Wednesday, August 05, 2015

Unsanctioned Voice; The New Deal transition; The Driver; Henry Galt; Gold; Austrian Business Cycle theory

Click these links for discussions of the Writer's Note , Chapters 1 and 2, Chapter 3, Chapters 4-6, Chapters 7-10 , Chapters 11 and 12 , Chapter 13 , Chapter 14 , Chapters 15 and 16 , Chapters 17-19 and Chapter 20 of Bruce Ramsey's Unsanctioned Voice.

Chapters 21 and 22 show, through Garrett's writings, the transition from the pre-New Deal depression era to the New Deal itself. The New Deal was the most momentous event in the history of the modern world. Because of the New Deal (and its more consistent counterparts of that era in Europe) millions have died, were never born, were born to different parents in different places and/or lived under tyranny (or the threat of tyranny) over the past 80 + years. Most importantly, the most prosperous and free nation in the history of the world (and western civilization itself) will die a premature death - thus bringing on chaos, tragedy and worldwide misery that will eclipse that associated with the fall of Rome. Garrett had a greater grasp of the significance of these events than most writers of his (or any) day. These chapters (and the articles they cite) give us a glimpse into the world at that transition point.

Chapter 21 features Garrett's articles advocating economic solutions that are based on individual investment and capital accumulation. Without citing The Driver (1922) specifically, Garrett recommended the actions taken by Henry Galt (pp. 148-149). Garrett proclaimed essentially that a downturn is the time to buy. Click here for a discussion of The Driver and its resolutions to the Panic of 1893 (including a lengthy quotation from Henry Galt).

While the idea of "buy low, sell high" is accepted as obvious by today's investors, it is implicitly rejected as a solution on a national scale. Instead, we let the government take actions that keep prices high and then wonder why recovery is slow or nonexistent while industry continues to disappear.

Chapter 21 recounts briefly a meeting with President Hoover where Garrett's ideas were ignored (p. 149).

Ramsey briefly identifies Garrett's theories as most closely (but not completely) associated with the Austrian school of economics (p. 145). Chapter 21 thus reminds one that while Garrett serves an invaluable role as a journalist and historian, only actual economists such as Mises can thoroughly diagnose business cycle theory from an economic perspective. (Garrett's acquiescence to the idea of a central bank (p. 145) came before the Austrian business cycle theory was known in America (see below)). Writers like Garrett, Rand, etc. provide both a philosophical justification for the economic theory of the Austrians and historical context that demonstrates our slide into tyranny.

Austrian Business Cycle theory:

Garrett's explanation of the Panic of 1893:

Ramsey notes on p. 151 that "The people were ready for the New Deal" (based on a Garrett article from October 1932). This point is debatable, as I do not believe that a people can ever be truly "ready" for tyranny until after it is imposed and takes effect. Only through the creation of dependence does a formerly free nation come to accept tyranny. Opposition to tyranny had been softened by economic conditions, but was the country really "ready" for what followed? What would Americans of 1932 say if they could see the U.S. of 2015 (and all that has happened in between)? It depends on what one means by "ready".

Chapter 22 explores briefly Garrett's opposition to the New Deal. The passion of Garrett's opposition comes through (p. 154) without the lengthy discussions that one will find in Ramsey's Salvos Against the New Deal. The discussion in Chapter 22 focuses mainly on the New Deal's seizure of gold and subsequent use and manipulation of fiat money (pp. 155-159).

Garrett foresaw the connection between fiat money and the ultimate loss of trust and character that would plague all human interaction in the United States. If money is not real and does not maintain a stable value, then contracts do not mean what they say and words themselves cannot be trusted:

All our economic undertakings above the level of solitary savage existence come to rest at last upon the security of words. Hence the importance of documents, bonds, statute books and records, lest people should dispute afterward what the words were. Then what if a sense of security in words should fail? What if it were no longer possible to trust the word of a government, that of your own or of any other; or to trust the word of a bond, the word of the law, the word of a contract, the word of a platform? . . . It requires no reflection to be able to say what the effect of this would be upon the sense of economic security.

Garrett, "The Great Moral Disaster," Saturday Evening Post, August 18, 1934 (as cited by Ramsey, p. 157).

Page 155 contains (citing a letter from Garrett to Rose Wilder Lane) Garrett's explanation of the purpose of the "Gold standard." Garrett's explanation is not fully "Austrian," but it is based on the same basic principles.

The discussion on page 157 is an abbreviated explanation of the debt crisis of the 1920's and 1930's as it related to World War I loans and reparations. A more thorough explanation appears in Garrett's Bubble That Broke the World.

Click here for a discussion of Chapters 23-25 and Garrett's opposition to the New Deal.

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