population, arguments in favor of tariffs and import quotas remain popular. The most famous defender of these restrictions is Pat Buchanan. His opinion is widespread within the conservative movement.
I first came across this in high school. The man who taught me high school civics and basic economics believed in tariffs. He was a conservative. He was probably the most conservative teacher at the high school level in Southern California. Nevertheless, when it came to the question of international trade, he was a believer in tariffs.
When I began to study economics in the late 1950s, primarily by reading The Freeman, I encountered the case for free trade. I realized at the time that The Freeman promoted a position that was not held by the conservatives I knew. There was something about the argument in favor of free trade that alienated those conservatives. There is something persuasive to them about the belief that government intervention at a national border is productive, even though they firmly assert that similar restrictions are unproductive at state borders, county borders, and city borders.
When I realized that this was the case, half a century ago, I also realized that becoming a professional economist has its downside. Probably the most obvious downside is this, which I have found it to be true ever since: people pay very little attention to economic arguments that challenge their belief in the productivity of government intervention.
Conservatives debate over which kinds of government intervention are productive, but there is not much debate on the fundamental question of the legitimacy of government intervention against voluntary transactions. I am not talking about trade in certain goods or services that are considered inherently immoral or destructive, such as prostitution and addictive drug usage. I am speaking about the exchange of goods and services that are not considered immoral, and that individuals want to purchase. For some reason, conservatives believe the state can be a tool for increasing personal wealth as well as national wealth, without hampering the economic liberties of others in the society.
You would think that conservatives, not trusting bureaucrats, would reject the idea that government bureaucrats who possess the power of the gun are not reliable people in the realm of economic planning. Yet what I have found for over 50 years is that in certain limited areas, the logic of freedom, meaning the logic of free trade, is not believed by people who say that they do believe in these principles. They accept arguments in favor of free trade as long as the trade takes place inside national borders. But as soon as they get to the border between two countries, they abandon any commitment to the logic of free trade. This has persuaded me that conservatives do not really understand the logic of free trade.Economic Logic
This raises another question. To what extent do conservatives believe in economic logic at all? Can they follow the logic of an argument? Can they even recognize the logic of an argument?
I have concluded that the vast majority of people who call themselves conservatives are unable to follow the logic of economic reasoning.
Back in 1946, Henry Hazlitt's book appeared: Economics in One Lesson. Early in the book, Hazlitt says that most people are unable to follow long chains of economic reasoning. They cannot see how economic cause and effect operate. I am convinced that Hazlitt was correct. I have found, over many years of experience, that most people do not have the ability or the interest in following long chains of reasoning. This especially applies to economic reasoning.
Over 40 years ago, I read in the introduction to the best economics textbook then available an explanation for why it is important that economists earn a Ph.D. The reason is this: if they are not compelled to study economics on a rigorous level, for many years, students will never believe what they read in their freshman year of college in the introductory class on economics. This is another way of saying that people do not really believe the logic of economics, unless they have spent a lot of time and effort following the implications of these relatively simple principles of cause and effect.
I have used the example of tariffs to illustrate my point. I have done so because this is the oldest debate within the camp of the economists. Modern economics began with a consideration of this question. Adam Smith and his peers in the Scottish Enlightenment understood that they were arguing against a popular conclusion, namely, that government restraints on trade benefit the general population. Those Scottish scholars understood clearly that this was a widespread idea, and that it would take careful economic reasoning to persuade the general public that these ideas are incorrect. It has taken a lot longer than Smith would have guessed to persuade the voters of the truths of the benefits of free trade.The Question of Fiat Money
I need to consider another issue, less well-known than the debate over free trade versus tariffs. This is the question of money.
We find that even those economists who claim to be rigorous logicians and also defenders of free market principles come to the conclusion that government is capable of establishing control over the monetary system, and that government regulations promoting the expansion of the money supply are positive economic policies. Milton Friedman argued carefully against the intervention of the government in many areas of life, but when it came to the question of monetary policy, he believed that the economy had to have a central bank, and that there had to be rules governing the central bank.
This was a silly argument. The idea that a central bank would submit itself to any fixed principles of action was ludicrous. The whole purpose of a central bank is to establish power, mainly promoted by profit-seeking fractional reserve banks, to enable the banks to continue to operate against the interests of depositors, voters, and investors. The main goal of a central bank is to keep the free market and its sanctions away from monetary policy.
Friedman never really believed this, and neither do his disciples. They follow the logic of private property to the "border" of central banking, and then they say: "The logic of our position does not apply to the area of central banking." In other words, they call for a government-established monopoly in order to protect the other government-established monopoly, namely, the fractional reserve banking system.
If Milton Friedman and virtually all of the defenders of free trade and free markets cannot understand the logic of this position as it applies to the monetary system, it should not surprise anybody to find that conservatives who have no training in economic logic and no training in economic history have come to a very similar conclusion. These are the Greenbackers. They do not understand the logic of the free market, and they surely do not understand the logic of the free market as it applies to monetary policy. In this sense, they are not much more ignorant about economics and money than professionally trained economists who are followers of Milton Friedman. They are surely no worse off than the followers of John Maynard Keynes. His academic followers promote very similar policies.
In the case of Keynes, he favored the logic of men who were correctly regarded in his day as economic cranks. These economic cranks held positions very similar to those promoted by modern Greenback advocates, who are never trained economists. But this is not why they have made their mistakes. John Maynard Keynes was a self-trained economist. His disciples are trained economists, yet they promote monetary policies that are not fundamentally different from those policies promoted by the Greenbackers.
In my critique in 1965 of the Greenback promoter Gertrude Coogan, I pointed out that her position on monetary policy was not fundamentally different from the position promoted by John Maynard Keynes. The main difference was this, which was not fundamental in terms of economic theory: Coogan's hostility to fractional reserve banking and especially privately owned banks. Coogan, as with all Greenbackers, hated fractional reserve banking, because it enabled bankers to make a lot of money by creating a lot of money. Coogan wanted the Federal government to make a lot of money by creating a lot of money. She trusted the Federal government. All Greenbackers trust the Federal government. No Greenbacker trusts a central banker.
That was the case until November 20, 2010, when Ellen Brown climbed aboard the U.S.S. Bernanke. She did this three days after I completed my refutation of her 30 attempts to refute me.
My original critique of Brown is the same as my critique of Gertrude Coogan. Brown holds the same economic logic that Gertrude Coogan held. She makes the same arguments; she relies on many of the same examples; and she quotes the same bogus quotes that Gertrude Coogan did. When I prepared to publish my extensive critique of Ellen Brown, I sent to the Mises Institute a somewhat updated version of my 1965 essay on Gertrude Coogan. The Mises Institute decided to publish that updated article in the form of a short book, Gertrude Coogan's Bluff. I wanted people to be able to access my critique of Coogan, so that they could understand that Ellen Brown was making the same arguments, meaning that she was making the same mistakes.
Some conservatives in the 1960s believed Gertrude Coogan, and too many conservatives today believe Ellen Brown. They do not know exactly why they believe her, but they accept her arguments in favor of fiat money because they accept her arguments against fractional reserve banking. The Austrian School economists have made far more cogent criticisms of fractional reserve banking, but they favor freedom in money, which leads historically to some form of gold or silver coin standard. The Greenbackers oppose gold and silver as the basis of the monetary system. They are in favor of the same kind of fiat monetary expansion that John Maynard Keynes was. Yet they think of themselves as anti-Keynesians.
How is it possible for conservatives who regard themselves as anti-Keynesians to adopt the monetary policies that Keynes recommended? The answer is simple: they do not understand John Maynard Keynes. They have never read the General Theory of Employment, Interest, and Money. They have never read any economic textbook at all. They have never read the strictly economic books and articles written by Ludwig von Mises or Murray Rothbard. They may have read Rothbard's history of the FED, but they have never accepted his position on gold coins and a monetary system based on gold coins as the free market's solution to the problem of price inflation.
The Greenbackers are completely devoid of any knowledge of economic cause-and-effect. They do not understand the principles of free trade. They do not understand the principles governing competing monetary systems. All they know is that they have been told that fractional reserve bankers have ripped them off, and therefore they accept the premise of the Greenbackers that the Congress of the United States will not rip them off. Yet most of them know that Congress has ripped them off continually. So, what is the problem? Why can't they see that handing over control over the monetary system to Congress will result in the same kind of theft that handing over to Congress the right to tax their incomes directly has created (the 16th Amendment)? What is it about the logic of the Greenbackers that completely undermines the ability of conservatives to recognize the threat that a congressional monopoly over money creation poses to them?
It is understandable why the Greenbackers of the 19th century favored this policy option. Greenbackers were promoters of government intervention. They were promoters of the Federal income tax. They were promoters of government intervention of many kinds, including the municipal ownership of public utilities and the regulation of these utilities by state and federal governments. So, it is understandable why political leftists would favor transferring the power over money to the United States Congress. But why is it that self-professed conservatives, who claim they do not trust the government, and who especially claim they do not trust Congress's ability to balance the budget, should then conclude that Congress should be granted a complete monopoly over money, and that the gold coin standard should never be allowed to interfere with congressional power over the money supply?
When you think about it, you realize that this makes no sense at all. The only explanation that makes this inconsistent thinking plausible is that people make intellectual decisions based primarily on emotion. One person says that we should fight Congress, because Congress taxes us too much, and a Tea Party member concludes that this is a good idea. Another person tells the same Tea Party member that the bad old bankers have cheated him, and the only way to get even with the bankers is to transfer to Congress a monopoly over the money supply. The Tea Party member agrees.
It is clear that the Tea Party member does not have a clear notion about the willingness of Congress to impose taxes by means of expanding the money supply. So, he concludes that it is safe to have Congress in charge of monetary policy, yet at the same time, the same person says that the public should not trust Congress with respect to taxation. He has no understanding of the fact that the ability to expand the money supply is one of the most important forms of taxation that any government possesses. He has no understanding of what is sometimes called the inflation tax.
The person believes that the inflation tax cannot and will not be imposed by Congress, even though Congress has a monopoly over guns and power. He believes that Congress is completely unreliable in the area of taxation, and he also believes that Congress is completely reliable in the area monetary policy. But fiat money creation ultimately is the power of taxation.
These same individuals are told by Ellen Brown that, if Congress is given the power over the printing of money, Congress can then abolish the income tax. She never proves this. But she says it over and over in her book. How in the world can Congress abolish the income tax, unless it possesses the power to impose some other tax? The other tax that Congress has the power to impose is the inflation tax. Yet these same people believe that Congress should not be allowed to impose an income tax. They believe that the ability to print money enables Congress to get something for nothing. They understand that an income tax violates the principle of something for nothing. They understand that a person who pays the income tax gets little or nothing, while Congress gets whatever it can buy with the money. "Congress really can get something for nothing." There is no confusion in their minds about this. Then Ellen Brown comes along and tells them that Congress can indeed get something for nothing, merely by printing money. Also, this money will not be inflationary. Congress can then get rid of the income tax. These people believe her.
In other words, these people cannot follow an economic argument. It is obvious that Ellen Brown cannot follow an economic argument. It is obvious that Gertrude Coogan could not follow an economic argument. It ought to be obvious that John Maynard Keynes could not follow an economic argument. But what we find is that Brown, Coogan, and Keynes all have conservative supporters, and in the case of Keynes, most of them have PhDs in economics.
What is the problem? Why is it that people cannot follow economic logic? I wish I knew. I have known that this was the case ever since the late 1960s. I wrote about it in my book, An Introduction to Christian Economics (1973). I wrote in the chapter on tariffs that people simply refuse to understand or believe it. This has not changed.
All of this brings me to a specific point. The conservative political movement is made up of people who are conservatives for emotional reasons. They are not conservatives because they read books on economic theory. They are not conservatives because they read books at all, except possibly short books written mostly by political activists. They did not come into the conservative movement based on their understanding of economic theory. They came into the conservative movement based on a vague awareness that the government is taxing them too much, and that something ought to be done about it. They have almost no idea of what should be done about it, either in theory or practice. I have seen this ever since the Goldwater conservatives. They have good intentions, and they are on a political road paved with good intentions.
When you find that, decade after decade, conservatives are committed to an economic policy that clearly undermines the principles that they say they believe in, you have to come up with one of two conclusions. First, they have no understanding of the economic principle that they claim to believe in. Second, they do not understand the logic of those principles. They may say that they believe in the principles, but they cannot articulate those principles, and they cannot devise a theory of cause-and-effect that is consistent with those principles.
All of which is to say that Henry Hazlitt was correct in 1946: most people cannot follow long chains of reasoning.Videos
One of the reasons why I want to do simple YouTube videos is because I understand the people cannot follow long chains of reasoning. They can follow a three-minute video. They cannot follow it very carefully, and they may not be able to put it together with 100 other three-minute videos, but at least, on this one point, I may be able to convince them that government is not acting in their self-interest. The government is acting in its own self-interest. Government's self-interest is almost always opposed to the self-interest of private property owners.
I will attempt to find a symbol to identify certain principles of action. Why? Because people can understand a symbol much easier than they can understand a long chain of reasoning.
Whenever I talk about government, when I produce those videos, I will use the images of a gun and a badge. People can relate to a gun and a badge. They generally understand that, with respect to government intervention in the economy, someone who wears a badge and a gun is trying to take money or freedom away from the public. So, when the person sees the image of the gun and badge, he instantly has an emotional reaction. If he is a conservative, he has a reaction that is negative, except in those cases at the national border.
Conservatives like tariffs at borders. They also like to send young Americans off to war. They like the idea of American greatness, and they define American greatness as the ability to stick guns in the bellies of foreigners. This has been true for 350 years, and it is not likely to change anytime soon. Conservatives will put up with taxation, economic intervention, and even a draft system that sends their sons off to die, as long as their sons get to wear a uniform, and as long as they are allowed to shoot foreigners.
This has been a divisive point in the conservative movement since at least the days of the Constitutional convention. The anti-Federalists did not trust Congress and the Federal government with the power to tax and consscript a man to go off and fight wars. Even within the camp of those who favored the Constitution, there was a division. Hamilton favored Federal debt and economic policies that centralized power, while Jefferson preferred the gold coin standard and restrictions on the extension of government authority over the economy. In American history, the Hamiltonians won the argument, and the Jeffersonians have been relegated to the fringe.
There is a producer and narrator of two Greenbacker videos named Bill Still. Still promotes the ideas found in Gertrude Coogan's books and Ellen Brown's book. There is no difference in their basic analysis of the economy. But Still has no footnotes. He has lots of images. He has logic, but this logic is no better than Ellen Brown's logic, which is to say, it is no logic at all. But people do not perceive as clearly that Still has no logic, because he promotes Greenback ideas by means of visual images. Even on this website, I have subscribers who keep posting one of the Bill Still videos, The Secret of Oz, and then ask whether or not this is a good video. It is clearly a lousy video, if you are talking about what it promotes. It is a good video in the sense that it confuses people with respect to the legitimacy of Congressional control over the money supply.
The fact that individuals can read my analysis of Ellen Brown, which is the most detailed analysis that most of them have ever read against a particular author, and still fail to recognize that Bill Still is promoting exactly the same system, is indicative of the fact that some people cannot follow long chains of reasoning. They cannot follow anything more than A+ B equals C. If I also say that A equals D, and B equals E, they do not conclude that D + E also equals C. What is the C? Congress. We should not trust it.
People who read my critique of Ellen Brown sometimes do not understand any of it. They read it, and they conclude: "Gary North does not like Ellen Brown's book." This is a correct conclusion. But, if they were asked to explain more than two or three ideas in Ellen Brown's book that I do not agree with, some of them would be hard pressed to do so. So, when they see the video by Bill Still, which promotes exactly the same system, they are unable to think through the implications of that video in terms of what they have read on this website against Ellen Brown's economics. They cannot perceive the connection between Ellen Brown's book and Bill Still's videos. There is such a connection, and it has to do with turning over to Congress a monopoly over the money supply. It also has to do with the abolition of the gold coin system, because that system thwarts Congress as well as it thwarts fractional reserve banking. They do not conclude that Bill Still is just another crackpot Keynesian. But that is what Bill Still is. So is Ellen Brown.
People hear the word "Keynes," and they think "bad." This is correct. The problem is, they cannot articulate what is bad about Keynes's economics. They only know the Keynes is bad. So, when they hear or read the same arguments that Keynes used, but the person comes to them seemingly in the name of conservatism, they are unable to conclude: this is bad.
This is an argument for a website like mine. People can post a link to a video and ask whether the video is any good. They trust my answer. I am not sure why they trust my answer, but they do. The best way to trust my answer is to read, think through, and understand the logic of my position. But this is difficult to do, and people want shortcuts. So, I used the question-and-answer forms to provide shortcuts.The Enemies of My Enemies
The trouble is, most conservatives do not belong to a website like this, and therefore they are vulnerable to left-wing promoters of Congressional sovereignty over money. They are vulnerable to people who come to them in the name of fiat money, not understanding that the people who have come in the name of Congressional fiat money since the 1870s have been left-wingers. They think that they are right-wingers. Why? Because these people oppose fractional reserve banking. But just because a critic opposes fractional reserve banking is not proof, in and of itself, that the person is in any way conservative.
One of the economists most quoted by the Greenbackers is Michael Hudson. Hudson is opposed to the bankers, and he is opposed to the expansion of federal power in foreign-policy. He is a leftist. He is the economic advisor to Dennis Kucinich. I think the green backers have a legitimate reason for quoting Michael Hudson. They are left-wingers, and he is a left-winger. He is opposed to the gold coin standard; they are opposed the gold coin standard. He is in favor of expanding government power; they are in favor of expanding government power. But what I do not understand is why conservatives accept their ideas and the authority of Michael Hudson in matters of economic reform.
Ellen Brown does not know what she is talking about. Neither did Gertrude Coogan. Neither does Bill Still. I refuted Ellen Brown, idea by idea, because I wanted to provide an example for conservatives of a false-flag infiltrator. I wanted to show that she does not know what she is talking about in terms of economic theory, and she is even less competent in her understanding of American history. She does not understand how to present an economic argument, and she does not understand how to use historical documents. I wanted to show that she is utterly incompetent.
I had hoped that she would respond to my arguments in the realm of economic theory, but she was wise enough not to do this. She did respond to 30 of my 31 criticisms of her handling of historical documentati