I had a friend, we’ll call him George[i], who had a theory about how to best keep the carbonation in his beverages. It was very straightforward. It went like this: After opening, leave the cap off. Although it sounds ridiculous, this was his actual procedure. Don’t laugh. This is the exact type of thinking that you hear verbalized and written into policy papers every day from government economists and aspiring government economists. Then you hear it parroted on the nightly news as talking points for the general public.
He would watch me replace the cap of my drink after each sip and scoff. Well, not necessarily when I put the cap on. You see, every time I would remove the cap we would hear the tell-tale “hiss” of carbonation escaping. It was undeniable. The evidence was right there. And this is why George would never put the cap on – because taking it off meant hearing the gas exiting.
Of course the “hiss” was merely the sound of the pressure releasing, the pressure of the gas that had been building up while the cap was blocking its escape. Although I couldn’t prove it, I tried to explain that the gas was escaping all the time, that it was the natural action of the gas to leave the liquid given the opportunity and that the cap was actually, on net, keeping more gas in the liquid than would otherwise remain. The fact that the gas was under pressure meant that its leaving the water to equalize with the pressure of the surrounding atmosphere had been obstructed by the cap. Less gas escaped than otherwise would have.
George couldn’t hear the gas escaping when he left the lid off, but he could when he removed it. So he left it off, drank flat soda, and cursed the beverage company.
Many economic fallacies propagated by State economists and held in the minds of the public boil down to the same way of thinking. Step one: identify a problem. Step two: shoot the messenger. Step three: blame the continuing problem on the very people attempting to serve you, while handing more bullets to the assassin. Within this framework it would be possible to discuss 98% of the issues facing the U.S. economy today, but we’ll narrow it down to the recent downgrade, by Standard and Poor’s rating agency, of the U.S. credit rating. Leading the charge is noted economist Michael Moore, who recently called for the executives at S&P to be jailed for lowering the Federal government’s rating from its AAA perch. Of course, Mr. Moore is a very successful storyteller and filmmaker who knows that a narrative that is easy to follow and an obvious villain are necessary ingredients for an entertaining 90-minute film. Surely, you say, cooler heads will prevail…
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In related news:
The ongoing stock market sell-off was not caused by S&P, it was caused by the ruinous policies and unfettered spending of an unaccountable and profligate government. The flight to U.S. Treasuries makes that clear enough. Yet the ideas coming out of Washington are to shoot the messengers, and unsurprisingly, to use a very loud gun.
Sound money would, to finish beating the metaphor, make a sound when government spending began raging out of control. It would be the sound of markets wheezing and taxpayers groaning every time their burdens were raised to support this boondoggle or that swindler, and it would sound much like George’s dreaded bottle cap “hiss”. Instead, fiat legal tender and electronic printing presses allow for the stealthy, unchecked escape of the gas, the flattening of the economy over time. Sound money is the lid. It is time for the separation of Money and State.
UPDATE: This gem sums up the spirit of this post: “As much as S&P tried to diss Treasuries, it is (sic) has created conditions that make them a choice investment.” Yes, clearly S&P is responsible for the state of the U.S. economy – in the same way that Wile E. Coyote only falls because he looks down.
[i] Identifiers have been changed to protect the guilty, but you know who you are!