Leithner Letter Nos. 117-119
26 September 2009 - 26 November 2009

From the beginning of the current financial crisis, many officials have been insisting that a big part of our problem is “confidence.” Remember back [in October-November 2008] when the $700 billion bailout was supposed to inject “confidence” into the financial system?

I can’t help but think of another definition of “confidence” – as in a confidence, or “con,” game. When you think about it, trying to gain someone’s confidence in order to [steal] their hard-earned dollars really isn’t an outlandish metaphor for our current situation.

While the nationalisation of corporations bothers me deeply on a philosophical level, other recent plans bother me on a more commonsense level. The Fed and the Treasury announced $800 billion extra, including a portion meant to stimulate consumer spending, including credit cards, auto loans, and student loans. Again, it has long been clear to some of us little people that the major problems our economy faces are due to waytoo much easy credit – and easy credit’s best accessory, short-term thinking.

The Fed and the Treasury continue to be hell-bent on doing all they can to persuade consumers – many of whom are already far over their heads in debt – to continue spending money they don’t have. There’s something downright morally reprehensible about that, but some seem to believe that’s the way the economy can be “saved.” We’re all supposed to dig ourselves in deeper – and of course, given the government’s soaring deficit, it’s doing the same thing.

If anything, I think it’s high time our culture takes a break from some of the misguided “confidence” it has exhibited for quite some time now. The overwhelming message seems to be that we all need to spend our economy back into growth, but if we read between the lines, it’s clear that growth over at least the past decade has been artificial, fired up by debt and a “confidence” that had no grounds in realistic measures like “income.”

The policy appears to be to do everything possible to try to keep the natural correction from occurring – although many of us believe it must occur for our economy to be healthy again – and insist that everybody be confident, for Pete’s sake. With all the talk of confidence, one good question might be why we should feel confident in a system that is propping up bad decisions and policies and even encouraging people to repeat the mistakes that got us here.

That’s when it’s easy to wonder if it is one heck of a confidence game, indeed.

Alyce Lomax
Confidence ... or Con Game? (1 December 2008)

Poindexter: Philosophical Mediocrity,
Economic Illiterate and Evil Political Genius

“Australia,” wrote Donald Horne in The Lucky Country (1964), “is run mainly by second-rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise. A nation more concerned with styles of life than with achievement has managed to achieve what may be the most evenly prosperous society in the world. It has done this in a social climate largely inimical to originality and the desire for excellence (except in sport) and in which there is less and less acclamation of hard work. According to the rules, Australia has not deserved its good fortune.”

A generation later, virtually all of this passage remains accurate. Yet Kevin Rudd is curious about events and ideas – perhaps because he’s genuinely inquisitive, or because he seeks weapons with which to bludgeon his opponents. Ideas matter so much to him that, a year before the ALP defeated the Liberal-National coalition, he wrote Howard’s Brutopia: the Battle of Ideas in Australian Politics (The Monthly, November 2006). That article described the “real battle of ideas in Australian politics” as the “battle between free market fundamentalism and the social-democratic belief that individual reward can be balanced with social responsibility.”

In that article, Poindexter used a variety of fallacies, such as false mutual exclusivity (you either worship the market or favour a balance of reward and responsibility) and prejudicial language (such as “free market fundamentalism”), to reason invalidly to the conclusion that anyone who applauds free trade among consenting adults is a selfish bastard who doesn’t give a damn about justice, decency, compassion or one’s family and neighbours. A charitable assessment is that Rudd hasn’t read, hasn’t understood or has simply ignored a long queue of analyses that refute his assertions – most notably Adam Smith’s The Theory of Moral Sentiments (1759), Ludwig von Mises’ Socialism (1922) and Liberalism (1927), and Friedrich Hayek’s The Road to Serfdom (1944) and The Constitution of Liberty (1959).

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Chris Leithner


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