Today's move by the Federal Reserve to "taper" its quantitative easing program reminded me just how toxic the opinions of "experts" frequently have been in our economy.
For centuries, the key to the American economy was the free market. Millions of people made individual decisions which in the aggregate determined where our economy was going. The result was that investments went into the places where the funds were most wanted, prices were kept as low as possible, economic growth was accelerated, and political distortion was kept to a minimum. The role of the government was to insure fair competition. It punished those who committed fraud or who competed unfairly. It insured the fair resolution of disputes through the court system. It did not, however, determine economic winners or losers; that was the function of the market.
In the early twentieth century, the Progressive movement was born. It emphasized the complexity of modern society and the modern economy, and it promoted the idea that "experts" were needed to make societal and economic decisions. Indeed, the Progressives wanted experts to make decisions about all aspects of life; they did not trust the wisdom of the people on which this nation was founded. For example, Planned Parenthood was established to try to reduce the numbers of poor and minority individuals who had children. This may sound shocking, but the goal of Margaret Sanger, the founder of Planned Parenthood, was to reduce the numbers of African American babies. Sanger, you see, was an expert (self-proclaimed) in which members of the human race ought to procreate, and in her view that did not include blacks.
It was not just social issues where the Progressive movement pushed the use of experts, however. The Federal Reserve was born to help control the money supply in America; we needed their expertise (or so we were told) to keep the economy on an even keel. The regulatory society was likewise born. Agencies like the EPA and OSHA are designed to have experts determine how to eliminate pollution or keep workers safe. There is a seemingly endless list of agencies in Washington these days that favor us with their "expertise". More and more of the freedom of individuals to make their own decisions was subjugated to the will of the "experts".
The big problem with the use of "experts", however, is that these folks are frequently wrong. Indeed, sometimes they are spectacularly wrong. Just look at the current issue of global warming. Just 15 years ago, the "experts" told us that the Earth was heating up at an alarming pace and that by now temperatures across the globe would be much warmer than they had been. Of course, the reality today is that temperatures are no warmer than they were 15 years ago. Remember that these same experts told us that our country had to stop burning inexpensive coal as a fuel to generate electricity and instead rely on very costly solar and wind power. They also told us that we would have to reduce our economic growth in rather dramatic fashion just to cut back on our carbon footprint. Fortunately, Americans rallied against some of the more dramatic recommendations of the "experts", and they did not pass Congress. Now, however, after it is clear that the experts were wrong, president Obama and the EPA are still trying to move ahead with their recommendations by means of executive orders and regulations.
Another big goof by the experts was the idea that lending money to those in bad credit groups so that they could buy their own homes would promote all sorts of social benefits. The banks across America were pressured by the government to make loans (remember those sub-prime loans?) to folks who were unlikely to pay the banks back. We all know where that led.
Lately, we have had the experts at the Federal Reserve using quantitative easing to try to help the economy grow. Literally trillions of dollars of cash has been injected into the American economy by the Fed. The hope was to promote economic growth. Of course, it did not work. When the first batch of QE was put into the economy, it helped the stock market and promoted speculation in commodities, but it did little to increase the GDP. As the economy continued to stumble along, the "experts" at the Fed decided on their next step. Maybe QE did not work the first time, but they would try it again. QE2, or the second attempt at quantitative easing was born. It did not work either. To be fair, it did help buoy the stock market so it made the rich richer, but it did next to nothing at most for the rest of the economy. Mercifully, QE2 ended. As there was no big growth in the economy, the experts at the Fed tried again. This time is was a variant of QE that they called a "twist". Then when that did not work, they went back to even more QE. So we have seen multiple rounds of quantitative easing with multiple failures to achieve faster growth. So much for the actual expertise of the Fed.
I don't want to debate the efficacy of quantitative easing right now. The point is that the geniuses at the Federal Reserve who claim to be experts have managed to pump trillions of dollars into the economy without doing much other than to help those already rich. They have also managed to squeeze all those who had saved over the years and were living, in part, on the interest that they earned on their funds. Six years ago, a retired person with $200,000 nest egg in CD's could earn about $1000 per month to supplement their Social Security. Today, that same person with the same savings now earns something like $50 per month. The Fed is squeezing these people and shifting the benefit to the wealthy with large stock portfolios. And they claim to be "experts"?
The real truth is that there are no experts who deserve to control the economy or our society. This is real truth which undermines the Progressive movement. The sooner that all Americans come to understand this truth, the better it will be for the country.
For centuries, the key to the American economy was the free market. Millions of people made individual decisions which in the aggregate determined where our economy was going. The result was that investments went into the places where the funds were most wanted, prices were kept as low as possible, economic growth was accelerated, and political distortion was kept to a minimum. The role of the government was to insure fair competition. It punished those who committed fraud or who competed unfairly. It insured the fair resolution of disputes through the court system. It did not, however, determine economic winners or losers; that was the function of the market.
In the early twentieth century, the Progressive movement was born. It emphasized the complexity of modern society and the modern economy, and it promoted the idea that "experts" were needed to make societal and economic decisions. Indeed, the Progressives wanted experts to make decisions about all aspects of life; they did not trust the wisdom of the people on which this nation was founded. For example, Planned Parenthood was established to try to reduce the numbers of poor and minority individuals who had children. This may sound shocking, but the goal of Margaret Sanger, the founder of Planned Parenthood, was to reduce the numbers of African American babies. Sanger, you see, was an expert (self-proclaimed) in which members of the human race ought to procreate, and in her view that did not include blacks.
It was not just social issues where the Progressive movement pushed the use of experts, however. The Federal Reserve was born to help control the money supply in America; we needed their expertise (or so we were told) to keep the economy on an even keel. The regulatory society was likewise born. Agencies like the EPA and OSHA are designed to have experts determine how to eliminate pollution or keep workers safe. There is a seemingly endless list of agencies in Washington these days that favor us with their "expertise". More and more of the freedom of individuals to make their own decisions was subjugated to the will of the "experts".
The big problem with the use of "experts", however, is that these folks are frequently wrong. Indeed, sometimes they are spectacularly wrong. Just look at the current issue of global warming. Just 15 years ago, the "experts" told us that the Earth was heating up at an alarming pace and that by now temperatures across the globe would be much warmer than they had been. Of course, the reality today is that temperatures are no warmer than they were 15 years ago. Remember that these same experts told us that our country had to stop burning inexpensive coal as a fuel to generate electricity and instead rely on very costly solar and wind power. They also told us that we would have to reduce our economic growth in rather dramatic fashion just to cut back on our carbon footprint. Fortunately, Americans rallied against some of the more dramatic recommendations of the "experts", and they did not pass Congress. Now, however, after it is clear that the experts were wrong, president Obama and the EPA are still trying to move ahead with their recommendations by means of executive orders and regulations.
Another big goof by the experts was the idea that lending money to those in bad credit groups so that they could buy their own homes would promote all sorts of social benefits. The banks across America were pressured by the government to make loans (remember those sub-prime loans?) to folks who were unlikely to pay the banks back. We all know where that led.
Lately, we have had the experts at the Federal Reserve using quantitative easing to try to help the economy grow. Literally trillions of dollars of cash has been injected into the American economy by the Fed. The hope was to promote economic growth. Of course, it did not work. When the first batch of QE was put into the economy, it helped the stock market and promoted speculation in commodities, but it did little to increase the GDP. As the economy continued to stumble along, the "experts" at the Fed decided on their next step. Maybe QE did not work the first time, but they would try it again. QE2, or the second attempt at quantitative easing was born. It did not work either. To be fair, it did help buoy the stock market so it made the rich richer, but it did next to nothing at most for the rest of the economy. Mercifully, QE2 ended. As there was no big growth in the economy, the experts at the Fed tried again. This time is was a variant of QE that they called a "twist". Then when that did not work, they went back to even more QE. So we have seen multiple rounds of quantitative easing with multiple failures to achieve faster growth. So much for the actual expertise of the Fed.
I don't want to debate the efficacy of quantitative easing right now. The point is that the geniuses at the Federal Reserve who claim to be experts have managed to pump trillions of dollars into the economy without doing much other than to help those already rich. They have also managed to squeeze all those who had saved over the years and were living, in part, on the interest that they earned on their funds. Six years ago, a retired person with $200,000 nest egg in CD's could earn about $1000 per month to supplement their Social Security. Today, that same person with the same savings now earns something like $50 per month. The Fed is squeezing these people and shifting the benefit to the wealthy with large stock portfolios. And they claim to be "experts"?
The real truth is that there are no experts who deserve to control the economy or our society. This is real truth which undermines the Progressive movement. The sooner that all Americans come to understand this truth, the better it will be for the country.
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