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Why Study Economics?

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From the Archives : Originally published June 30th, 2002
561 words - Reading time : 1 - 2 minutes
( 5 votes, 4.8/5 )
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Category : Fundamental Ideas





"I place economy among the first and most important virtues and public debt among the greatest of dangers; we must make our choice between economy and liberty; or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy." (Thomas Jefferson)


In his statement, Jefferson used the term 'economy' in two slightly different senses. When he said economy was "among the first and most important virtues", he meant careful and thrifty management of public revenue. When he said we have to choose between economy and liberty, he was addressing the question of where the focus of government should be - whether government should expand its budget and provide public services or focus on protecting life, liberty, and property.


Jefferson understood better that any political leader in world history that government 'profusion' could only be paid by "the labors of the people." He knew that a growing government budget and an extension of the services government offers "under the pretense of caring for [the people]" can only come at the expense of private property and individual liberty.


The so-called 'new economics' of John Maynard Keynes formalized and gave quasi-scientific status to economic fallacies that are as old as civilized man. He provided a rationalization for government intervention into free market, for governmental control of the supply of money and credit, and for policies of irresponsible deficit spending and inflationary expansionism.


With very few exceptions, politicians and members of academia have taken his fallacies as axiomatic principles and expanded them into a hopelessly complex system of terms, symbols, and mathematical equations. They foster the view that only government, supported by countless task forces, high-paid consultants, and innumerable subcommittees and bureaucratic agencies can find the right set of 'compromises' to mange the mixed bag of interests in our nation.


They allege that the government should manage the economy by inflating the supply of money and credit to encourage production, while simultaneously taxing the 'excess profits' of the most productive industries; by deficit spending to provide the 'underprivileged' with 'equal opportunity', while forcing the businesses that might have been able to employ them to provide minimum wages, matching social security contributions, and unemployment insurance; by imposing trade barriers to encourage domestic industry, while simultaneously providing 'developing' third world countries with low cost loans or outright grants so that they will be our 'friends'; and the list goes on and on.


As appealing as this sounds we can't reverse cause and effect. Prosperity cannot be created with the stroke of a pen on a new bill in Congress. A money printing press cannot produce real wealth. If it could, we'd have eliminated poverty shortly after Gutenburg's 1440 invention.


Economics isn't a mystical realm, nor is it the province of geniuses or specialists with some kind of special insight akin to religious revelation. If you balance your checkbook each month and understand that you can't operate with a negative balance indefinitely, you already know more about economics than most government policy makers.


Resources:


  • Methods of a Wall Street Master by Victor Sperandeo.
  • Mises.org a website devoted to the Austrian School of Economics, a school of economic thought founded by Carl Menger (Feb 28, 1840 - Feb 26, 1921) with his work Principles of Economics published in 1871.



Mike Hewitt

Editor

DollarDaze.org





 



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