I'll take Paul Volcker at Treasury

Under Paul Volcker's reign as Federal Reserve Chairman, interest rates were at record highs. Throughout the era of record-high interest rates, times were painful. Volcker's medicine has been perceived by laymen and economists alike as the cause of the pain. That view is a corollary of myopic, mainstream macroeconomics, which deals only in ways to manipulate symptoms - i.e., central economic planning.

During the recession phase - i.e., the curative phase - econometricians pull out piles of data. The data itself then becomes synonymous with the recession, as though nothing in the past helped cause present circumstances. From that thought pattern, it then follows that to manipulate the "markers" of the recession - e.g., falling asset prices - is to provide the "cure."

It is important to understand that symptoms do not cause symptoms. The credit crunch, for example, is not a problem. The credit crunch is a symptom of a savings crunch. When one grasps this, along with understanding how the economy really works - i.e., capital funds capital, which funds labor - they can begin to understand that Paul Volcker had merely reacted to a previously-played hand. The longer the Fed is able to create periods of artificially low interest rates, the longer we will have to experience periods of high interest rates.

Volcker's legacy: he saved the dollar, thus buying us about thirty extra years of time to decide whether or not we wish to be a republic again, or do we wish to have all-round central economic planning. The choices are nothing other, and the stakes are high.

What Paul Volcker did was put us through a period of prolonged saving. That was the necessary consequence of the guns-and-butter policy pursued during the Vietnam War-era. Sound familiar? What the U.S. needs right now is not more inflationary credit expansion - which is the pursued policy of the present - but a good dose of Volcker's medicine, i.e., another period of prolonged saving.

That said, I do disagree with some of what Paul Volcker is advocating. I noticed that Paul Volcker gave a speech in which he pointed out how we are going to have to curtail consumption, but then simultaneously advocated infrastructure spending schemes by the federal government. This is not the right answer.

Producers need to consume in order to sustain the process of production. Thus all consumption is not bad. Consumption that isn't paid for with production - i.e., something only the true free market can do - is the problem. Our consumption needs to be pinpointed towards rebuilding capital.

If the Fed keeps on inflating and the politicians keep on spending in the name of demand-side stimulus, this will negate the positive effects of the market's reaction to the previous inflationary orgy, i.e., curtailing consumption. Raising taxes - i.e., forced "saving" - is not real saving, and is not an answer.

Somebody explain to me why anybody but schizophrenic, power-hungry madmen would advocate inflationary spending to encourage consumption, but then higher taxes to promote "saving?"

Each successive inflationary boom consumes more and more capital, making the inflation worse and worse. Every additional dime the Congress spends is making an already bad situation even worse. Think of it as an alcoholic with liver cirrhosis taking another drink.

If Americans truly understood what is happening, they would be demanding that Congress end its orgy, resign, and the federal government be liquidated. If progressives truly understood economics, they would become Austrian School economists overnight.

As Ludwig von Mises and Eugen von Bohm-Bawerk saliently articulated, labor can't increase its share at the expense of capital. Nobody can argue against capital without arguing for a reduction in their own standard of living. Thus the problem for the progressive should not be with capital per se, but that capital is so inaccessible to the common person.

Why is capital so inaccessible to the common person? Every tax, every regulation, every government program drives up the cost of capital. Politicians love this, because they get power. Big business loves this, because it creates barriers to controlling capital - i.e., suppresses competition.

The government can't keep wages artificially high for one group without creating under-employment for another, thus lowering real wages. The government destroys capital, and it is capital that pays wages.

Present policy has us headed towards a complete economic collapse and national bankruptcy. We are on the Titanic. If politicians did the right things now, we could avoid this impending catastrophe. The problem: politicians would rather we all sink than to give up control over the wheel. Politicians don't want to relinquish a single inch of power.

Understand that given the government's reaction to our economic problems, and that everything it is doing today is only precipitating more problems tomorrow, the Congress is positioning itself to take more and more aggressive stances against the American people. As Mises articulated: government intervention creates problems which then begets more government intervention.

We are at a precipice, and we need to ask a few questions before we reach the point of no return. Do we want all-round central economic planning? Are we going to put up with the government - which is responsible for the problem to begin with - inserting more and more of itself into the economy in order to prop itself up? Are we going to tolerate the government nationalizing industry? Are we more concerned with politicians keeping their power intact than with our own welfare? Is not the purpose of security to secure liberty? What good will anything the government does be when we are all in cardboard boxes?

Here is my answer: I'll take Paul Volcker at Treasury, but give us nobody at the Federal Reserve and let us return to a free market, sound money. This would, of course, virtually empty the Treasury's coffers. Just how it needs to be. Politicians can't convince me that their interests coincide with mine.