REAL Money   
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Contact:
Foundation for Economic Growth,
P.O. Box 10-282,
Wellington, N.Z.
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The Foundation for Economic Growth is a group of like-minded individuals who have decided to act rather than accept New Zealand's continuing poor economic performance. The Foundation is not affiliated with any political party. Add Your Comments Here.

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Most recent update: Mar 3rd, 2014 - 11:01:36

REAL Economics
Introduction

When I first began studying economics in 2005 I quickly became confused because there didn't seem to be any set of basic rules upon which everyone agreed. The subject seemed to be very much a matter of opinion rather than scientific fact. I couldn't find clear observations or principles with which all economists would agree.

And then I stumbled upon the pronouncements of Central Bankers around the world and I found their comments to be incomprehensible or such that they conveyed very little or no information. Alan Greenspan admitted that his statements were not meant to be understood when people complained. Giving the impression that anything he said might be taken out of context and too much read into his remarks. Since his comments were analysed in detail word for word and compared in detail with his previous pronouncement and that this analysis could make a big difference for investors and business people in deciding the future for many millions of dollars and workers, this was probably a wise decision. Besides if no-one understood his oratory then he could never be seen to be wrong.

I also came to realise that politics and economics were hopelessly mixed up and this confusion caused many arguments to go unresolved as the contenders were arguing from different ideological bases.
(See http://en.wikipedia.org/wiki/Political_economy)
(or http://www.wordiq.com/definition/Political_economy).

As time passed I also became more and more concerned at the extent of the use of paper money and how this meant that we had no sound basis for measurement of value within economics. Paper money caused large distortions in economies around the world which resulted in a boom and bust regime.

The Foundation for Economic Growth started in 2002 with the remit of helping politicians and people in general to understand that a growing economy was beneficial to all and that some actions would help and some would not. We were concerned that the Labour government at the time, led by Helen Clark, was claiming that they could make an "Economic Transformation" which would see New Zealand's fortunes restored and bring us back into the top half of the OECD. Our opinion was that her understanding was well astray and her efforts would transform a booming economy into a bust.

The bust started on January 2007 and when the rest of the world followed suit 18 months later we were in big trouble. What I found to be most surprising is that none of the economists employed to study these things and provide predictions for banks and governments had any idea of what was happening. There were no predictions of the bust starting until May of 2007 - five months after the event.

What is the point of predictions made after the event?

Further study has led me to the conclusion that we should be searching for the optimal way for creating wealth and ensuring that all people have the opportunity of working for and keeping their wealth.

As Ludwig von Mises said, "Capitalism gave the world what it needed, a higher standard of living for a steadily increasing number of people."

We must also realise that it is the people working in the private part of society that are generating this wealth and the government and its bureaucracy merely tax and distribute this wealth.

The entrepreneurs are the Golden Geese of society and we must encourage as many people as possible to become a Golden Goose! Taxation and regulation only serve to impede our entrepreneurs in their quest for endless golden eggs.


Sep 25, 2010, 09:26

REAL Economics
Some REAL Information

My studies took me to a book, "Financial Reckoning Day" by William Bonner with Addison Wiggin.
(http://www.amazon.com/Financial-Reckoning-Day-Surviving-Depression/dp/0471449733)

Leading on from this to The Daily Reckoning website.
(www.dailyreckoning.com)

The book explained how booms and bubbles develop and how they would eventually lead to a major collapse in our money system. Very heady stuff for a book published in 2003!

This book led me on to a number of writers on the web - most of whom were REAL Investment Advisers. If all these people were right then we were headed for a catastrophe. Fortunately there were some things we could do to protect ourselves and our savings.

But the question that continued to bother me was, "Does the thinking of these people have any basis in scientific fact?" I was surrounded by a world of opinion and few if any facts. Not exactly an environment in which to risk my meager savings.

Fortunately these authors talked about and all seemed to follow the thinking of a group of economists writing from the 1930s up to the present day and known as the Austrian School of Economics. The founder of this thinking seemed to be generally agreed as Ludwig von Mises and hence to the site of the Mises Institute.
See (http://mises.org/).

From here I discovered Ludwig von Mises' book "Human Action"
(http://www.amazon.com/Human-Action-Scholars-Ludwig-Mises/dp/1933550317/ref=sr_1_2?s=books&ie=UTF8&qid=1284938129&sr=1-2)

and Professor Huerta de Soto's "Money, Bank Credit, and Economic Cycles".
(http://www.amazon.com/Money-Bank-Credit-Economic-Cycles/dp/0945466390)

These provided the necessary academic rigor upon which I felt happy to base my thinking.


Sep 24, 2010, 10:34

REAL Economics
Politics and Economics

One large question remained, however, and that concerned the way that politics and economics interacted. Could we have one without the other? How could I study economics if it was dependent on political ideology for it's truths and fallacies?

After studying the writings of a number of the Austrian economists I came to the conclusion that it would be useful to think about economics without politics and then return to the REAL World where politics always controls our environment.

This seemed to be particularly clear after studying von Mises book "Human Action". If we confine ourselves to just observing humans in action and considering how they may behave if there was no government control then we may see a way forward.

With this in mind we should examine the chart found at the website below. I have tried to illustrate the different forms of government which may vary from laissez faire through to rigid dictatorship. Interestingly we find that both the left and the right can move in either direction and you will know many examples around the world which match the various degrees of left-right and up-down split. Even our own governments over the years have demonstrated differing tendencies in all directions!

Visit Website ]
Sep 20, 2010, 11:36

REAL Economics
What I Found

I found the answers to all the questions which had been bugging me. The results are relatively easy to demonstrate and once I had this new point of view it all started to make sense and I could see where the world is headed.

Unfortunately the truth is rather unpalatable. But, nevertheless, I have found in life that it is better to know the truth and then figure out how to deal with it than to hide from the truth and ignore problems that threaten to overwhelm me.

The story unfolds in the chapters following.


Sep 19, 2010, 09:32