"There is no maxim in my opinion which is more liable to be misapplied, and which therefore needs elucidation than the current one that the interest of the majority is the political standard of right and wrong...." ~ James Madison
Emerald City Goes Bust
Exclusive to STR
April 4, 2008
"The economy is, uh, very strong, we're uh, not in a recession! Everything will start to go back to normal as things, um, stabilize with the Fed's new rate cuts. The signs...simply do not point to a recession!"
But the man on my TV screen stuttered and sweated as he spoke.
As I watched this interview one morning before going to work, the man's demeanor called to mind a pivotal scene from The Wizard of Oz. Picture it; Dorothy and her companions stand before the Wizard after defeating the Wicked Witch, having come to plead for their wishes. The Wizard looms above them in the midst of erupting jets of fire; his voice booms like thunder; his disembodied, godlike image stares down contemptuously at the puny creatures before him. Surely no man or woman would dare question or challenge this all-powerful, all-knowing figure. But thanks to Dorothy's dog Toto, the "Wizard" is revealed to be an illusion; a meek old man behind a flimsy curtain, making a show for all to see ' a Brobdingnagian turned Lilliputian in the wink of an eye!
Likewise, the current economic situation has shown that certain politicians and "experts" are nothing more than a gaggle of scuzzy showmen in their own right; fallen "wizards" in a real-life Oz.
In the Wizard of Oz books by L. Frank Baum, Emerald City's walls are green-tinted, but the actual buildings within are not. Special glasses that visitors must wear (supposedly in order to protect their mortal eyes from the "brightness and glory" of the city around them) make everything appear in green tones. These "green glasses" are one of many illusions the Wizard arranges to inspire awe and respect. Moreover, in the books it is suggested that death does not exist in the land of Oz. Meat even grows on trees, so that animals need not be killed and no mortal price be paid for such delights. So here we have a shared illusion of splendor, wealth, and immortality, which parallels a refusal by our real-life "wizards" in D.C. and Wall Street to face the unintended consequences of their rash policies, the loose credit they dole out, and the fake, worthless paper money they print.
And all the while we too wear the green glasses as we slide into debt and bankruptcy -- both economic and moral.
Just as in Oz, the "wizards" of our sacrosanct Fed-ocracy wow us with their own magic tricks. They work some arcane contrivance with "Interest Rates" and "Federal Funds Rate" and -- POOF! -- stimulate the economy! They conjure up some lopsided trade agreements like NAFTA and GATT and -- POOF! -- create and preserve "our" jobs! They pull out paper money out of a hat and -- POOF! -- create more money for everyone out of thin air! They hypnotize us with double-talk, bedazzle us with number tricks and statistics to hide unemployment rates, as well as the fact that real incomes have fallen as the cost of living explodes, and they make the slippery slope to economic ruin -- POOF! -- disappear! Yes, in Oz we can have all the luxury we like, no matter what the costs may be for us and our children.
Say, how do those green glasses fit? Do they work for your myopia?
In addition to their magickry, the "wizards" have all the answers. Every day we hear our wise leaders and economists lecture us on the state of the economy, as if they alone can tame the savage beasts Inflation and Contraction with the mystical sword of Liquidity. Only they can decipher the complex Externalities and unravel the Complex Statistical Analyses needed to set back The Deficit and boost GNP, GDP, and The Dow, and keep the Bear away. Only they know what's best for us, what works, what taxes are necessary, what favored industries our expropriated money ought to support. And few public figures dare challenge their orthodoxy (notable exceptions being the Mises Institute and Ron Paul in his quixotic Presidential bid).
Methinks the air is getting to be a little too thin up in their ivory towers -- or rather, emerald towers -- and not enough oxygen is reaching their brains.
We hold such reverence for these "wizards" because we supposedly know less about basic economics than they do. Few of us really know how the modern so-called "capitalist" economy we have works. Hell, we can't even manage our own personal finances! So we passively accepted their assurances about the economy being in solid shape; we believed them when they said our homes, mortgages, jobs and retirement plans were secure; we figured that even though most Americans save little, the beloved Government in all its generosity would handle things. We tuned into CNN and pored over the Times and The Wall Street Journal and figured everything would be okay, that our real-life Oz was fail-safe. They led us to think we could live like emperors, though we were really just paupers.
Let me take off my green glasses, just for a sec, so I can clean them -- oooooh, I never saw that big elephant in the living room before...
For all their forecasts and optimism and fancy degrees and awesome job titles and impressive jargon, it seems things are not getting better. They screwed up time and time again, with the Great Depression, the New Deal, taking us off gold, financing imperialist wars, and creating bubble economies, corporate cronyism, and savage inflation in the process.
Emerald City has gone bust, and the wizards have been caught with their pants down.
And what of Ben Bernanke, the Fed Chairman, the Head Charlatan, the Great Wizard of Oz in our tale? Like his predecessors, he tries to keep the smoke-and-mirrors show going, but the emerald curtain has torn (we can't afford another because the credit cards are maxed out), revealing him too to be an impotent magician in a world that's becoming less and less able to afford the extravagance. So it's no small thing that he is on record admitting that the Fed's policies were responsible for the Great Depression.
Essentially, Bernanke's view is that the Fed just didn't manage things well enough. It's funny; the very people who would likely agree that Soviet-style command economies are inevitably doomed to fail are the same damned stooges who think that the free market can (and should) be "managed" by policy and laws and tax incentives and such. Even Milton Friedman, often portrayed as a champion of laissez-faire, also thought that the economy ought to be massaged by public policy in order to make things more "efficient" (for whom?), and of course his followers are legion in today's banking and policy world. Don't get me started on the deliberate hypocrisy of Alan Greenspan, who penned "Gold and Economic Freedom" and then rejected his own wisdom upon rising to the Fed.
There is no magic spell that the wizards can concoct to make things work exactly as they would like. This mysterious "market" that we so often invoke is little more than the sum total of human interactions and exchanges and transactions -- goods, services, ideas, information -- whether they have a direct economic basis or a purely social value. When we talk about "managing" the economy or the market, what we really mean is controlling people's peaceful and productive interactions by force. You cannot stop all people in all places and times and situations from engaging in this activity, nor can you exert direct control over them all. Such would require godlike power that not even the "Unitary Executive" Bush can claim. The more they try to hold onto it, the more slips through their grubby fingers.
So perhaps it's now time for Bernanke to learn a new lesson: the economy is not something that can be "managed" like an email inbox, or an assembly line, or the pantry, or even one's personal finances. The more he and his fellow "wizards" try (and the more we passively support them), the worse things shall become.
We have lived beyond our means for far too long. The Soviet Empire fell because it went bankrupt. So shall it be with the American Empire. The fairy tale is soon to end. Bush will not grow a brain nor Cheney a heart; the Yellow Brick Road is full of potholes; no ruby slippers will take us back to a safer, softer Kansas . But maybe the coming collapse will force some to muster courage enough to take off the green glasses and say: We don't need the wizards anymore, no magickry, no illusions, no shared delusions, no Oz, no Wizard!