Today, we reflect on the wisdom of a parable from the Good Book, shared in the spirit of a Sunday sermon. For dramatic effect, we’ll reference the esteemed King James Version.
“And he spake many things unto them in parables, saying, Behold, a sower went forth to sow; And when he sowed, some seeds fell by the way side, and the fowls came and devoured them up: Some fell upon stony places, where they had not much earth: and forthwith they sprung up, because they had no deepness of earth: And when the sun was up, they were scorched; and because they had no root, they withered away. And some fell among thorns; and the thorns sprung up, and choked them: But other fell into good ground, and brought forth fruit, some an hundredfold, some sixtyfold, some thirtyfold. Who hath ears to hear, let him hear.” (Matthew 13:3-9)
While we respect the original context of this parable, we take the liberty to apply its meaning to our discussion. Through careful thought and humility, we aim to explore the damaging consequences of unchecked monetary policies over the past five decades.
In our interpretation, the sower can represent government money printers, the seeds stand for U.S. dollars, and the harvest symbolizes economic growth. However, just as a crop of wheat requires time, nurturing, and favorable conditions to thrive, so does an economy need mindful management and resources to flourish.
Choosing shortcuts and neglecting responsibilities leads to failure. A seed won’t take root in barren asphalt, nor will it prosper in a neglected field where it can be easily consumed or overwhelmed by weeds.
Seeds of Waste
Over the past 50 years, the U.S. money printers have irresponsibly dispersed dollars into unproductive avenues, squandering opportunities for meaningful economic growth. The nation’s hard-earned wealth, accumulated over centuries, has been squandered. Instead of prosperity, we face rampant homelessness, a reliance on government aid, an oversized federal apparatus, an embattled military, and unsustainable debt—a disheartening testament to the results of careless monetary policymaking.
In 2020, as the coronavirus pandemic prompted extensive lockdowns, the money printers increased their efforts, distributing over $5 trillion in Treasury notes and mortgage-backed securities created from nothing. This led to inflated bubbles in both stock and bond markets, followed by another surge in residential real estate values. Now, as these bubbles deflate, the vast misallocation of resources becomes painfully clear.
The government also funneled capital to individuals through stimulus checks—however insignificantly this amount compared to financial market injections—granting claims to goods and services without an equivalent boost in production. It’s no surprise to see consumer price inflation hitting 9.1 percent.
The Paycheck Protection Program (PPP), which offered small businesses loans (forgiving those used for payroll), has come under scrutiny as well, with estimates indicating that over $117 billion of the $780 billion distributed went to ineligible businesses. Additionally, it’s unclear how much of the funding that reached qualifying businesses was directed toward productive purposes.
Invisible Hand
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner,” stated Adam Smith in *The Wealth of Nations*, “but from their regard to their own interest.”
Central planners often neglect this truth. They may enjoy their coffee, knowing it was produced through private enterprise, yet once inside their offices, they revert to policies aimed at manipulating the economy and funneling resources to favored programs.
Despite two years marked by extreme government intervention, the economy is contracting. The first quarter of 2022 recorded a negative growth rate of 1.6 percent. Preliminary figures for the second quarter suggest a similar trend.
The Atlanta Fed’s July 19, 2022, GDPNow forecast indicates another contraction at an annual rate of -1.6 percent for the second quarter. What’s going wrong?
Simply put, central planning cannot effectively guide capital to areas where it is most valued. For an economy to thrive, financial resources must be allocated by those who bear the responsibility of their use.
When individuals engage in trade, they do so with the belief that both parties will benefit. Transactions, unencumbered by government interference, promote decisions aligned with responsible resource management. As sound choices are made repeatedly, guided by an invisible hand akin to Smith’s concept, prosperity flourishes.
How Central Planners Sow Seeds of Economic Ruin
When government planners impose their will on the economy, financial resources are misallocated and squandered on ventures lacking merit, ultimately diminishing economic abundance.
Profit in a market economy stems from providing goods or services that meet public demand at agreeable prices. Businesses succeed by catering to public needs and desires.
While central planners may profess support for economic growth, like California Governor Gavin Newsom—with his belief in the effectiveness of big government—they ought to gain a clearer understanding of the conditions necessary for genuine prosperity.
An economy cannot flourish when entangled in regulatory weeds and excessive taxation. Likewise, growth is stifled when private property rights are not upheld, and when irresponsible fiscal policies waste capital. Any prosperity enjoyed, in truth, arises not due to government, but rather in spite of it.
The heavy-handed actions of the state sow seeds of economic decline. Central planners are left with an economy riddled with barriers to growth, stifling productivity and creativity. Any attempts at innovation are quickly smothered in a sterile environment devoid of fertile ground.
If politicians genuinely sought to enhance the economy, they would refrain from being overly clever. They should cease government-directed stimulus efforts and allow capital to flow freely toward productive activities. Reducing regulations and taxes would enable the most industrious citizens to flourish and create meaningful jobs.
Regrettably, political leaders in Washington seem to lack the wisdom, restraint, and humility necessary for these changes. As a result, the economic outlook remains bleak for this year and beyond.
[Editor’s note: Don’t allow the heavy hand of excessive intervention to undermine your efforts. While options for safeguarding your wealth as the economy falters are dwindling, some remain. I have dedicated the past six months to exploring practical steps that individuals can take to secure their financial privacy. My findings are compiled in the Financial First Aid Kit. For details on this publication and how to obtain a copy, click here.]
Sincerely,
MN Gordon
for Economic Prism
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