Dear class of ’14, you’re screwed

We’re still on our Commencement Day address, whence our callow graduates find out that they’ve been set up.

Dear Class of ‘14,

Except in the sciences and engineering – a college education might do more harm than good. As I explained yesterday, in order to be taught, studied and learned, the arts and humanities must be reduced to a caricature. People are turned into stick figures. Complex storylines become narratives so simple even a college student can understand them.

You’re young. And now that you’re leaving school, you can begin to learn. It will take you many years to develop the deep suspicion and cynicism you need to understand what is really going on. But I’ll give you a little preview.

America’s armed forces protect our freedom, right? Memorial Day is set aside to honour them – in spirit. The Veterans Administration provides them with material benefits. That is the information that is taught to every schoolchild and rehearsed annually by every newspaper in the nation.

On Memorial Day, our minister chose to tell the story of Moses Triplett, whose daughter is the last person from the Civil War era still receiving veterans’ benefits.

Triplett was a soldier in the army of the Confederacy. On the road to Gettysburg, Mr Triplett defected to the Union cause. He survived the war. Married. His wife died. Late in life, Mr Triplett remarried to a woman 50 years younger and had a child who is still alive. But why should we honour a man who betrayed his people and his nation?

The trouble with Memorial Day and higher education is similar. You have to ignore the particulars to appreciate them. Take out the inconvenient details. Remove the embarrassing facts. Often what is left is sterile nonsense.

Every Memorial Day editorial tells us that our veterans fought for ‘freedom’. Yet, in not a single one of America’s wars was an enemy preparing to reduce our freedom. The Huns wanted Alsace, not Pennsylvania. The poor Filipinos intended no subjugation of Indiana.

Bill Bonner on markets, economics & the madness of crowds

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And what about the Nicaraguans? Nobody even remembers the shackles they were meant to clamp onto American wrists. But after every victory, we know what happened next; the doughboys and grunts came home to higher taxes and more prohibitions.

What you learn in college is the way things are ‘supposed’ to work. But few things in real life are as simpleminded as they’re ‘supposed’ to be.

Our government is not run by or for the people. A government is merely a way one group of people – the insiders – take advantage of other people – the outsiders. You can call it a democracy or a dictatorship, it hardly matters. It can be gentle and broadly tolerable or brutal and widely detested. What makes it a government is that it has a monopoly on the use of violence; ultimately, the insiders use it to get what they want.

As for the economy, you have learned how it is a capitalist system. You have been told that it needs regulation by the SEC, the Fed, the Justice Department, the FDA, the FTC and other agencies to keep the capitalists honest. You have been lied to.

It’s not a capitalist system; the feds took the capital out 40 years ago. Now, it depends on cronies and credit. It’s a corrupt system, in other words, the product of collusion between industry and the agencies meant to regulate them. Its real purpose is to transfer more wealth and power to the insiders.

William Baumol understood. He guessed that prices for manufactured goods would go down – because there was a lot of competition – while prices for locally produced services would go up. That’s why your TVs are cheap… but your health care has become so expensive; health care can be more closely controlled and manipulated by the insiders.

It is largely protected from competition and distorted by third parties who pay the bills – including the government and insurance companies.

This also helps explain why a university education is eight times more costly than it was in 1978. Because, as I explained on Friday, college was optional to a decent income in the ‘70s. Now, it’s almost obligatory.

When everything is rigged, the riggers have the money and the power. Lobbyists, lawyers, accountants, administrators… Whether you want to take a business public… or just build a house… you come face to face with someone who can stop you, with paperwork, legal razzmatazz and nauseating administration. You need to play the game too.

More to come, including the ‘Cantillon effect’, and ‘intertemporal discoordination’. You’ll find out what they mean (hint: you’re ‘screwed’).

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  • Ellen12

    This is where the ‘Too big to fail’ culture has brought us and enraged as so many of the population are about the abuse the financial service sector continues to inflict on society ‘globally’, it will probably, in the end take physical rebellion by the young to stop them. Like it or not, what we see in the financial service market is akin to the entitlement culture of the kings and queens of Europe that brought about the demise of monarchy and laid the seeds of democracy (now a long forgotten concept) The daily reckoning accurately described as this whole banking ‘too big to fail’ culture as “Head I win, tails you lose.” A few fines handed out to individual deviant bankers, no prosecutions resulting in custodial sentences for the theft of people’s wealth and, more importantly, futures on a grand scale in full view of governments, central banks and regulators. We are truly living in a dark age.

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