Lewis - Free prices now!: fixing the economy by abolishing the Fed

[Soviet] socialism collapsed because it did not tell the economic truth.

Oystein Dahle

W hy is the human race so poor? Why do billions still lack enough even to eat?

As this author noted in an earlier book, even a small sum of money, such as $10, if compounded at 3% over 1,000 years, would produce a sum equal to twice the worlds wealth today. It should be ridiculously easy, over time, to end human poverty. Why have we failed to do so?

Safety is certainly an important factor. No one will bring wealth out of hiding, much less invest it, if it is likely to be stolen. But protection from outright theft is not enough. We need an honest system of mutual exchange. A corrupt and dishonest economic system does not create wealth; it destroys it.

The most reliable barometer of economic honesty is to be found in prices. Honest prices, neither manipulated or controlled, provide both investors and consumers with reliable economic signals. They show, beyond any doubt, what is scarce, what is plentiful, where opportunities lie, and where they do not lie.

A corrupt economic system does not want honest prices, honest information, or honest results. The truth may be inconvenient or unprofitable for powerful government leaders or private interests allied with them. Typically, throughout human history, these leaders and special interests have sought to use their power to manipulate and control prices to their own advantage.

Much of the time, powerful price manipulators and controllers are accompanied and assisted by ideologists or theoreticians. These professional advisorsmodern day Magi, skilled verbally or in mathematicsconfidently argue that dishonest prices are really honest; honest prices are really dishonest; the resulting chaos is really order; and a future filled with jobs and plenty lies ahead with just a few more manipulations and controls. Sometimes the arguments are presented with calculated deceit, sometimes with muddled sincerity.

Can it really be this simple, that job growth and economic prosperity depend on allowing economic prices to tell the truth, free from the self-dealing and self-interested theories of powerful special interests? That is the central thesis of this book, and each chapter will explore it from an additional angle. What is needed to pull humanity out of dire poverty is a free price system, one that is neither manipulated nor controlled.

If prices are not free, an economic system cannot be expected to function properly. What happens thereafter will depend on the degree of price manipulation or control. If it is not extreme, the economy may limp along, impaired, not realizing its full potential, but not in overt crisis.

If the undermining of free prices is extreme enough, the system will visibly falter and may even collapse, as in 1929 or 2008. In this case, capital, jobs, and peoples lives are destroyed. Ironically, the crisis often leads to a government response which entails even more price manipulation and control, and which therefore guarantees even more trouble, if not immediately, then down the road.

A further irony of all this is that a large majority of professional economists, including those aligned on the political left as well as right, respond to surveys by indicating that they generally oppose government price controls. The problem is that most government price manipulations and controls are not advertised as such. They may be stealthy by design, or they may just take a form that is not easily recognized for what it is.

Throughout this book, one of its aims will be to unmask these misguided government actions and show that they are indeed price manipulations and controls. We will also try to explain why they are doing untold damage to the hopes and prospects of anyone who depends on the economy, especially the poor.

Are the Rich Necessary? Great Economic Arguments and How They Reflect Our Personal Values (Mt. Jackson, VA: Axios Press, 2009). Those readers may wish to review Part Two briefly or proceed directly to Part Three.