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Post details: Pearls of Wisdom

Pearls of Wisdom

George Santayana, a Spanish philosopher and novelist once said: "Those who do not learn from history are bound to repeat it". And that is the deep truth about the plight of the human race on this planet, although Mark Twain would probably temper our expectations with his famous disctum "History does not repeat itself, but it does rhyme".

This Christmas I finally found some time to put together a collection of quotes that had caught my attention over the past year. They show nicely how mankind continues to struggle with a fairly limited but recurring set of problems. We just don't seem to be able to learn from our past mistakes.

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A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.

This piece of wisdom is usually attributed to Alexander Frasier Tytler. He may not be the original author, but the quote captures the primary weakness of democracy quite fittingly.

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The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.

This is an old one - usually attributed to Marcus Tullius Cicero (most likely an embellished version of one of his actual speeches). But this piece again neatly summarizes the timeless problem of human governance. Living beyond one's means seems to be the end game of all complex societies. Too bad there was no Twitterus in those days, otherwise this Roman philosopher and statesman could have started "Occupy Circus Maximus" - a new and revolutionary movement that might have saved the already crumbling empire and put the whole civilization on a fast track into modern times.

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In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold [...]
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.

This is Alan Greenspan in one of his early objectivist essays. It shows how far way he strayed away from his youthful ideals but it also shows the true dilemma of monetary policy. However imperfect the gold standard may be, the moment our money acquires arbitrary value it becomes an object of manipulation.

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Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some [...] As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

This is an actual quotation from John Maynard Keynes ("The Economic Consequences of the Peace"). This quote points in the same direction as young Greenspan. The manipulation of currency (which almost always means its debasement) is not a sound and fair economic policy. Although it may be politically the most convenient one.

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And that's it for now. Close the textbook. However familiar our problems may seem, they will always need to be rehashed in terms of a new context. While we can learn a lot from the past, we should keep our eyes on the ultimate prize: the future. Or as one Johann Wolfgang von Goethe once put it - All theory, dear friend, is gray, but the golden tree of life springs ever green.

dd

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