A Little Truth Smashes Mountains Of Lies

I remember once when I was about twelve or thirteen, I told a lie to my parents. The lie was not very believable on its own, so I had to come up with other lies to support it. When those lies became untenable, more lies were needed. The lies kept getting more and more outrageous. Of course, the situation couldn’t continue for very long. All that my parents needed to do was discover a single inconsistency and the whole thing came crashing down.

Such is the nature of  lies and such is the nature of truth. If a mountain of falsehoods has been built up, a small truth can demolish the entire shaky structure.

I remember the Enron scandal vaguely. I was only a young boy when it happened.  In accounting school they made us study it. A bunch of really smart guys had crafted an intricate web of lies. The lies were so good and so plausible that they were able to fool much of the investing public for a long time. As a result, they made billions of dollars.

However, all it took was a couple of short traders to realize that the whole thing was a house of cards. Things didn’t seem right. A light of truth was made available to the public and the whole thing quickly unraveled. All of the power, prestige, and money in the world can’t protect a lie forever.

Another example is the notion that lowering interest rates and printing money can stimulate an economy out of a recession. This was tried during the recession that followed 9/11. It seemed to work for a while. The Federal Reserve chairman got on TV and said that the economy looked strong. The housing sector boomed. The lie seemed to be working.

But the lie was discovered, as lies always are. When the Fed stopped printing money and raised interest rates, the housing bubble popped and the whole thing crashed. A credit crunch precipitated the bust. When the fed stopped printing money, banks stopped making short term loans to each other. The small truth that there wasn’t enough money to support the existing price structure wrought devastating consequences.

There are certainly many lies in the world waiting to be discovered. The biggest whopper, in the economic realm at least, is that government deficits can fix an economy. Close behind is the belief that the government can provide free services.

Thousands of people, blessed with powerful brains, have spent hundreds of year creating these lies. Mathematical models and equations have been meticulously crafted to support these falsehoods. Study after study present empirical evidence apparently proving that was is false is actually true. Nobel prize winners stand behind podiums and receive awards for perpetuating myths.

But all it takes is a simple truth to unravel the entire structure. The truth is this. Governments have no money of their own. Every deficit they run, and every service the provide, comes at the expense of some other service that had to be abandoned. The government can cause nothing new to come into existence.

If it can cause nothing new to come into existence, it cannot stimulate the economy. At best, government spending can only keep the economy on exactly the same footing it is already on. At worst, it takes decision making power away from successful entrepreneurs and vests the power with career bureaucrats. Resources that would have been used creatively and efficiently are funneled into make work projects.

All the sophisticated mathematical equations in the world can’t deny this truth. Any historical evidence that seems to disprove this axiom has been incorrectly interpreted.

By virtue of understanding simple truths, the humblest day worker is wiser than the most prestigious professor.

Consider this analogy. Two men are both going to the same place. One is driving a Lamborgini, the other a run down Ford Escort. They come to a fork in the road. The Lamborgini takes of at 100 MPH in the wrong direction. The ford moves slowly along the right path. Who is closer to their destination?

Such is the nature of truth. Small moves in the right direction are infinitely better than huge strides towards falsehood.

 

 

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One Response to A Little Truth Smashes Mountains Of Lies

  1. gokulraman says:

    Nice… a little lie smashes a mountain of trust too… 🙂

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