Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
By CoyotePrime (Reporter)
Contributor profile | More stories
Story Views
Now:
Last hour:
Last 24 hours:
Total:

Free Download: Henry Hazlitt, "Economics in One Lesson"

% of readers think this story is Fact. Add your two cents.


“You’ve Been Bamboozled“
by Brian Maher

“From time immemorial proverbial wisdom has taught the virtues of saving,” wrote Henry Hazlitt, “and warned against the consequences of prodigality and waste.” Hazlitt authored his masterly primer on economics, “Economics in One Lesson”, in 1946. Yet he etched it in the rock of ages, its insights timeless. 

“This proverbial wisdom has reflected the common ethical as well as the merely prudential judgments of mankind,” Hazlitt continued… “But there have always been squanderers, and there have apparently always been theorists to rationalize their squandering.” Today these theorists invade us, batter us and torture us ceaselessly… like a thousand alarm clocks joined in chorus. 

Yesterday we alerted you to the latest assault upon savings. During economic stress, negative interest rates would crack open the piggy bank… and spill its contents into the productive economy. This is the way to recovery, say its drummers. And savings are in the way. But today we leap to savings’ defense. We illustrate why savings are a blessing at all times, in all seasons…

The Virtue of Savings: Saving is a passable evil in normal times, modern economists allow. But in dark times saving locks needed capital out of the productive economy. Investment, meantime, answers a higher calling. It is publicly minded. It pitches in… and expands the economy. The central bank must therefore suppress savings to increase spending… and investment. Negative interest rates, they claim, are one solution.

But there can be no investment without savings, say the old economists… as there can be no bread without grain. Explained the late economist Murray Rothbard: “Savings and investment are indissolubly linked. It is impossible to encourage one and discourage the other. Aside from bank credit, investments can come from no other source than savings. In order to invest resources in the future, he must first restrict his consumption and save funds. This restricting is his savings, and so saving and investment are always equivalent. The two terms may be used almost interchangeably.” 

The more accumulated savings in the economy… the more potential investment. An economy built atop a sturdy foundation of savings is a rugged economy, a durable economy. No passing gale will knock it over.

Consider for example the frugal farmer… He has deferred present gratification, and stored up a full silo of grain. There it sits, seemingly idle. But this silo contains a vast reservoir of capital. The farmer can afford to sell part of his surplus. With the proceeds he can purchase more efficient farm equipment, which increases his yield. His purchase gives employment to producers of farm equipment and those further along the production chain. 

Or he can invest in additional land to expand his empire. The added land yields further grain production. This in turn extends Earth’s bounty in wider and wider circles – and at lower cost, no less. That is, his capital stock expands and the world benefits. Only his original surplus allows it. But he retains a healthful portion of his siloed grain against the uncertain future.

There is next year’s crop to consider. If it fails, if the next year is lean, it does not clean him out. He has plenty stored up. And so his previous willingness to save has paid him a handsome dividend. He can then proceed to rebuild his capital from a somewhat diminished base. We will call this man Farmer X. Contrast him with Farmer Y…

The Perils of Living Only for Today: This man has rather extravagant tastes for a farmer. And he likes to parade his wealth before his fellows. He squanders his surplus on costly vacations, restaurants, autos, etc. It is true, his patronage keeps local businesses in funds. But his grain silo is perpetually empty. That is, his capital stocks are perpetually empty. He has little savings. He therefore has little to invest. He has deprived the future so that he may gratify the present… and taken food out of future mouths. And should next year’s crop fail, Farmer Y is in an awful way.

Assume it does. The surplus grain that could have sustained him he has dissipated. He has nothing left to see him through. He is thrown into bankruptcy and must sell his farm at a fire sale price. If only he had saved.

Ah, but our tale takes an additional twist… Let us now reintroduce Farmer X. He purchases the wastrel’s farm – at a fire sale price – and transforms it into a vastly productive asset. The world is that much richer… and happier. All because of his original willingness to save.

Multiply this example by millions and it becomes clear… A healthy economy requires a full silo of grain – of savings, that is. An empty silo means no investment in the future. And society has nothing laid by to weather future crises. We must therefore conclude: Negative interest rates and the war against savings are essentially wars upon the future.

Debunking the “Paradox of Thrift”: Returning to Hazlitt: “The artificial reduction of interest rates discourages normal thrift, saving and investment. It reduces the accumulation of capital. It slows down that increase in productivity, that “economic growth” that “progressives” profess to be so eager to promote.”

The critic of savings will concede that saving may make individual sense. But if everybody saved, he argues, consumption would wind to a halt. The economy would sink deeper and deeper into the deeps, until finally imploding upon itself. The “paradox of thrift,” they call it.

Explains arch-Keynesian Dr. Paul Krugman: “The story behind the paradox of thrift goes like this. Suppose a large group of people decides to save more. You might think that this would necessarily mean a rise in national savings. But if falling consumption causes the economy to fall into a recession, incomes will fall, and so will savings. The government must therefore race in to supply the demand that individual savers will not. Its role must be “the spender of last resort.”

But there is no paradox, say the old economists, with their starched collars, pursed lips… and straight laces. What applies to the individual applies to society at large, they insist. When society saves in lean times, it is not eliminating consumption – merely delaying it. The demand that is supposedly lost is not lost at all. It is simply shifted toward the future. Today’s savings are therefore tomorrow’s spending, tomorrow’s consumption.

Or to return to Hazlitt: “‘Saving,’ in short, in the modern world, is only another form of spending.” And by reducing consumption today, society allows wasting enterprises absorbing valuable resources to finally die the death. It clears out the deadwood created by the previous boom, now artificially sustained.

Society’s deep pool of savings can then nourish the “thrusting saplings” of future growth – newer, better, more efficient industries. These are tomorrow’s redwoods. Low interest rates drain the pool of savings… and choke off nutrients from the emerging forest. Negative interest rates double and triple the error. Meantime, government spending to extend the boom simply keeps dying enterprises on respirator support. They become the living dead. But these are the errors that presently afflict and lacerate us all.

We Need to “De-bamboozle” Ourselves: But the crank, the charlatan, the quack, the pitch man, the rogue, the honest fraud… he will always be with us. Author Hunter Lewis wrote a withering critique of Lord Keynes: “Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles and Busts.”  He tells a tale in which British Prime Minister David Lloyd George “bamboozled” U.S. President Woodrow Wilson. George then discovered “it was harder to de-bamboozle [Wilson] than it had been to bamboozle him.” 

Concludes Lewis: “This describes our predicament today. Keynes has bamboozled us and it is very difficult to de-bamboozle ourselves.” “Negative interest rates are your proof…”
Freely download “Economics in One Lesson”, by Henry Hazlitt, here:


Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2019/02/free-download-henry-hazlitt-economics.html



Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!


Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST


Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover -  Reduces Smart Meter radiation by 96%! (See Video).

Report abuse

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.