Quote of the Day: Keynesian Policies as Root of Inflationism

What is happening instead is that workers are getting higher money wages, which are lower real wages because the value of the monetary unit is constantly being diluted. We are going into progressive inflation. Savers are being liquidated. Their property is being confiscated. New savers are scared away. Politicians are constantly afraid, and rightly so, of doing things that are unpopular. They endorse popular spending measures but they shun the resulting costs, and to stay popular they have resorted to inflation. This is the so-called Keynesian policy. It is set forth in Keynes' book, The General Theory of Employment, Interest and Money. The key sentence is: "A movement by employers to revise money-wage bargains downward will be more strongly resisted than a gradual and automatic lowering of real wages as a result of rising prices."

This was the policy endorsed by Keynes. It is the policy of most governments in the Western world today. Keynes knew, as every economist does, that the only way that you can employ more people is to lower the wage rate. But ever since World War I this had become politically more difficult in Great Britain. Powerful British labor unions, with the help of the Fabian Socialists, had built up public pressures which opposed any lowering of any money wages. British politicians of all parties were afraid to resist this popular union policy. So in 1931, when the number of unemployed became unbearable, the politicians in office preferred to lower wages by devaluing the British pound. The workers kept their puffed-up pound wages, but their pounds bought less.

In 1936, Keynes gave this political policy academic sanction in the book and sentence just quoted. Since then, most Western nations have adopted this "full employment" policy. In essence, when unemployment is considered too high, wages are lowered by lowering the value of the monetary unit. This is done by increasing the quantity of the monetary units. This will be the subject of the next lectures. We will then discuss money and the government handling of this monetary problem. We have gotten into a situation of ever-rising wages and prices, with more and more workers paid less than they would earn in a free market. It is very difficult to get out of such a situation. The real answer, of course, is economic education.

Neither union leaders nor union workers are stupid people. Keynes and the British politicians were able to fool the employees in England when they first tried this scheme in 1931. They changed all the index numbers, making it difficult to document the price rises reflecting the lower purchasing power of the pound. But now every union has a statistician. They may call him an economist, but he can see from the official cost of living indices that prices are going up. And when they go up, the unions demand still higher wages. This system of Keynes' has just about reached the end of the road. You can no longer fool the workers by lowering the value of the monetary unit. They are on to what is happening and they are not going to take it much longer. The only final answer to this problem is more economic education, showing that the only way to keep raising wages permanently is to increase production, and the way to do this is to encourage savings. For it is only increased savings that can provide workers with more and better education and more and better tools, with which they can produce and buy more and better products that they want most.

(bold emphasis added)

This is from the must read transcribed lecture by economist Percy L. Greaves, Jr. (1906–1984) at the Mises.org.

Quote of the Day: The Free Market is in Full Harmony with the Principles of Christianity

I am a very staunch believer that free-market principles are in full harmony with Christian principles and that the free market is the only economic system that is consistent with Christian or Judeo-Christian principles. I must say that in recent years the organized churches, both the Protestant and the Roman Catholic, have not been in harmony with free-market teachings, nor have they been in harmony with what I must hold are the principles taught in the Bible. The organized churches have largely accepted the welfare state ideology so popular today. This ideology has changed the original meaning of the Ten Commandments. I could give you quite a speech on that. However, I want to make just this one point. There is the Commandment which in English is only four words: "Thou shalt not steal." Today, most of our people think that it has been expanded to eight words. They think it is: "Thou shalt not steal except by majority vote." They seem to think that any stealing done by majority vote is all right.

Except when necessary for defense, neither capitalism nor Christianity approves of the use of force or coercion. The fundamental principle of the free market, voluntary social cooperation for mutual advantage, is in full conformity with Judeo-Christian teachings.

This is from an article or transcript from a talk given by the late free-market economist Percy L. Greaves, Jr. (1906–1984).

Quote of the Day: A Fair Exchange is an Unequal Exchange from which All Parties Expect To Gain

Value is the significance a good has for the well-being of a human being or beings. The value of a good is determined by the importance attached to the utility of the marginal unit in satisfying some human want.

All life is change. For men, life is a series of choices by which we seek to exchange something we have for something we prefer. We know what we prefer. No other man or bureaucrat is capable of telling us what we prefer. Our preferences are our values. They provide us with the compass by which we steer all our purposeful actions. And last but not least, a fair exchange is not an equal exchange. A fair exchange is an unequal exchange from which all parties expect to gain.

Barring force, fraud, or human error, every free market transaction provides all parties with a psychic profit or higher value, according to their own scale of values. Anything that raises cost or hinders the free and voluntary transactions of the market place must keep human satisfactions from reaching their highest potential. Today the greatest obstructions to the attainment of higher human satisfactions are the well-meaning but futile political interferences with the mutually beneficial transactions of a free market economy.

This is the summary from must read speech made by the late economist Percy L. Greaves, Jr. (1906–1984)

Quote of the Day: Freedom is Indivisible

First, let me say that freedom is indivisible. You cannot lose a part of your freedom, the freedom of speech, the freedom to buy, the freedom to print, without eventually losing all of your freedom. Of course, all freedom is based on economic freedom. Freedom is indivisible. No one man invented the airplane. It took many, many men to invent today's jet. It took a lot of history, a lot of just minor improvements.

My great teacher, Mises, asks, "What is the automobile of 1969?" He answers his own question: "It is just the automobile of 1909 with thousands upon thousands of minor improvements." Everyone who suggested an improvement did it with the hope that he would make a profit. Many made suggestions that fell by the wayside. But it was the freedom of those men to work on improving the automobile that has given us the automobile that we have today. No one man invented it, neither did one man produce it.

This is from the late economist Percy L. Greaves, Jr’s must read article (it's really a transcript from a talk) about the essence of Economics.