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Follow the Money. It Leads to a Gun. It Is Pointing at You



March 11, 2010 – Comments (16)

If you ask "Why do I have to do that?" enough times you will eventually find out.

Meanwhile, those who help the robbers carry out their destructive activities enjoy the good life, at your expense.

Government Workers Feel No Economic Pain

It gets worse. How far down the rabbit hole do you want to go?  How many times do you want to ask "Why do I have to do that?"

There is a gun pointing at you right now.  It's concealed, but it's real. 

In between you and that gun is a layer of obscurity.  This layer includes economists like Paul Krugman and Brad DeLong, religious figures like the bishops of the Catholic Church, lawyers, university deans and professors, bureaucrats, lobbyists, and politicians.  They all make a fine living doing what appear to be completely worthless tasks.  But they do serve a purpose.  They hide the gun from you.  As long as you do what they say, you will never see it. You can go about your life completely unaware of its existence.  It may become so obscured that you claim it doesn't exist at all.  You may even begin to believe that you are free.  Once you are completely sure that there is no gun, you declare that you pay your taxes happily and voluntarily!

"None are more hopelessly enslaved than those who falsely believe they are free," Johann Wolfgang von Goethe once said.

Obscuring the Gun might have been the whole point of Positivism in the Social Sciences. Though the following article discusses Keynesianism specifically, you will find that nearly all of sociology academia are positivists.  Positivists believe that everything must be tested before we say it is correct. This is useful for some things, but not so useful for sociology.  Positivism also has a very interesting side effect.  Consider that testing all of these half baked ideas costs money (your money), earns tremendous prestige even for the complete nitwits (Climate Scientists), and allows otherwise uninteresting people to surround themselves with other eager, though less enlightened nitwits, to man their ever growing research staffs.

Consider the following statement:

Something that is completely blue can not also be completely red. 

You and I might call this a "truth" or "axiomatic." 

A Keynesian Positivist would say, "We need to test that before we know that it is true.  Now give me your money for research. (Your tax money - direct or indirect - pays for nearly all of academia's research.)  It's ok," he says, "I have the conscience of a liberal."

Enjoy the following article from Gary North on using mental images to clear the obscurity of Keynesianism.  Behind it, you find the gun.  It is pointed at you.

David in Qatar

Four Mental Images That Immunize Sensible People – But Not Economists – Against Keynesian Economics - by Gary North

Four images provide the conceptual tools to refute Keynesian economics: the gun, the wallet, the IOU, and the printing press. Recall them every time you read a Keynesian promotion of the latest government-spending plan. Let me explain.

Think of yourself as engaged in a public debate. If you want to undermine an intellectual opponent in a debate, find his system's central weak point and latch onto it like a bulldog. Never let it go. Make sure the audience leaves the debate with your refutation in their minds.

In preparing for a debate, remember this principle of effective communication: "It is easier to forget a formula than a mental image."

Academic economists love formulas. This is their great vulnerability. Unlike formulas in physics, economists' formulas conceal profound conceptual errors that simple mental images reveal as utter nonsense. The average person can readily comprehend these errors through the use of simple mental images. But academic economists are deliberately trained in graduate school to ignore these images. They are easily blinded by formulas. This puts them at a disadvantage in public debate, especially when debating members of the one school of economics that does not use formulas: Austrian School economics. I will now offer a demonstration of this principle of debate.


The account of Keynesian economics on Wikipedia is a good place to begin. Here, we read of the textbook Keynesian formula:

In scientific notation, the Keynesian Formula consists of the following make-up:

C + I + G + X – M = Y(GDP)

which means:

Consumption + Investment + Government Spending + Exports Imports = Gross Domestic Product

This is standard stuff. Start here.

Spending is the heart of Keynesian economics – aggregate spending. Consumption (C) is a series of society-wide individual allocation decisions. Investment (I) is a series of society-wide individual allocation decisions. Exports (X) are a series of society-wide individual allocation decisions. It is the same for imports.

Government spending is an allocation decision of a different kind. "See this gun? See where it is pointed? Hand over your wallet."

The student can see that total spending is based on all the letters of the formula. C, I, X, and M all begin with the original owners of resources. But G does not begin with the original owners. G begins with the new owner after multiple transactions with the gun.

G does not create. G confiscates. G cannot spend anything that it did not extract from consumers or investors.

C, I, X, and M are based on production. They are creative forces. G is based on confiscation. It is not a creative force. Everything spent by G comes at the expense of C, I, X, or M. When G spends, it does so at the expense of the others.

A bright student is smart enough to figure out what most people do when constantly threatened with robbers with guns, even if the robbers carry badges. They will not put all of their money in their wallets. They will hide some of their currency. They will not spend it. People who carry badges and guns call this currency hoarding. This is a Very Bad Thing, we are assured.

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16 Comments – Post Your Own

#1) On March 11, 2010 at 6:06 PM, anticitrade (98.99) wrote:

Follow the hand holding the gun.  It leads to a monkey.  The monkey is riding a dog.  The dog is flying an airplane.  The airplane is flying over a beautiful ocean.  You are the ocean.  You are salty and confused.  Wait what?


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#2) On March 11, 2010 at 6:23 PM, whereaminow (< 20) wrote:


Did you ever read A Hitchiker's Guide to the Universe?  I think you turned on the Improbability Drive.

David in Qatar 

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#3) On March 11, 2010 at 6:23 PM, Melaschasm (< 20) wrote:

C + I + G + X – M = Y(GDP)

A more accurate formula would be C + I + X - M = G + Y(GDP)


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#4) On March 11, 2010 at 6:41 PM, whereaminow (< 20) wrote:


You got it. Nice Rothbardian insight.

David in Qatar

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#5) On March 11, 2010 at 6:49 PM, 100ozRound (28.74) wrote:

Let's just hope it doesn't get to G=Y

It's headed that way....

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#6) On March 11, 2010 at 7:09 PM, whereaminow (< 20) wrote:


LOL. That was the USSR formula.  Which, by the way, Keynesian icon and Krugman mentor Paul Samuelson once thought they would out produce the U.S.  Why? Because their GDP kept going up and up.  Well, if G = Y.......

David in Qatar 

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#7) On March 11, 2010 at 7:47 PM, kdakota630 (29.41) wrote:

LOL @ anticitrade

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#8) On March 12, 2010 at 11:21 AM, 4everlost (28.81) wrote:


The other aspect missing in the equation is that G wastes part of what it confiscates from C + I.

The true number for  G is G *(waste factor)

It's also true that  C is dependent on I.  Generally, when  I is lowered then so is C.

Rec #23 from me.

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#9) On March 12, 2010 at 11:56 AM, nzsvz9 (< 20) wrote:


More heavy handed than usual .. but nonetheless true.

In reviewing the article I got to thinking. Where does "G" come from? Are the sources of income all done at the barrel of a gun? After some reflection about the sources of income that governments had at their disposal, I came up with the following:

1. Taxation - Direct taxation of wages, sales taxes on purchases, ownership of property, livning in a county or city. Indirect taxation in the supply chain, and gross taxation of certain consumer goods (i.e. alcohol and gasoline for example) and services (i.e. hotel tax). Gun? Yes.

2. Confiscation. Siezure laws from drug cases are revenue for the government agencies involved. Emminent domain is another form of seizure. Endangered species act - stop you from developing on your own proerty. Gun? Yes.

3. Fines and Criminal Penalties. Speed lately - see what that'll cost you. Have a case brought against you for criminal activity - pay the state for penalties. Gun? Yes.

4. Duties and Excise - Direct taxation of activities of import/export. Gun? No. But don't try not to pay it!

5. Leases - Revenue from the lease of land, airspace, broadcast frequencies and such. Gun? No.

6. Licensing - Revenue from the statutory licensing of everything from driving, to fishing, to where and what you can build. Gun? No. But don't fish without a license!

7. Sale of Assets - The government is a huge landowner, and at least in theory has a lot of buildings and capital goods it could sell to raise cash. Gun? No.

8. Debt. The government issues a bond, collect cash for it and pay interest, or full principle from an initial discount - or both. Gun? No. Well, maybe.

9. Printing press. In the electronicic age we don't necessarily have to see the pages of Benjamins rolling off the printing press, they can be ledgers with more zeros, created out of fractional reserve banking. Where does the Fed get all the money they lend out anyway? Gun? No. But it is much easier than wielding a gun - and they do it with a smile - "for the children".

10. Conquest. War was a primary motivator of greedy monarchs throughout time. Raiding treasure from another country, or going to "war for oil" ... Gun? Yes!

Isn't that enough?

Known as the tapped-out nzsvz9

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#10) On March 12, 2010 at 12:20 PM, farmnut1985 (< 20) wrote:


Like the choice of sources and had to add one of my favorites the Death Tax, lets take because you don't need it any more and I don't care that the farm has been in your family for 100+ years.

Especially like #9 as we used to joke that they just kept adjusting the numbers in their excel spreadsheet to get the amount they needed.

 Good article David as always.


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#11) On March 12, 2010 at 1:03 PM, FleaBagger (27.32) wrote:

nzsvz9 - I'm not sure where you got the idea that duties and excise and the like are not collected at gunpoint, but let's just examine things like leases and debt: people are voluntarily paying the government for use of government land and future interest payments, things like that, right?

But where did government get that land, and where will it get the money to pay interest on its debts? At gunpoint. Any other answer ought to be tested before being aired. I would love to hear testimony that you successfully proved taxes voluntary.

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#12) On March 12, 2010 at 1:37 PM, whereaminow (< 20) wrote:

nzsvz9 farmnut1985 and FleaBagger,

Great comments. Worthy of a second post on this subject.  I appreciate your thoughts.

David in Qatar

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#13) On March 12, 2010 at 3:01 PM, eldemonio (98.24) wrote:

Nice post.  This formula for GDP is flocked when you live in a country run by a bunch of morons spending money like a back woods hillbilly lottery winner.

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#14) On March 12, 2010 at 3:02 PM, whereaminow (< 20) wrote:

LOL, just came across this in the Lew Rockwell blog:

Posted by Christopher Manion on March 11, 2010 09:47 AM

I’ve been getting a ton of mail regarding the support of Catholic bishops for health care “reform.” Apparently, a lot of Catholics didn’t know about the billions of taxpayer dollars the bishops receive a year, and how that money might influence the left-wing agenda of the bishops conference (why is its headquarters located in Washington, anyway?).

A lot of people are already calling their senators and representatives, but few Catholics ever realized that they had to call their bishops, too. Don’t worry, the bishops are prepared. Like my senators, they have set up a recorder for people calling to complain about their endorsement of socialized medicine (the number is here, at the very bottom of the page. Apparently you have to ask for the “health care desk.”)

After the scandals, the bishops formally promised a renewed transparency and openness to the people. They’ve been ignoring it ever since.

I swear I didn't read that before writing about Catholic bishops above. I just know how the game works.

Any other Catholics here?  I grew up in Catholic schools (K-12) but I am not one.  Ever notice the difference between the Catholic teachings before the Fed and after?

David in Qatar

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#15) On March 15, 2010 at 12:12 PM, nzsvz9 (< 20) wrote:

farmnut1985 and FleaBagger,

As for the death tax - that one should be included in the taxation item #1. Although I suspect that when WIllie Nelson dies, the government won't find a cent, but everyone at the cremation will get a contact buzz.

As for the land lease and sale, consider the more honorable actions of our government in the past - the Louisiana purchase, and Seward's Folly - which arguably could be lauded as trades and sales (Although native Americans would not see it as such). These were not done through war, but as transactions - and to me that is government acting better than it usually does. The government still owns a lot of that land and could lease or sell it - not with the gun! Now the money they used to make the purchases may have been tainted to begin with, but in and of itself - these transactions are almost honorable.

But, I suppose it's kind of like the mob taking drug money and opening a dry cleaner ...

Known as no-starch nzsvz9

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#16) On March 16, 2010 at 11:15 AM, ralphmachio (< 20) wrote:

I was confirmed, but would have been burned as a heretic in any one of the crusades for the views I currently have.  I think the Catholic Church had maps of North America they stole from Alexandria, and Knowingly sent Columbus here, to claim as their own, as a shell corp. That is why they preached the Earth was flat, to make sure nobody went exploring where they already knew land to be. There is evidence that Templars made it to North America during the last Crusades. Is it a coincidence that we war with the muslims, or is it merely a continuation of a war thousands of years old? 

I know, I know, Conspiracy Theory! (therefore, it cannot ever be valid)

There are 2 banks that cannot be audited, the FED, and the Vatican Bank.  

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