In Praise Of Karl Marx

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Dear Diary,

Wall Street reconvenes today after a long holiday. Investment advisers, economists and soothsayers have given us their guesses and wishful thinking about where the world is headed in 2015.

Most see “more of the same.” They’re buying the dips. And waiting for corporate boards to approve more share buybacks.

They’re sure that if anything goes wrong, Janet Yellen will come to the rescue.

And they’re probably right. “More of the same” is what we usually get.

But not always…

Last week, we were exploring “solutions.”

Frequently we comment on the Fed’s bubbles… and the inevitability that they will pop and cause widespread misery. Some readers think it mean-spirited of us not to offer a solution that will avoid the suffering.

Some even think we are looking forward to a catastrophe just so we can say I told you so.

An explanation is needed…

Marx Was Right!

Right before Christmas, we spent some time in Washington, D.C., renewing our ties to the activist community.

We attended a meeting of conservatives – some of whom we had known 30 years ago, as director of the National Taxpayers Union.

We were called on to explain ourselves. Why had we forsaken the public interest sector? What were we up to now?

We demurred. We didn’t have the heart to tell them how we had been won over to Marx’s viewpoint. Karl Marx had plenty of bad ideas. But he had at least one good one: historical determinism.

It is not the consciousness of men that determines their social being, but their social being that determines their consciousness.

Or as Marx put it:

At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production or – what is but a legal expression for the same thing – with the property relations within which they have been at work hitherto.

From forms of development of the productive forces these relations turn into fetters. Then begins an epoch of social revolution.

Path Dependent

French scholar Pierre-Simon Laplace put it better:

We ought to regard the present state of the universe as the effect of its antecedent state and as the cause of the state that is to follow.

An intelligence knowing all the forces acting in nature at a given instant, as well as the momentary positions of all things in the universe, would be able to comprehend in one single formula the motions of the largest bodies as well as the lightest atoms in the world, provided that its intellect were sufficiently powerful to subject all data to analysis; to it nothing would be uncertain, the future as well as the past would be present to its eyes.

The perfection that the human mind has been able to give to astronomy affords but a feeble outline of such an intelligence.

And we put it best of all:

People come to think what they must think when they must think it.

This is another way of saying that the future is “path dependent.” Where you go depends on what road you’re on… 2015 depends on 2014, which depended on 2013. And so on.

The Road to Disaster

If the Fed had not made so much credit available last year, there wouldn’t be so much debt hanging over the market today. And you wouldn’t need another credit crisis to get rid of it.

That’s also part of the reason you hear so little about “solutions” here at theDiary. There aren’t any! The path goes where it goes, all the way to the end.

When you borrow money, you have to pay it back. Or something bad happens. When a year passes, you are a year older. There are no “solutions.”

Is that negative?

Nope. It’s just the way it is.

But wait. There’s more to the story. A lot more…

Because we humans never know exactly what road we’re on. Or where it leads. But as Marx pointed out, the road itself changes the way we think. Usually, we will want to go to the end of it… even when we know it leads to disaster.

So what if we see the road is washed-out ahead? What if we know we’re on a bus headed for the cliff?

Are we better off not knowing?

More tomorrow…

Regards,

Bill