Fact Check: The Truth About Blame For Recent Mass Shootings

2020 Democrats lay blame on Trump’s rhetoric for shootings
AP Headline today

Democrat politicians, media personalities, and celebrities were quick to place blame on Donald Trump for the mass shootings this weekend that left 31 dead in El Paso and Dayton.  They called Trump a white nationalist, white supremacist, hater, bigot, racist, etc.  He has "blood on his hands" they said.  There was no ambiguity.  The shooters were taking direct orders from The White House, according to Democrats.

Except there's only one problem;  both shooters left trails that lead to different conclusions.

The Dayton shooter referred to himself as a LEFTIST.  He was an antifa guy, dressed as an antifa guy, and was an enthusiastic socialist supporter of Elizabeth Warren and Bernie Sanders. 

The El Paso guy wrote a detailed manifesto in which he mentioned:   

Immigration 15 times
Environmental issues 16 times
Hispanics 10 times
Corporations 10 times

Wait.  He railed against corporations and the environment in equal measure to Hispanics and immigrants?

For much of his manifesto he sounded exactly like AOC, Elizabeth Warren, Kamala Harris, and Bernie Sanders.  And on illegal immigration, he mirrored Democrats alarmist language as much as Donald Trump's.  Every Democrat running today has used language like "crisis" and "flood" when referring to the illegals pouring across our border.  So have Barack Obama and Hillary Clinton. 

But what turned the El Paso shooter into a killer was his despondency over the environment, corporations, and automation.  He singled out these concerns as the reasons he believed he had no future.  It's that kind of Nihilism that turns a political concern into a mass murder tragedy.  After all, in a twisted mind, if we are doomed anyway why not kill in order to wake people up to save civilization?  Where did he get these ideas?  Not from Donald Trump.

For those of you playing the blame game, here's the actual score: of the 22 dead in El Paso, 11 are charged to Democrats based on the very words of the shooter.  The 9 dead in Dayton are all charged to Democrats.  That makes the final score:  Democrats 20, and Republicans 11.   

The truth, though, is these two shootings can be blamed on two sick individuals.  The question we need to ask is why are we breeding insane people and allowing them access to weapons.  The second amendment IS compatible with preventing mass murderers from obtaining guns.

If you're wondering why we haven't fixed that yet, research who's blocking this NRA supported bill that would flag mental illness during background checks.  And if you're wondering why we have so many insane young single men, read this.  (Hint: they are almost all fatherless!) 
_________________________________________________________________________________


For further reading, here are some excerpts from the El Paso shooters manifesto:

My ideology has not changed for several years. My opinions on automation, immigration, and the rest predate Trump and his campaign for president. I('m) putting this here because some people will blame the President or certain presidential candidates for the attack. This is not the case. I know that the media will probably call me a white supremacist anyway and blame Trump’s rhetoric. The media is infamous for fake news. Their reaction to this attack will likely just confirm that. 

He specifically stated his ideas predated Trump.  No one screaming about blame read his own words.   

...The inconvenient truth is that our leaders, both Democrat AND Republican, have been failing us for decades. They are either complacent or involved in one of the biggest betrayals of the American public in our history. The takeover of the United States government by unchecked corporations... 

Both parties are to blame for the... corporate takeover.

...My whole life I have been preparing for a future that currently doesn’t exist. The job of my dreams will likely be automated. Hispanics will take control of the local and state government of my beloved Texas, changing policy to better suit their needs. They will turn Texas into an instrument of a political coup which will hasten the destruction of our country. The environment is getting worse by the year...

There is no future...and the environment is getting worse. 

...The American lifestyle affords our citizens an incredible quality of life. However, our lifestyle is destroying the environment of our country. The decimation of the environment is creating a massive burden for future generations. Corporations are heading the destruction of our environment by shamelessly over harvesting resources. This has been a problem for decades. For example, this phenomenon is brilliantly portrayed in the decades old classic “The Lorax”. Watersheds around the country, especially in agricultural areas, are being depleted. Fresh water is being polluted from farming and oil drilling operations. Consumer culture is creating thousands of tons of unnecessary plastic waste and electronic waste, and recycling to help slow this down is almost non-existent. Urban sprawl creates inefficient cities which unnecessarily destroys millions of acres of land. We even use god knows how many trees worth of paper towels just wipe water off our hands. Everything I have seen and heard in my short life has led me to believe that the average American isn’t willing to change their lifestyle, even if the changes only cause a slight inconvenience. The government is unwilling to tackle these issues beyond empty promises since they are owned by corporations. Corporations that also like immigration because more people means a bigger market for their products. I just want to say that I love the people of this country, but god damn most of y’all are just too stubborn to change your lifestyle. So the next logical step is to decrease the number of people in America using resources. If we can get rid of enough people, then our way of life can become more sustainable....

See, he was just striving to make America more "sustainable".  He railed against depleted resources, depleted watersheds, pollution, drilling, plastic and electronic waste, urban sprawl, disposable paper towels, etc.  This all sounds like standard issue environmental leftism.  Might as well blame "The Lorax" for these murders, since that is the only "entity" he cites by name! 

Socialism is the Darwin Award for Economic Ignorance [UPDATED]

Pop quiz:

The United States is:
      A) a capitalist country
      B) a socialist country

No doubt, you were raised to call our economic system, "capitalism".  But did you know that the term "capitalism" is actually a derogatory one?  Do you know who made that term popular?  Did you know that that term didn't exist when the founders designed our economic system? And is it even true that we are a "capitalist" country today?     

The original design of our economic system could best be described as "free-markets and limited-government", not capitalist.  But by the numbers, we have spent the last 100 years moving, or "progressing", away from our original design.  Arguably, we can no longer be considered a free-market / limited-government country.  Here's a graph that chronicles this "progress": (click on the graph to view it in higher resolution)

In 1900, total government spending (federal, state, and local) consumed less than 10% of the private sector (private sector = GDP minus federal, state, and local government spending).  Then, in 1919, exactly 100 years ago, the Communist Party of the USA was founded on an agenda of labor unions and totalitarian socialism.  By the 1930s labor unions were in full bloom, and some of CPUSA's socialist wish-list was already law.  Under Barack Obama, the last President to have a complete record, peace-time government spending consumed about 70% of the private sector. That is the highest peace-time level in our history.  Only WWII exceeded it.  When 70% of a nation's wealth is consumed by government during peace-time, that may not be textbook socialism, but it certainly isn't the free-market / limited-government we had prior to 1929.

In nominal terms, the largest socialist programs on Earth are all U.S. programs.  They make-up about 50% of our total federal, state, and local government spending.  Social Security is the largest government retirement program in the world.  Medicare, Medicaid, SCHIP, Obamacare, etc., make up the largest government medical programs in the world.  Our government welfare programs, federal, state, and local, are the biggest on the planet.  Our food stamp program is the biggest on the planet.  And our accumulated government debt is the largest in the world. Among the most populist countries, none, including countries like China, India, Indonesia, and Russia spend anything near what we do on social programs.  Many European countries do spend more per capita, but they are small compared to the U.S., and the spending differences are, for the most part, minimal.

But spending is not the only measure of a government's size.  Regulation plays an equally important role, and the U.S. economy is highly regulated at the federal, state, and local levels.  In short, one can make the case that between government spending and our high levels of regulation, we have already turned the corner.  For socialists though, there are no limiting principles, and thus there is always more to do.

Our latest socialist push, which began with Barack Obama, is gathering steam and is represented today by Bernie Sanders, Alexandria Ocasio-Cortez, and over half the Democrat party which supports Medicare for All, The Green New Deal, Guaranteed Income, Guaranteed Jobs, 70% - 90% marginal tax rates, and the like.  Today, socialism polls higher than capitalism among Democrats and the young.  It is an inexorable political force that is clearly visible on the graph above.  And it will undoubtedly continue to overtake our once free-market / limited-government system.

Unlike free-markets and limited-government, socialism in its fully realized form requires unlimited, or "totalitarian" government.  That's because coercion is at the heart of it.  Totalitarian government is required to force citizens to do something that is entirely unnatural - work hard without the ability to realize the fruits of one's labor.  (Gee, that sounds familiar. Didn't we fight a civil war over that?).  Dissociating work from reward is the "fatal conceit" of socialism, to borrow a phrase from F.A. Hayek.

But none of that is taught in America today.  Which is why we are where we are, and are careening rapidly towards totalitarian socialism.  Why is this accelerating now?

Pop quiz:   

1. Who is the father of modern socialism/communism?  
2. Who is the father of modern capitalism? 

Odds are you will be able to answer the first question correctly and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "From each according to his ability, to each according to his need."

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank, or be mostly wrong.

If you attended a public school in the U.S., chances are most of your teachers were union members. Unions were prohibited for most government workers prior to the 1960s because organized labor in the U.S. began as a communist/socialist movement.  Public sector unions were seen as a huge conflict of interest. But that changed in the 1960's under Democrat John F. Kennedy, and since then government workers, including school teachers, have flooded into organized labor. That's not to say all teachers and organized laborers are socialists.  Most probably don't even think in those terms, but the politics of organized labor leans undeniably in that direction. You may or may not have been taught Marxism in school, but you probably weren't taught anything positive about "capitalism"!  

If you attended a college in the U.S., particularly in recent years, you are very likely to have been taught Marxism.  Karl Marx's "Communist Manifesto" is the third most assigned book at U.S. colleges today.  That's out of all the books ever published!  The next most assigned book in economics, capitalist or otherwise, is not even close.      

So how did you answer the second question above?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern communism/socialism AND the father of modern capitalism. Karl Marx was the person who defined that term for the masses in his risible critique of 1860s capitalism, "Das Kapital".  

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations” was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism wasn't in common use in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what "Marxism" is, why doesn't everyone know what "Smithism" is?  Because it’s not taught, except to select economics majors.  According to the Open Syllabus Project, Adam Smith is assigned at a rate about 25% compared to Karl Marx.  "Smithism" never became a word the way "Marxism" did.  You can go through K-12 and well beyond in schools in the U.S. and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding and success of our country.

Pop quiz:  

1. What is Supply Side Economics?  
2. What is Demand Side Economics?

You are probably familiar with the first term, but can you accurately define it?  Have you ever heard of its opposite, Demand Side Economics?  

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   

·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side seeks to stimulate consumption (Keynesianism), or at times to redistribute wealth (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get... crickets.  The language in this case does not favor the Marxist/socialist demand side ideology.   Hence, it is not even defined.  [UPDATE:  There is now a short and inaccurate entry on Wikipedia for Demand Side Economics.  When the first version of this piece was written in 2016, there was only a re-direct to "Keynesianism".] 

Pop quiz:

The financial crisis of 2008 was caused by:

      A) Greedy bankers, deregulation, George W Bush, and capitalism
      B) Socialism

Most likely, you are 100% certain the correct answer is A.  

No event had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is, the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist/demand side regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached its apex in 2007 under Republican George W. Bush, while Democrats including Senator Barack Obama, ran both houses of congress.

All of the risk from this socialist redistribution was supposed to be assumed by the federal government, mostly in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in such risky lending? Because they were coerced to do so.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts and none of them failed.  Why the difference?  Only in the U.S. was mortgage credit redistributed.  To make matters worse, government regulations encouraged financial institutions to load up on mortgage backed securities.   Unfortunately, when the scheme went bad the damage quickly spread to the private financial sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidates like Bernie Sanders and Ocasio-Cortez today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of free-market failure.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing accelerated under Barack Obama.  We are currently in the process of building a second real estate bubble.  Adding to that are new socialist bubbles in national debt, student loans, auto loans, and equity prices.

Pop quiz:

People love Scandinavian socialism because:

      A) Scandinavian countries are happy, healthy, productive, prosperous, AND socialist
      B) They misunderstand Scandinavian economics and history

Scandinavian success came long before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they first began their turn towards socialism. Socialism had nothing to do with their success.  But sixty years of high taxes and socialism has slowed their growth and momentum.  Until recently, Sweden and Denmark spent more than 100% of their private sectors on government - an obviously unsustainable level.  In response, socialist Europe has been freeing their economies and sharply turning away from socialism.  Switzerland, Ireland, and the U.K. are economically freer than the U.S., and Sweden, yes "socialist" Sweden, is essentially tied with the U.S. in economic freedom today.  (According to the Heritage Foundation rankings.)

Here's the thing:  National socialism has never produced anything long term other than misery, poverty, totalitarianism, and death.  Think Soviet Union, Cuba, Venezuela, and North Korea.  The NAZIS, who brought about the holocaust, WWII, and directly or indirectly caused the death of 70 million people, were known by the German acronym for "National Socialists".

So, that's at the national level.  And long term.  At the local level, socialism can survive a bit longer. Local socialism does not eliminate the incentive killing aspects of socialism, but it does avoid the inevitable monetary collapse.  That's because local governments cannot create money and therefore tend to be more fiscally responsible. National governments can hide their insolvency, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is created and controlled.  Our system was never designed to be a socialist system.  The Constitution implied that the states were the proper place for redistributive experimentation.  The conflict of interest at the national level is just too great.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power. The founders knew that.  It is happening today.  We doubled our national debt during just Obama's eight years.  Interest rates were artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  

In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is great after all that, congratulations, you've earned a Darwin Award in Economics!

SOTU: What if we are already a SOCIALIST country?

One of the most interesting lines in last night's SOTU speech was when Donald Trump declared, "The United States will never be a socialist country!"  Would a Bush have ever said that?  How about McCain or Romney?  Certainly no Democrat would ever say that since they consider socialism the future of their party!   

As Republicans applauded the line, the network cameras couldn't find the fresh young face of socialism in America, Alexandria Ocasio-Cortez, though they did manage to find the red-faced scowl of old Bernie Sanders who looked like a stake had just been driven through his heart.  A picture is worth a thousand Marxist dialectics.

I found the line somewhat ironic though, since I've been writing for some time that WE ALREADY ARE A SOCIALIST COUNTRY!  You may not realize it yourself.  Donald Trump may not know it.  And Bernie and Alex certainly don't think the project is complete.  But it's true.  Consider these points:

• In 1900, government consumed less that 10% of the private sector in the U.S.  ("private sector" = GDP minus government spending)
• Under Barack Obama, the last administration to have a complete record, the government consumed around 70% of the private sector in the U.S.
• When a majority of the wealth production of an economy is dedicated to government during peacetime, that is by the modern definition... socialism.

• The big ticket items have all been largely socialized in the U.S. over the last century - housing, education, finance, health care, and retirement.  Only food, transportation, energy, and communication remain as somewhat private sector matters.  (Except of course for food stamps, school lunches, agricultural subsidies, public transportation, Amtrak, TSA, FAA, NTSB, EPA, DOE, etc. etc. etc.)   
• Health care is almost entirely controlled by the government, and for the poor and those over 65 on Medicare and Medicaid, where the bulk of health spending occurs, it is entirely funded by government.
• Virtually every mortgage in the U.S. is owned by a Government Sponsored Entity, like Fannie Mae and Freddie Mac.  
• Every student loan since the Obama administration now comes from the government.  
• The entire financial sector of the U.S. economy is backstopped and heavily regulated by government.  
• Education is almost entirely funded and controlled by the government.
• Social Security is the largest retirement program on earth, and even private pensions are guaranteed by the government. 
• Government is so vast and unlimited that even Donald Trump, an avowed anti-socialist, is powerless to stop these policies and programs.  
• We have about $22 trillion in debt, and the Fed borrowed/printed another $3.5 trillion under Obama.  It's a total of about $25 trillion in debt funded by a private sector that runs about $13 trillion annually.  
• If and when interest rates normalize to around 5%, which is inevitable, we will more closely resemble Venezuela than any version of the U.S. we've ever known.

Sorry, I know no one wants to hear this, but we are basically a socialist country now.  What Bernie Sanders and the Ocasio-Cortez Democrats are talking about is putting the finishing touches on it.  They need totalitarian socialism for eternal power.  Taking over the four areas not already socialized -  transportation, energy, food, and communication is the next step.  That's what the "Green New Deal", "Net Neutrality", "Guaranteed Income", "Guaranteed Jobs", 90% Taxes, and $15 Minimum wage will help accomplish.  Add in "Medicare For All" and we are cradle to grave totalitarian socialist.

Uninformed voters are always suckers for free stuff.  They never understand that the cure is always worse than the disease, when the cure is socialism.         

Socialism is the Darwin Award for Economic Ignorance

Socialism is poised for a big victory in tomorrow's 2018 midterm elections.  The so-called "big blue wave" is, among other things, a big socialist wave.  Democrats have overnight become the 'Democrat Socialist Party" and across the board are running on massively expanding government entitlements, all paid for by redistributing wealth from everyone richer than you... to you.  What could possibly go wrong?   

Most people paying attention to economic history know full well that all forms of socialism lead to economic misery and human suffering.  It's not surprising that some would wish that fate on their fellow countrymen, after all some people are inherently cruel, nihilistic, and even suicidal.  But that doesn't account for everyone sucked into this self-destructive vortex.  Some people are true believers and think that socialism will actually help people.  Why is that?           

Pop quiz:   

1. Who is the father of modern socialism/communism?  
2. Who is the father of modern capitalism? 

Odds are you will be able to answer the first question correctly and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "From each according to his ability, to each according to his need."

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank, or be mostly wrong.

If you attended a public school in the U.S., chances are most of your teachers were union members. Unions were prohibited for most government workers prior to the 1960s because organized labor in the U.S. began as a communist/socialist movement.  Public sector unions were seen as a huge conflict of interest. But that changed in the 1960's under Democrat John F. Kennedy, and since then government workers, including school teachers, have flooded into organized labor. That's not to say all teachers and organized laborers are socialists.  Most probably don't even think in those terms, but the politics of organized labor leans undeniably in that direction. You may or may not have been taught Marxism in school, but you probably weren't taught anything positive about "capitalism"!  

If you attended a college in the U.S., particularly in recent years, you are very likely to have been taught Marxism.  Karl Marx's "Communist Manifesto" is the third most assigned book at U.S. colleges today.  That's out of all the books ever published!  The next most assigned book in economics, capitalist or otherwise, is not even close.      

So how did you answer the second question above?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern communism/socialism AND the father of modern capitalism. Karl Marx was the person who defined that term for the masses in his risible critique of 1860s capitalism, "Das Kapital".  

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations” was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism wasn't in common use in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what "Marxism" is, why doesn't everyone know what "Smithism" is?  Because it’s not taught, except to select economics majors.  According to the Open Syllabus Project, Adam Smith is assigned at a rate about 25% compared to Karl Marx.  "Smithism" never became a word the way "Marxism" did.  You can go through K-12 and well beyond in schools in the U.S. and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding and success of our country.

Pop quiz:  

1. What is Supply Side Economics?  
2. What is Demand Side Economics?

You are probably familiar with the first term, but can you accurately define it?  Have you ever heard of its opposite, Demand Side Economics?  

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   

·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side seeks to stimulate consumption (Keynesianism), or at times to redistribute wealth (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get... crickets.  The language in this case does not favor the Marxist/socialist demand side ideology.   Hence, it is not even defined.  [UPDATE:  There is now a short and inaccurate entry on Wikipedia for Demand Side Economics.  When the first version of this piece was written in 2016, there was only a re-direct to "Keynesianism".] 

Pop quiz:

The financial crisis of 2008 was caused by:

      A) Greedy bankers, deregulation, George W Bush, and capitalism
      B) Socialism

Most likely, you are 100% certain the correct answer is A.  

No event had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is, the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist/demand side regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached its apex in 2007 under Republican George W. Bush, while Democrats including Senator Barack Obama, ran both houses of congress.

All of the risk from this socialist redistribution was supposed to be assumed by the federal government, mostly in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in such risky lending? Because they were coerced to do so.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts and none of them failed.  Why the difference?  Only in the U.S. was mortgage credit redistributed.  To make matters worse, government regulations encouraged financial institutions to load up on mortgage backed securities.   Unfortunately, when the scheme went bad the damage quickly spread to the private financial sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidates like Bernie Sanders and Ocasio-Cortez today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of free-market failure.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing accelerated under Barack Obama.  We are currently in the process of building a second real estate bubble.  Adding to that are new socialist bubbles in national debt, student loans, auto loans, and equity prices.

Pop quiz:

People love Scandinavian socialism because:

      A) Scandinavian countries are happy, healthy, productive, prosperous, AND socialist
      B) They misunderstand Scandinavian economics and history

Scandinavian success came long before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they first began their turn towards socialism. Socialism had nothing to do with their success.  But sixty years of high taxes and socialism has slowed their growth and momentum.  Until recently, Sweden and Denmark spent more than 100% of their private sectors on government - an obviously unsustainable level.  In response, socialist Europe has been freeing their economies and sharply turning away from socialism.  Switzerland, Ireland, and the U.K. are economically freer than the U.S., and Sweden, yes "socialist" Sweden, is essentially tied with the U.S. in economic freedom today.  (According to the Heritage Foundation rankings.)

Here's the thing:  National socialism has never produced anything long term other than misery, poverty, totalitarianism, and death.  Think Soviet Union, Cuba, Venezuela, and North Korea.  The NAZIS, who brought about the holocaust, WWII, and directly or indirectly caused the death of 70 million people, were known by the German acronym for "National Socialists".

So, that's at the national level.  And long term.  At the local level, socialism can survive a bit longer. Local socialism does not eliminate the incentive killing aspects of socialism, but it does avoid the inevitable monetary collapse.  That's because local governments cannot create money and therefore tend to be more fiscally responsible. National governments can hide their insolvency, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is created and controlled.  Our system was never designed to be a socialist system.  The Constitution implied that the states were the proper place for redistributive experimentation.  The conflict of interest at the national level is just too great.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power. The founders knew that.  It is happening today.  We doubled our national debt during just Obama's eight years.  Interest rates were artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  

In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is great after all that, congratulations, you've earned a Darwin Award in Economics!

Sorry, We're Already a Socialist Country [UPDATED]

The Undiepundit Socialist Index:

First, let's talk about socialism.

Strictly defined, socialism refers to government owning the "means of production".  That means business assets like buildings, fixtures, tools, machines, vehicles, goodwill, etc. all become the property of the state under textbook socialism.  But that's not what we mean when we use the word today.  Socialist Bernie Sanders isn't calling for government nationalization of business assets.  He just wants medicine, education, housing, food, transportation, etc. provided for free to anyone who wants it, whether a citizen or not. How he intends to do that and how the quality of those things will be affected is never explained.

And that's the point; socialism is not a specific policy-set.  It's more a mindset.  It starts out being about economic issues, and it ends up being about power.

Here's a simple test:  if you believe that the federal government should provide basic human services to everyone for free, then you are a socialist.  If you understand that this kind of cure is always worse than the disease, then you are not.

Again, that's when the FEDERAL government does it.  State and local governments providing basic human services is another matter.  States cannot print and borrow money like the federal government can.  This imposes "limiting principles" on their largess.  States must make ends meet when they go socialist; they cannot hide insolvency for very long.  The U.S. federal government has no such limiting principles.

The U.S. government has found myriad ways to socialize whole sectors of our economy without making ends meet or doing it openly.  For example, in the 1990s the U.S. federal government wanted to massively subsidize housing, but they were unwilling to raise the revenue to pay for it.  So, they simply changed the mortgage requirements.  All of a sudden, any person regardless of credit history could obtain a mortgage.  It worked fabulously well for over a decade until the housing market stalled in 2006.  By 2008, the entire financial system of the planet was in ruins.

Very little has changed. No one would accuse Donald Trump of being a socialist, yet under him every new mortgage in the U.S. is owned by a government sponsored enterprise (GSE) like Fannie Mae or Freddie Mac.  Those same GSEs were the epicenter of the financial crisis in 2008.  The unfunded liabilities of Fannie and Freddie do not appear as "spending" until a crisis hits, as it did during the sub-prime financial mess.  You can see the effects on the graph above.

But we've been pretty socialist since about 1982.  That's when government spending first consumed over 50% of the private sector in the U.S..  50% is the tipping point.  When half the population becomes dependent on government, they tend to vote accordingly.  Before long it leads to "totalitarian" socialism. 

Why totalitarian?  Because without "limiting principles", socialism eventually requires force.  Once the predominant belief is that the federal government should provide basic needs for free, then those needs become "rights".  Once those needs become "rights", it's only a matter of time before that necessitates confiscation of wealth and power.  Your money, your power, your freedom, must all be subordinated for the "rights" of others.  Without limiting principles this has been proven throughout history.

Limiting principles are what saved the Scandinavian countries.  They reversed course from socialism because they were constrained by limiting principles.  Prior to the 1960s the Scandinavian countries were free market exemplars of health, literacy, productivity, and happiness.  Then in the 1960s they became enamored with socialism.  After about fifty years of progressive socialism they realized the cure was worse than the disease.  Wealthy citizens were fleeing, businesses were moving, economies were lagging, birthrates dropped, labor was being imported at unsustainable rates, and the fiscal trajectory was ominous.  These countries are relatively small compared to the U.S. and do not control the world's reserve currency.  Those on the Euro do not even control their own currency! They have built in limiting principles.  So they changed course.

Today, Scandinavian countries still retain some of the legacy socialist items, but the mindset has changed.  The Prime Minister of Denmark recently admonished Bernie Sanders for calling Denmark a socialist country.  In a 2015 speech at Harvard he said:

"I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy."

Sweden also backtracked, and both countries improved.

Similar results can be seen in the U.S. after the modest two year Trump reversal that is evident on the graph above.  To be clear, many manifestations of Trump's reversal cannot be seen in the numbers. Deregulation, a huge part of Trump's reversal, does not appear immediately on a spending graph.

But Trump is an anomaly.  We can see that the socialist mindset has inexorable momentum.  We were at 10% on the Undiepundit Socialist Index when WWI broke out.  One hundred years later, we averaged about 70% under Barack Obama.  Notice: the other two big spikes were for major World Wars!

So why doesn't it feel like we live in a socialist country?  If government was consuming 70% of the private sector from 2008-2016, wouldn't we sense that and change course?  No, because we were insulated due to massive borrowing, printing, and near 0% interest rates.  During that period the  federal debt doubled from $10 to $20 TRILLION and the Federal Reserve Bank added another $3.5 TRILLION to its balance sheet. You can hide a lot of economic signals when you create 13.5 TRILLION dollars from thin air.   At least temporarily.  The dollar's status as the world's reserve currency removes ALL limiting principles.

Sorry, we've been motoring towards totalitarian socialism since at least FDR.  Donald Trump is probably just a speed bump on that road.

[UPDATE]
It is also worth noting that Karl Marx's Communist Manifesto is the 3rd most assigned book at U.S. colleges today according to the Open Syllabus Project.  Of all the books ever published in history, the 3rd most assigned one is the one teaching socialism and communism to our kids.  You are what you teach. 

Socialism is The Darwin Award for Economic Ignorance [UPDATED]

Socialism got a fresh transfusion the other day with the surprise victory by Alexandria Ocasio-Cortez (above) in a NY congressional primary.  The 28 year old Democrat is a full-on  socialist whose platform reads almost point for point like the constitution of the defunct Soviet Union.  Within hours,  supposedly mainstream Democrats throughout the country began calling her the future of the party and adopted much of her socialist agenda.  Overnight, the Democrat Party, the party of JFK and "a rising tide lifts all boats" has become the party of "let's lower the tide and ground all the boats"!

Most people paying attention to economic history know full well that all forms of socialism lead to economic collapse and untold human suffering when left in place.  It's not surprising that some would wish that fate on their fellow countrymen, after all some people are inherently cruel, nihilistic, and even suicidal.  But that doesn't account for everyone sucked into this self-destructive vortex.  Some are true believers.  Why is that?             

Pop quiz:   

1. Who is the father of modern socialism/communism?  
2. Who is the father of modern capitalism? 

Odds are you will be able to answer the first question correctly and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "From each according to his ability, to each according to his need."

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank, or be mostly wrong.

If you attended a public school in the U.S., chances are most of your teachers were union members. Unions were prohibited for most government workers prior to the 1960s because organized labor in the U.S. began as a communist/socialist movement.  Public sector unions were seen as a huge conflict of interest. But that changed in the 1960's under Democrat John F. Kennedy, and since then government workers, including school teachers, have flooded into organized labor. That's not to say all teachers and organized laborers are socialists.  Most probably don't even think in those terms, but the politics of organized labor leans undeniably in that direction. You may or may not have been taught Marxism in school, but you probably weren't taught anything positive about "capitalism"!  

If you attended a college in the U.S., particularly in recent years, you are very likely to have been taught Marxism.  Karl Marx's "Communist Manifesto" is the third most assigned book at U.S. colleges today.  That's out of all the books ever published!  The next most assigned book in economics, capitalist or otherwise, is not even close.      

So how did you answer the second question above?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern communism/socialism AND the father of modern capitalism. Karl Marx was the person who defined that term for the masses in his risible critique of 1860s capitalism, "Das Kapital".  

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations” was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism wasn't in common use in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what "Marxism" is, why doesn't everyone know what "Smithism" is?  Because it’s not taught, except to select economics majors.  According to the Open Syllabus Project, Adam Smith is assigned at a rate about 25% compared to Karl Marx.  "Smithism" never became a word the way "Marxism" did.  You can go through K-12 and well beyond in schools in the U.S. and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding and success of our country.

Pop quiz:  

1. What is Supply Side Economics?  
2. What is Demand Side Economics?

You are probably familiar with the first term, but can you accurately define it?  Have you ever heard of its opposite, Demand Side Economics?  

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   

·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side seeks to stimulate consumption (Keynesianism), or at times to redistribute wealth (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get... crickets.  The language in this case does not favor the Marxist/socialist demand side ideology.   Hence, it is not even defined.  [UPDATE:  There is now a short and inaccurate entry on Wikipedia for Demand Side Economics.  When the first version of this piece was written in 2016, there was only a re-direct to "Keynesianism".] 

Pop quiz:

The financial crisis of 2008 was caused by:

      A) Greedy bankers, deregulation, George W Bush, and capitalism
      B) Socialism

Most likely, you are 100% certain the correct answer is A.  

No event had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is, the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist/demand side regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached its apex in 2007 under Republican George W. Bush, while Democrats including Senator Barack Obama, ran both houses of congress.

All of the risk from this socialist redistribution was supposed to be assumed by the federal government, mostly in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in such risky lending? Because they were coerced to do so.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts and none of them failed.  Why the difference?  Only in the U.S. was mortgage credit redistributed.  To make matters worse, government regulations encouraged financial institutions to load up on mortgage backed securities.   Unfortunately, when the scheme went bad the damage quickly spread to the private financial sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidates like Bernie Sanders and Ocasio-Cortez today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of free-market failure.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing accelerated under Barack Obama.  We are currently in the process of building a second real estate bubble.  Adding to that are new socialist bubbles in national debt, student loans, auto loans, and equity prices.

Pop quiz:

People love Scandinavian socialism because:

      A) Scandinavian countries are happy, healthy, productive, prosperous, AND socialist
      B) They misunderstand Scandinavian economics and history

Scandinavian success came long before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they first began their turn towards socialism. Socialism had nothing to do with their success.  But sixty years of high taxes and socialism has slowed their growth and momentum.  Until recently, Sweden and Denmark spent more than 100% of their private sectors on government - an obviously unsustainable level.  In response, socialist Europe has been freeing their economies and sharply turning away from socialism.  Switzerland, Ireland, and the U.K. are economically freer than the U.S., and Sweden, yes "socialist" Sweden, is essentially tied with the U.S. in economic freedom today.  (According to the Heritage Foundation rankings.)

Here's the thing:  National socialism has never produced anything long term other than misery, poverty, totalitarianism, and death.  Think Soviet Union, Cuba, Venezuela, and North Korea.  The NAZIS, who brought about the holocaust, WWII, and directly or indirectly caused the death of 70 million people, were known by the German acronym for "National Socialists".

So, that's at the national level.  And long term.  At the local level, socialism can survive a bit longer. Local socialism does not eliminate the incentive killing aspects of socialism, but it does avoid the inevitable monetary collapse.  That's because local governments cannot create money and therefore tend to be more fiscally responsible. National governments can hide their insolvency, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is created and controlled.  Our system was never designed to be a socialist system.  The Constitution implied that the states were the proper place for redistributive experimentation.  The conflict of interest at the national level is just too great.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power. The founders knew that.  It is happening today.  We doubled our national debt during just Obama's eight years.  Interest rates were artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  

In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is great after all that, congratulations, you've earned a Darwin Award in Economics!

Marxism and Mobility

I'm not usually one to root for the Communist, but that's what I found myself doing the other day. As a student of economic history, I consider communism, and in fact all degrees of Marxism (which is always "progressive") antithetical to sustainable human well being.  Economic history bears this out. But there are some circumstances which make it excusable.    

To wit, the other day I read a Wall Street Journal book review of "Ants Among Elephants", by Sujatha Gidla. an account of life as an "Untouchable" in India.  The reviewer cited two narratives running through the book, the hardships of Ms. Gidla's Untouchable family, and their political views as communists.

Well hell, if I was born an Untouchable in India, I'd be first in line at the communist buffet!  India's caste system, despite efforts to end it, is still the mother of all mobility killers.  If your grandparents swept the floor, so did your parents, and so will you in all likelihood.  And it goes back countless generations.  Marxism is the only option when the culture won't abide.

I've never bought into the notion that income gaps breed Marxists.  That's not enough.  To me it's always been about economic mobility.  Think of any Marxist movement in history and you'll find, A) downtrodden people with, B) no hope of upward mobility.   The lack of hope is key.  We've had downtrodden socialists and communists in the U.S. since the late 1800s, but they never got much traction because we've always been the land of mobility.

All of which got me wondering:   Why in the U.S,  the world heavyweight champion of economic mobility, is Marxism ascendant today?

One popular theory is that in the information age, only tech geniuses and the hyper-educated can advance.  This leaves the less-educated feeling trapped.  Others say it's low skilled immigrants and an inner city underclass who see no way out.  All that sounds good, except most of the Marxists I know have graduate degrees!

Here's another theory:  In 1900, total government spending (federal, state,  and local) was around 7% of national income.  Today it's around 60%. *  As government and redistribution have grown, mobility has shrunk.

We keep trying to wipe out poverty and hardship by expanding government. Yet we still have poverty and hardship in about the same proportions.  What we're losing in the bargain is mobility.

This is the tragedy of Barack Obama, Bernie Sanders, and the modern Democrat party;  they see inequality and think bigger government and more redistribution are the solutions.   It's a cheap emotional appeal that voters increasingly fall for,  but it always makes things worse in the long run.  

What they miss is that we are not India. We have a long history of mobility that we've only recently lost.  For example, blacks moved into the middle class at a faster rate in the 1950s than they do now!  Astonishing when you consider the headwinds pre civil rights.

Perhaps in the back of voters minds, when they heard "Make America Great Again", they were thinking of our lost mobility.

The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.  - Alexis de Tocqueville, 1850s

*

Socialism is the Darwin Award for Economic Ignorance

Pop quiz:   

1. Who is the father of modern socialism/communism?  
2. Who is the father of modern capitalism? 

Odds are you will be able to answer the first question correctly and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "From each according to his ability, to each according to his need."

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank, or be mostly wrong.

If you attended a public school in the U.S., chances are most of your teachers were union members. Unions were prohibited for most government workers prior to the 1960s because organized labor in the U.S. began as a communist/socialist movement.  Public sector unions were seen as a huge conflict of interest. But that changed in the 1960's under Democrat John F. Kennedy, and since then government workers, including school teachers, have flooded into organized labor. That's not to say all teachers and organized laborers are socialists.  Most probably don't even think in those terms, but the politics of organized labor leans undeniably in that direction. You may or may not have been taught Marxism in school, but you probably weren't taught anything positive about "capitalism"!  

If you attended a college in the U.S., particularly in recent years, you are very likely to have been taught Marxism.  Karl Marx's "Communist Manifesto" is the third most assigned book at U.S. colleges today.  That's out of all the books ever published!  The next most assigned book in economics, capitalist or otherwise, is not even close.      

So how did you answer the second question above?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern communism/socialism AND the father of modern capitalism. Karl Marx was the person who defined that term for the masses in his risible critique of 1860s capitalism, "Das Kapital".  

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations” was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism wasn't in common use in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what "Marxism" is, why doesn't everyone know what "Smithism" is?  Because it’s not taught, except to select economics majors.  According to the Open Syllabus Project, Adam Smith is assigned at a rate about 25% compared to Karl Marx.  "Smithism" never became a word the way "Marxism" did.  You can go through K-12 and well beyond in schools in the U.S. and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding and success of our country.

Pop quiz:  

1. What is Supply Side Economics?  
2. What is Demand Side Economics?

You are probably familiar with the first term, but can you accurately define it?  Have you ever heard of its opposite, Demand Side Economics?  

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   

·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side seeks to stimulate consumption (Keynesianism), or at times to redistribute wealth (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get... crickets.  The language in this case does not favor the Marxist/socialist demand side ideology.   Hence, it is not even defined.  [UPDATE:  There is now a short and inaccurate entry on Wikipedia for Demand Side Economics.  When the first version of this piece was written in 2016, there was only a re-direct to "Keynesianism".] 

Pop quiz:

The financial crisis of 2008 was caused by:

      A) Greedy bankers, deregulation, George W Bush, and capitalism
      B) Socialism

Most likely, you are 100% certain the correct answer is A.  

No event had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is, the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist/demand side regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached its apex in 2007 under Republican George W. Bush, while Democrats including Senator Barack Obama, ran both houses of congress.

All of the risk from this socialist redistribution was supposed to be assumed by the federal government, mostly in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in such risky lending? Because they were coerced to do so.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts and none of them failed.  Why the difference?  Only in the U.S. was mortgage credit redistributed.  To make matters worse, government regulations encouraged financial institutions to load up on mortgage backed securities.   Unfortunately, when the scheme went bad the damage quickly spread to the private financial sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidates like Bernie Sanders and Ocasio-Cortez today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of free-market failure.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing accelerated under Barack Obama.  We are currently in the process of building a second real estate bubble.  Adding to that are new socialist bubbles in national debt, student loans, auto loans, and equity prices.

Pop quiz:

People love Scandinavian socialism because:

      A) Scandinavian countries are happy, healthy, productive, prosperous, AND socialist
      B) They misunderstand Scandinavian economics and history

Scandinavian success came long before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they first began their turn towards socialism. Socialism had nothing to do with their success.  But sixty years of high taxes and socialism has slowed their growth and momentum.  Until recently, Sweden and Denmark spent more than 100% of their private sectors on government - an obviously unsustainable level.  In response, socialist Europe has been freeing their economies and sharply turning away from socialism.  Switzerland, Ireland, and the U.K. are economically freer than the U.S., and Sweden, yes "socialist" Sweden, is essentially tied with the U.S. in economic freedom today.  (According to the Heritage Foundation rankings.)

Here's the thing:  National socialism has never produced anything long term other than misery, poverty, totalitarianism, and death.  Think Soviet Union, Cuba, Venezuela, and North Korea.  The NAZIS, who brought about the holocaust, WWII, and directly or indirectly caused the death of 70 million people, were known by the German acronym for "National Socialists".

So, that's at the national level.  And long term.  At the local level, socialism can survive a bit longer. Local socialism does not eliminate the incentive killing aspects of socialism, but it does avoid the inevitable monetary collapse.  That's because local governments cannot create money and therefore tend to be more fiscally responsible. National governments can hide their insolvency, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is created and controlled.  Our system was never designed to be a socialist system.  The Constitution implied that the states were the proper place for redistributive experimentation.  The conflict of interest at the national level is just too great.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power. The founders knew that.  It is happening today.  We doubled our national debt during just Obama's eight years.  Interest rates were artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  

In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is great after all that, congratulations, you've earned a Darwin Award in Economics!

Why Socialism is Chic, and Capitalism is Not (ICYMI)

Socialism is chic in 2015.   But, just a few short years ago Obama voters would mock and charge racism when anyone likened his ideology to socialism.  Now Bernie Sanders, an openly socialist candidate, is leading in some key polls of those very same voters!

Why is this happening in a country which enjoys the highest standard of living of any large diverse country, and one which uniquely earned it's place due to its historic reliance on free markets and constitutionally limited government?  Part of this is a triumph of deliberate indoctrination which has been going on for at least half a century.  Another part, and the most recent part, is a deliberate deception regarding the financial crisis of 2008.

Pop quiz:   

1. Who is the father of modern socialism/communism?  
2. Who is the father of modern capitalism? 

Odds are you will be able to answer the first question correctly, and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "from each according to his ability, to each according to his need".

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank or be mostly wrong.

You may not realize it, but socialists have been influencing you your whole life. Prior to the 1960's there were prohibitions on government workers joining organized labor.  That's because there was an obvious conflict of interest; organized labor and socialism have been synonymous throughout their shared history in the U.S.. But that changed in the 1960's under Democrat John F. Kennedy, and since then, government workers including school teachers have flooded into organized labor.   Most likely every teacher who taught you in a U.S. public school was a member of organized labor.  Of course, not all teachers, nor members of organized labor, are socialists, but the politics of organized labor in the U.S. leans undeniably in that direction.  

"Hold on!", you say, "Just because public schools are unionized and organized labor leans socialist doesn't mean it has had any real impact on our country!"  Actually it has.  After half a century of this, Karl Marx is the most assigned economist at U.S. colleges today.  By far.   

So how did you answer the second question?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern socialism AND the father of modern capitalism. Karl Marx was the person who defined capitalism for the masses in his scathing critique of 1860s capitalism called "Das Kapital".  He constructed a convenient dichotomy between socialism and capitalism based on his own definitions to support his theories .  Of course Marx's preferred ideology, socialism, was defined in the most glowing light, while his version of capitalism was defined in the most sinister.

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations”, was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism didn't exist in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what Marxism is, why doesn't everyone know what Smithism is?  Because it’s not taught.   Except to select economics majors.  "Smithism" never became a word.  Marxism is taught everywhere all the time, and not just to economics majors.  If you want to learn about Adam Smith, you most likely have to do it on your own.  You can go through K-12 and well beyond in schools in the U.S., and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding of our country.  If you go to Wikipedia and look up Marxism, you’ll find plenty.  If you go to Wikipedia and look up Smithism, you’ll get crickets. 

How about a more modern term, like Supply Side Economics?  You are probably familiar with that term, but can you accurately define it?  Can you define its opposite, Demand Side Economics?

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   

·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side at times seeks to stimulate consumption (Keynesianism), or at times to achieve egalitarianism (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get zip.  The language in this case does not favor the socialist demand side ideology.   Hence, it is not even defined.

No event has had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached it’s apex in 2007 under Republican George W. Bush, while Democrats, including Senator Barack Obama, ran both houses of congress.

All the risk from this socialist redistribution was supposed to be assumed by the federal government in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in subprime lending for the first time in history in such large numbers? Because they were coerced to do so by their government.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts, and none of them failed.  Are U.S. bankers so much greedier than their Canadian counterparts that they drove their banks into insolvency while their less regulated neighbors to the north did not?  No, it was U.S. government regulation in the form of a socialist housing policy that caused the financial crisis.  Unfortunately, when the scheme went bad the damage spread to the private banking and investment sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidate Bernie Sanders today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of failed capitalism.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  We are.  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing have accelerated under Barack Obama.  We are in the process of building a second real estate bubble. Adding to that scenario is a socialist national debt bubble, student loan bubble, auto loan bubble, and equity bubble.

You might be saying, "OK, big deal, I'm a socialist.  Lots of countries are socialist, and some of them seem to be doing just fine.  What about the Scandinavian countries?  Why can't we have what they have?  Free healthcare, free college, and lots of benefits sounds pretty good to me!".  Scandinavian success came before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they made the turn.  Fifty years of high taxes has slowed their growth and momentum and now they are "feeling the Bern".  Sweden and Denmark currently spend more than 100% of their private sector income on government services.  This is obviously unsustainable.  Socialist Europe is failing and is increasingly freeing their economies in response.

Here's the thing:  National socialism has never produced anything long term other than misery, starvation, poverty, and authoritarianism.  That's at the national level.  And long term.  At the local level, socialism can survive a bit longer.  Local socialism does not eliminate the incentive killing aspects of socialism, but it does delay the inevitable monetary collapse.  That's because local governments cannot create money. State and local governments must be more disciplined or risk imminent collapse.  Therefore, they tend to be more fiscally responsible.  National governments can hide their insolvency much longer, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is usually created and controlled.  The Euro countries are a recent exception now that money is no longer controlled by the individual countries.  The Euro is controlled by the European Central Bank, which is a consortium of 19 Eurozone countries .  It's almost like they recognized the fatal flaw and are trying to work around it.

But in the U.S. we have no such arrangement.  We borrow and print money at the federal level. Our system was never designed to be a socialist system.  The constitution implied that the states were the proper place for redistributive experimentation.  At the national level, the conflict of interest is just too great for elected officials.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power today.  The founders knew that.  It's happening today. We have doubled our national debt in just the last seven years.  Interest rates have been artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  

In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is chic after all that, that is your right.  Just keep it local, and maybe - just maybe, it won't collapse until after your kids inherit the mess.