NOTE: Mel Gibson has made a fortune over the last week because of his ability to orchestrate the greatest negative-response marketing campaign in movie history. I call it the “Raspberry Concerto in F-Major.” He got liberals to foam at the mouth in print. Tens of millions of people have paid $8 to find out what the fuss is all about. I want to find out how he did it.
Please give me some help. Go onto Google or some other search engine and do a search for “The Passion” “review,” “violence,” “anti-semitic,” and any other negative words you can think of. See what you can find after page 5. If you find some really juicy hatchet job, please send me the link.
Americans live in a fantasy world. This fantasy world is going to be destroyed by economic forces that are already well-established.
It is easy for readers to think, “He’s talking about the other guy.” Maybe I am, but if you are doing essentially what the other guy is doing, then I’m talking about you.
Americans no longer save. They spend. You have read this over and over, but has it registered? Really?
What percentage of your after-tax income do you save each month? Do you have an automatic thrift plan with your employer? Do you ever touch the money? You should have a monthly automatic paycheck deduction plan unless you are so well disciplined that you have budgeted all of the money in advance, including the thrift portion. Not many people are sufficiently self-disciplined to do this. They have this or that emergency that just happens to pop up before the money is deposited into the savings account.
SAVING AND SUCCESS
It is the determination to save that marks the successful person. I am not persuaded that the successful person is made successful by a savings program. He is successful because he has determination to spend less than he earns, every month, no matter what. It is this unbreakable dedication to sacrificing a portion of the present for the sake of the future that marks the successful person. It is a mind-set. It is this self-determined, self-disciplined program — a systematic savings program — that marks the person who has the ability to become a success. This personality trait affects everything he does. He is future-oriented. He is therefore upper-class.
Your class position is established by your view of time, not the money you own today. If you are future-oriented, you are upper class. If you are present-oriented, you are lower class. Your present wealth testifies to what you are. It does not determine what you are. Don’t mistake the evidence for the cause.
A successful person is not successful because he saves. He saves because he has the personal characteristics that produce success. Saving is not the cause. It is the sign that the person has one of the crucial personal characteristics of success.
The young man who saves at least 10% of his after tax income from the day he gets his first job possesses the mark of success. This self-discipline must be taught. It does not come naturally for most people. A young man doesn’t emotionally know that if he doesn’t save for his old age, he will be in dire straits. He may become dependent on his children. To think that a 12-year-old is motivated by such a vision of the future is naïve. Ben Franklin said it best: “A child thinks that $20 and 20 years cannot be spent.” Children are not future-oriented. Present-orientation is one of the primary marks of a child. Children are also not independent. Others make their decisions for them. That is the primary mark of a child.
A NATION OF CHILDREN
Americans today are a nation of children. We can see this in their savings habits. We can also see it in their voting habits.
In recessions, the rate of thrift rises. People get scared. They worry about losing their jobs. They recognize that they are vulnerable. Like the overweight person who finds that his clothes are too tight and who thinks, “I must start dieting today,” so is the spendthrift in a recession. He can no longer put off a savings program, he thinks. He must begin saving. So, he does.
But, like the overweight person who loses 20 pounds and whose clothes again fit, the saver is tempted to go off his budgetary diet. The money seems good. The job seems safe. He stops saving.
You can chart recession years by looking at the sharp increase in the national savings rate. You can also mark the period of the recovery. The savings rate drops.
In the most recent recession of 2001, the savings rate never went over 4%. In previous recessions, it has gone over 8%. Today, it has fallen back into the 1% to 2% range. The recession has had no lasting effect on people’s willingness to sacrifice present enjoyment for the sake of future security and income.
From the point of view of the return on savings, I can hardly blame the American public. The Federal Reserve System pumped in so much money in 2001 that it drove the short-term interest rate from over 6% to about 1%. Meanwhile, the rate of price increases was over 2%. After income taxes and the decline of purchasing power, a person with a passbook savings account or money market fund went in the hole. He had a negative return on his money. That means that his sacrifice of present enjoyment of spending the money left him poorer. Then why save?
Here’s why. When he loses the willingness to save, this affects his outlook regarding the future. He consciously decides that the payoff of self-denial today is a losing proposition. He concludes that the system is rigged against him in his capacity as a saver. He is correct: the system really is rigged in favor of the spender and the debtor.
When a recession hits, Keynesian policies of deficit financing are adopted by the Federal government. The central bank starts buying government debt with newly created fiat money. The government and the central bank adopt policies that are disastrous for individuals to adopt: reduced saving, more spending, more borrowing.
The public is so utterly ill-informed today — as ill-informed as Keynesian economists — that people mimic the state. They spend. They take on consumer debt. In the 2001 recession, they bought homes and new cars. This, we are assured by government economists, was a good thing. The consumer did not falter. The consumer spent the country into prosperity.
This is the essence of the Keynesian economic solution to recession: spend yourself (and the nation) into prosperity. Keynesians apply this principle to government spending because they believe that consumers are slackers when it comes to spending during a recession. There is insufficient demand. Demand — spending — is the key to recovery — not thrift (a negative), not reduced wage rates (a negative), but spending. So, the government must pick up the slack. It must also encourage the public to follow the leader.
This is a child’s universe. The child falls down and scrapes his knee. He runs to his mother to get her to make the pain go away. His mother will fix it! Two minutes before he fell down, he may have resented his dependence on his mother. He wanted to be a big boy. But when big boys fall down, they don’t run to their mothers. He is not ready to be a big boy after all.
Americans have bought the Keynesian party line. They believe that self-discipline is not the way to success. They believe in the state as mother. So, we live under the watchful eye of the nanny state. That is what most Americans want. They vote for politicians who refuse to cut back on government spending. The state grows ever larger, and so do its promises.
We have again seen the rate of thrift fall to about 1%. We have seen the Federal government’s percentage of the economy rise to 25%. These phenomena are the result of the same mind-set. As surely as the determination to save is related to the determination to become independent economically, so is the determination to take on consumer debt to buy depreciating assets linked to the determination to find someone else to solve life’s economic problems. “Make it stop hurting!”
When the economy falls down and goes un-boom, the voters run to the government. “It hurts. Make it better.” What snookums needs is a cotton swab drenched in alcohol. “This is going to hurt.” Response: “No! Don’t!” The child wants the hurt to go away now. He doesn’t want what is necessary to solve his problem — his real problem. He doesn’t know anything about infection. He knows only that his knee hurts and he wants mommy to make it stop hurting.
In politics, however, mommy has to be re-elected at regular intervals. Mommy is not secure in her high office. So, she promises never to use that nasty old alcohol. She will kiss the wound and make it well. In doing so, she will increase the risk of infection.
Ever since John Maynard Keynes persuaded politicians that what they wanted to do — increase spending without raising taxes, and therefore increase the national deficit — is economically sound policy, the politicians have become incorrigible spendthrifts. They want to be re-elected, and a slack economy is their own scraped knee. So, they run to the central bank. “Kiss it and make the pain go away.” The central bank obliges. It creates money. The supply of money goes up. This tends to lower the price of money — the interest rate — in the recession phase. The result: the destruction of a positive economic return for savers, after taxes and price inflation.
Keynes taught that what is rational for the individual during a recession — increased thrift — is bad for the economy as a whole. To cut expenses personally is self-defeating nationally, says the Keynesian, even if he calls himself a supply-side economist, a monetarist, or an Austrian economist. If his argument is that thrift and cost-cutting are good for the individual but bad for the economy, he is a Keynesian. He is denying the heart of free market economics, from Adam Smith to the present. He is saying that rational individual self-interest not only fails to coordinate the economy, it is bad for the economy. This assumption is the heart, mind, and soul of anti-capitalism, from the old mercantilism that Adam Smith refuted to the new mercantilism in its various incarnations. Most economists share the same faith in government: “The free market needs the government to kiss it and make it not hurt any more.”
This is the child’s universe. The West has entered its second childhood. It has become dependent on government to provide fiat money. America has become dependent on Asians to supply us with loans and capital. The problem now facing Americans is that Asian investors in the second half of 2003 dramatically reduced their rate of investing in the United States. What appears to be Asian investment today is in fact Asian fiat money. The Japanese central bank and the Chinese central bank are in high gear. They are keeping the dollar’s value high by inflating their own currencies and buying U.S. government debt. This is Asian mercantilism. “What is bad for individual investors — monetary inflation — is good for the export sector.”
If the world’s central banks were ever to stop creating money, the malinvestments which their low interest rate policies have created would be exposed by the capital markets as misused capital. The capital markets would fall like a stone. The West’s central banks have undermined thrift, and what little thrift remains is lured into projects that cannot be sustained apart from the illusion provided by even more fiat money.
The nanny state has kissed the nasty scrape, and in doing so, has infected it. The voters cry, “Make it stop hurting!” They never stop crying.
The West is now in its second childhood. It refuses to do what is necessary to grow up: reduce taxes, increase thrift, pay off the national debt, and stop creating new money. This can be done, but it won’t be done. To do it would hurt. “Make it stop hurting!”
THE IMMIGRANT’S MIND-SET
Consider the young adult immigrant to America in 1912. He came to America because of America’s opportunity. What opportunity? To escape the grasping hand of government.
He had no future in his homeland. He thought he might have a future here. It was that hope of a better life that motivated him to do what few people will ever do: leave the homeland.
The best movie I have ever seen about this is Elia Kazan’s semi-autobiographical film, America, America. It is about a young Greek who no longer wants to live under Turkish rule. He has seen his Armenian friend and his friend’s family murdered. The movie takes place beginning in 1915, the year that the Armenian genocide began. The Turks killed about a million Armenians. The world ignored this. The world was busy fighting World War I. The Germans were allied with the Turks. They did not care. The English assault failed at Gallipoli, so they were unable to do anything about it. After the war, it was all officially forgotten.
In the movie, the Greek does not forget. He is willing to do anything to make enough money to buy a ticket to America. This corrupts him. The movie becomes a story of his willingness to sacrifice morality and those around him to get his hands on that ticket — literally. The scene where he gets his hands on the ticket is a classic. The movie ends with him in New York, working as a shoeshine boy. “Next, please. Who’s next?” I saw the movie over 40 years ago, and I can remember scene after scene. It made a deep impression on me.
The narrator — Kazan — says that young man eventually makes enough money to pay for his family to come to America — all but his father. His father died in the old country.
Immigrants save. They work long hours, and they save high percentages of their income. They are motivated to succeed because they are motivated to survive. No one guarantees them anything. Anyway, no one did in America in 1912.
The United States government has made American taxpayers work overtime to undermine the immigrant’s mind-set. The state has set up welfare programs for the poor, including the illegal immigrant. It is illegal for states to refuse to educate the children of illegal immigrants. It is illegal for hospitals that receive Federal funds to refuse treatment of the poor, including illegal immigrants. Naturally, the state is even more generous to legal immigrants.
The Federal government’s economic policies are based on a child’s view of cause and effect. The immigrant who arrives, hoping to get a better life, is encouraged to adopt the Keynesian view of adulthood, which is in fact the child’s world of permanent dependence and deferred pain. Soon, the immigrant is crying out to the nanny state, “Make it stop hurting.”
It is more important to save than it is to save wisely. The discipline of thrift is more important than the avenue of thrift. It is not your wisdom in picking an investment portfolio that will make the highest return that will make the difference when you can no longer earn a living. Rather, it is the mind-set that led you to save.
To change your mind-set, you must change your behavior. What this country needs — what the West needs — is Spendthrifts Anonymous. There should be a 12-step program for people who have been on a 20-year spending binge. We call a long period of drunkenness a bender. An Alcoholics Anonymous member is supposed to admit to himself and others that he has been on a bender. Well, the nation has been on a spender.
The trouble is, it usually takes a moment of truth for a drunk to recognize what he has become. He must see the future, and he must conclude, “Booze is going to kill me.” He must stop drinking immediately, while his clarity lasts. He must immediately move from a marginalist mind-set — “fewer drinks” — to an absolute mind-set: “no drinks.” The marginalist mind-set will kill him, because once he takes a drink, he cannot control his drinking. He will move from a marginal drink to a bender.
The individual saver must act at the margin. He cannot go cold turkey. He must live in the present. So, he must spend. But this nation is so far down the road to bankruptcy — massive, irreversible debt — that unless we, as a people, reverse our spending and start saving, then we are going to wind up like the drunk who wants only one more drink. We are going to wind up in a gutter. One drink at a time, the drunk consumes his future and then his present. One consumer debt at a time, an individual does the same thing. So do collectives that pursue the same policy of immediate consumption at the expense of future consumption.
The nanny state today goes looking for injuries to kiss. The voters need to tell the state exactly what it can kiss. But the voters never do.
This story is not going to end well for most people. I hope it ends well for you.
March 6, 2004
Copyright © 2004 LewRockwell.com