Central Planning Is More Than Just Friction

Now let’s look at the next part of that quote. It breeds resentment. Are we there yet, today? Nearly everyone takes so-called inequality to be a problem, with the Left moving on to the solution phase (taxes, of course).

We will skip to the last part for a moment. “…Wealth-getting degenerates into a gamble…” Buy stocks, buy real estate, buy bitcoin, and even buy gold. Everyone just wants to know what asset will go up next. Few questions if this central-banking assets-going-up mechanism is destructive.

Now back to the most interesting part of the quote. This theme is not often written about. The relationship between debtor and creditor is the foundation of capitalism. Keep in mind, this is coming from Keynes, about whom Benito Mussolini, the fascist dictator of Italy, said:

“Fascism entirely agrees with Mr. Maynard Keynes, despite the latter’s prominent position as a Liberal. In fact, Mr. Keynes’ excellent little book, The End of Laissez-Faire might, so far as it goes, serve as a useful introduction to fascist economics. There is scarcely anything to object to in it and there is much to applaud.”

And Keynes is claiming that the origin of the above quote about destroying capitalism, is actually the communist butcher, Vladimir Lenin. Neither of these two were for capitalism, free markets, or freedom. And yet they think that the credit relationship is the foundation of capitalism.

As an aside, this touches on the age-old question of what is money. Is the dollar money? Or is gold money? Or are they both money, and gold just better money? There is no question that the dollar is the generally accepted medium of exchange. But is medium of exchange the definition of money?

If one thinks of capitalism as merely people buying and selling in a market, then why isn’t this definition right? What else could money mean, other than medium of exchange?

But, if one thinks that the creditor-debtor relationship is vitally important (much less the foundation of capitalism), then one has a reason to question this definition. Money must perform the function of extinguishing debt.

The dollar cannot perform this function.

And indeed, Keynes and Lenin understood that the government can destroy the capitalist system by debauching the currency. Note that, twice they use the word “currency”, but not the word “money”. Keynes understood something in 1920 that many people do not, today.

Why would the credit relationship be the foundation of capitalism? Can’t people buy and sell things without credit? Consumers can certainly buy consumer goods without credit.

But what about producers?

The Foundation of Capitalism

Production, even in an industrial economy of the form that existed before World War I, occurs at large scale in factories full of machines. The enterprises who own and operate these factories depend on credit to finance them. Without credit, such factories would not exist and civilization would be dragged backwards to a much less efficient mode of production. Goods we take for granted would not be available at all. Basic necessities like food and clothing would be far more expensive. And wages would drop drastically, with the drop in productivity.

View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Gary Anderson 1 year ago Contributor's comment

Two things. First, you spoke about hoarding, but not about bond hoarding. Second, you mentioned the dollar and gold as money, but if you ask a clearinghouse, bonds are the real money. They are the collateral. So, there is a stability there. I am not saying it is a good system, but after MBSs blew up, interest treasuries became the collateral of choice and we entered the new normal.