Last Updated:September 2 @ 05:56 pm

Brown: Politics Cannot Solve Our Economic Problems

By Floyd and Mary Beth Brown

This week we are in the European Union, here to observe the European economic crisis from a front row seat. What we found was even more disturbing than we expected.

The Olympics are in full swing, but you get the sense they are like the Roman Circuses of old. The purposes of the games are to distract the citizenry from the misery of their governance.

One Englishman explained their predicament to me like this. "First they told us this was the worst recession since the early 1980's, and then they told us that it was the worst recession since the 1970's, and then they told us it was the worst recession since World War II. Now they are telling us here in Britain that it is as bad as the Great Depression."

He then went on to explain, "We feel fortunate here in Britain because in the Ireland, Spain and Greece people are starting to go hungry." We could hardly believe our ears. On the continent of Europe the economic crisis is so difficult that hunger is the result for the first time since World War II.

The economic problems we face are beyond the ability of politicians to solve. Since the economic crisis began in 2008, every three months on average the political establishment in America and Europe has announced some type of bailout or economic rescue operation. What the politicians fail to recognized is that each successive bailout is like the heroin which lures and destroys the addict. At first a small amount of heroin can provide the fix, but with each successive high, the addict needs more of the drug. It is same with the bailouts. Each one is bigger than the next, and none ever heal the patient but end up making him worse. Instead the economy has become hooked on the drug of lower interest rates and greater injections of liquidity. But in 2012 the finances of the governments involved, the Central Banks engaged, and finally the banks considered too big to fail, only have continued to deteriorate.

It is never pleasant to say we told you so, but regular readers of this column know that we have been predicting the failure of the bailouts since the entire first endeavor to fix the problem was announced in 2008 by George W. Bush.

In America, as in Europe, our elected leaders, Republican or Democrat are powerless against the storms that are buffeting our economy. We find ourselves astonished that any individual, be he, Ben Bernanke, Barack Obama, or European Central Bank President Mario Draghi, would be so arrogant as to believe their actions can solve the problems. The business cycle of boom and bust is largely created by governments and central banks, and only time will heal the pain these institutions created, and only after they cease their misguided attempts to control everything. In his most excellent book, Human Action, the greatest voice of Austrian Economic theory, Ludwig von Mises, sums it up this way, "there is no way to avoid the collapse of a credit boom -- and that more credit expansion simply destroys the currency."

More medicine in the form of socialism could forever kill the patient. What we need is a period where markets clear, insolvent banks go under and the government cuts back its meddling in the economy and allow free people solve these problems.

The problem with this solution is the irrelevant politicians. In order to secure their re-election, they need to be important. So they will likely keep meddling.

The Obama administration has taken us to the desperate point where 40 cents of every dollar spent at the federal level is borrowed. Much of the borrowed money has been printed by the Federal Reserve. This is called monetizing the debt. Never in history has this not led to financial disaster. The empirical evidence shows the politicians are in a hopeless position, and more bailouts will only prolong the pain.

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©2012 Floyd and Mary Beth Brown. The Browns are bestselling authors and speakers. To comment on this column. Together they write a national weekly column distributed exclusively by Cagle Cartoons newspaper syndicate. Floyd is also president of the Western Center for Journalism.

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13 Comments

  1. billwvComment by billwv
    August 6, 2012 @ 2:03 pm

    Brainless politicians and lawmakers aided and abetted by a lunatic POTUS and Vice-POTUS have put us in our present dilema and only sound fundamental and economic principles will get us out. That is why it is important [vitally so] to fill our House and Senate with principled persons and rid ourselves of the dead-weight that is in place. We need rid and shed of Ozero and his White House of horrors and mismanagement.
    November 2012 will tell the tale of what Americans are made of.

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    • inluminatuoComment by inluminatuo
      August 7, 2012 @ 5:57 am

      The problem began much earlier when the Democrats took over Congress and fed the housing bubble with both fists, aided by a Republican President who went along for the ride enabling the foolish liberal concept that every citizen is entitled to own a house even though he might be too dishonest or stupid to make the payment. Of course the government would back the citizens loans that the politically correct politicians shoved down the throats of the banks who bundled the good loans in with the bad and sold them on the world market to hide the upcoming disaster, while the greedy misguided loan officers and realators got rich as the bubble expanded, then went broke when it finally burst, just like our world economies are about to do now when false socialist ideology meets the truth of reality, and the chickens come home to roost. The reality is there is no free lunch, you cannot live on borrowed money without bad consequences, and the government needs to get out of the business of backing loans based on social and socialist experimentation with people’s lives that is not based on reality. Solyndra is just the paridigm of the larger Liberal socialist picture of an economic Dorian Gray.

      We will never borrow our way out and will have to work our way out to pay for the debt we have placed over our, our children and our grandchildren that we now owe. The Liberal party was fun while it lasted but the drugs always wear off and now someone has to get out the broom and work and sweat the cleanup of the mess.

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  2. mrwilsonComment by mrwilson
    August 6, 2012 @ 2:23 pm

    I don’t know where this man has been; the one quoted, “….people are starting to go hungry…” That is just in some other counties and not Britain that he was speaking of. He failed to mention America; one in four children goes to bed hungry.
    He failed to mention the parents of Chinese children. They are now telling their children, at the dinner table, to finish their food.”Eat your dinner, there are starving children in America, New Zealand, Greece, Ireland, and in England.”

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    • bna42Comment by bna42
      August 6, 2012 @ 3:19 pm

      “He failed to mention America; one in four children goes to bed hungry.”

      That is false! Even the lying, dishonest federal government says it is one out of six. However, with all the food banks,churches, and civic organizations, and government programs feeding people, it is not possible that 25% of our children “go to bed hungry”. We are so bogged down in the welfare state that even during the summer when schools are not in session, people can go to the school and eat 2 meals per day free.

      IF anyone in this nation goes to bed hungry it is because they don’t want help, they won’t accept help, or they are too lazy to get help.

      But how do you think people are going to feel when our economy completely collapses, our money is worthless, and everyone is going hungry? Who are you going to blame–the politicians who have built this unsustainable nanny state and fostered a generation of people who expect the government to take care of them? Or will you blame the taxpayers who just didn’t want to pay more taxes for the politicians to squander on themselves?

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    • inluminatuoComment by inluminatuo
      August 7, 2012 @ 6:07 am

      I have traveled this country extensively for 40 years and have yet to meet ANYONE who died of hunger in America.If there are hungry children it is because of stupid lazy non-productive parents who prefer to walks the streets with hand out and drugs in, and vote for the Democrat party every chance they can to keep the free food and drugs coming while their children run the streets unsupervised, then join gangs to find some modicum of relevance and recognition.

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  3. wellknownComment by wellknown
    August 6, 2012 @ 3:51 pm

    It is the politics of the Old that can solve our financial crisis. Kindly go to ISBN 978-1-4678-8393-1 (sc).

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  4. joelinpdxComment by joelinpdx
    August 6, 2012 @ 3:57 pm

    What kind of ignoramuses are you people? Of course politics will fix the economy. We have an election scheduled for three months from today. That’s politics. In that election we need to elect Mitt Romney. That’s politics. And all things going correctly, in January we will inaugurate President Romney and the economy will start to heel. More politics.

    If the voters of this country are stupid enough to give Obozo another term, then the economy will continue to fail…and that to is politics.

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    • celtwarriorComment by celtwarrior
      August 6, 2012 @ 7:54 pm

      what planet are you from, joelinpdx?

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    • operator61Comment by operator61
      August 7, 2012 @ 3:44 am

      It will take a lot more than politics to fix the economy. To think that the only thing holding back prosperity is politics is niaeve at best.
      Morality or lack there of, plays an important part in the equation. With all the corruption in politics and business a prosperous economy is a long way away.

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    • operator61Comment by operator61
      August 7, 2012 @ 3:55 am

      Politics is also what has screwed the economy in the first place. The government and politics are not what create a good economy. When govt and politics are kept out then the people can create wealth, the politicians need to stay out ot the way of the real wealth creators.
      Politics hinder the economy. Politicians need to stick to politics, that’s what limited govt is all about.

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    • whitcComment by whitc
      August 7, 2012 @ 9:37 am

      Sorry to say but the housing bubble and subsequent banking collapse was created in large part by government deregulation in the industry. While I do agree that government should usually stay out of the way of business there are too many cases nowadays that require oversight. The terms for CEO’s are so short that they’re willing to make decisions that require Long-term loss in return for short-term gain to make the stock-holders and board happy and to keep their job a little while longer for that gigantic pay-check.

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  5. HotTeaComment by HotTea
    August 6, 2012 @ 4:28 pm

    You are indeed correct, Joel. I would add little except to say sound moral policies that fully support our Constitution and the rights granted thereunder to be free of nearly all government regulation and thus allow capitalism to once again thrive. If we do that, our economic progress will also work to pull “dear old England” out of the tank and other European countries as well.

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  6. lowlifeComment by lowlife
    August 8, 2012 @ 10:36 pm

    I’m glad to see that someone, besides me, reads Mises, the greatest economic mind of the twentieth century and probably several other centuries. If his writings were taught in the schools and universities, to the extent that the socialist nonsense of Keynes and the technical ramblings of the monetarists are, people would have no difficulty in understanding how we got into this mess and how to put an end to it. But that would severely cramp the style of the political class and the banking industry and end their collusion in the Federal Reserve. The government-funded education system will tend to suppress a curriculum that shows how every government intervention distorts the economy and pushes us in the direction of tyranny and poverty. A basic knowledge of Mises and Bastiat makes it easy to see the evil consequences of government actions that may seem reasonable, or helpful, until you come to understand the unseen effects that come along with the seen benefits that the politicians tout and claim credit for.

    It’s not that politicians can’t solve the problem, but that they wouldn’t, even if they knew how. The solution involves the elimination of most of their political power base (the power to punish their enemies and reward their supporters by the allocation of direct cash payments, government contracts, subsidies, grants, price supports, tariffs, guaranteed loans, insurance at rates that don’t begin to cover the claims paid, jobs with good pay and benefits, little work and early retirement; laws giving them unfair advantage over their competitors, or adversaries; regulatory rules and licensing requirements to cripple their competitors, or shut down their percieved enemies, etc.); without an endless supply of money to buy political support and a continual stream of unconstitutional laws and regulations, manipulated for political purposes, politicians would have no value and it would be a waste of money to offer them bribes, or campaign contributions. A government with sound money, reasonable tax rates, a balanced budget and strictly constrained to doing only those things that the Constitution demands, or allows, wouldn’t have the ability to do much of anything, either for us, or to us (which is exactly the way it should be and what Jefferson, Madison, Franklin, et al intended government to be).

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