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Thoughts from Poland


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As I end two weeks teaching in Poland, let me share some depressing thoughts.

  • Poland is a beautiful country with good people; but the economy is hurting.  Compared to past years, few people are in shops, few in restaurants – both in Warsaw and Krakow.
  • Lawyers and academics are eager for advice: should we lower taxes, reduce spending . . . or should we follow America and do the opposite and by that probably obtain full EU privileges?  My answer is always to follow their instincts: the best government is the one which governs least.  Older people listen while the young do not believe.  Capitalism built this county so fast, the young have too little memory of how bad a government can be.
  • Sarah Palin has a terrible reputation in Europe.  That truly saddens me, but the press here hurt her more than in the U.S., which is hard to imagine.

My lectures on tax have been technical.  But my lectures on economics and finance have been pessimistic.  Perhaps too much.  In general, I believe the time for recovery is now past for a generation.  Spending trillions we do not have will be inflationary in a few years.  In the short run, things will worsen, but then spending will kick in and people will feel better.  Democrats will expand in 2010 – in Congress and in Legislatures.  They will control the census and re-districting.  By 2012, inflation will be a major problem.  The best we can hope for is to take back the House and Presidency, which will be insufficient.

People, especially students, ask me: what should we do.  My best answer, last night, was two-fold:

  1. Your government should lower taxes, lower regulation, and forget about the Euro.
  2. You should do what you do best.  Only you know.  I do not know and your government does not know.  You know.  So do it.  If you have a system in which you will reap most of the rewards, but also suffer most of the risk, you will, collectively, make the correct decisions.  If instead, you must share most of the reward and you risk little, most of you will do nothing or you will take the safe way out. In that case, everyone will lose.

They asked, which country will lead the future . . . the U.S., China, India? My thoughts:

  1. China has too many systemic problems with far too many people and poor infrasturcture in much of the country.  The U.S. bonds it holds are just paper and are thus worthless.  I wish the Fed would print an extra trillion dollars, send Sec. Clinton to China and pay them off.  I do not worry about China.
  2. India is in worse shape.  Watch the movie.  Those problems cannot be solved in ten years or fifty years.  Much of their problems involve entrenched religious issues, which can take hundreds or thousands of years to overcome. Do not look to India for leadership.
  3. The U.S. is, at least for four years, on a downward spiral.  Russia being poor is the best thing, but it is also scary: a hungry bear may be weak, but it can also be viscious.  If Russia seeks Georgia, Obama will not help.  If Russia moves on Ukraine, Obama will not help.  If Russia moves on Poland, America will demand Obama help.  But, if America weakens, do not look to the Germans or French or the EU to save you. You are then on your own.
  4. Humans will survive and the strongest and most ingenuitive will prosper.  That requires small government and flat, fair taxes.  The percentage of tax to GDP is important, but the broadness is most important.  When a majority of the people pay no tax and thus can vote to make the minority give them things, all is lost.  The majority (with many individual exceptions) will impose its will and the minority (with some exceptions) will quit trying hard.  Thus I cannot predict which country will come out on top until I see how much freedom it has, whether its tax system is fair, whether its regulatory system is reasonable and small, and whether it has guns.  Unfortunately Poles have no guns.  That is their biggest mistake.  For now, America will keep you safe . . . but if you are on your own and your economy becomes strong because of a good system, someone will try to take it from you.  If they have guns, and you do not, you will lose.

They ask what caused this crisis. My thoughts:

  1. Democrats created Fannie Mae and Freddie Mac, with stupid Republican cooperation.
  2. Democrats passed laws and forced or encouraged lenders to lend to people who could not afford what they borrowed.  Stupid Republicans went along, believing in home ownership without remembering what “ownership” means.  Title to a house, with debt that need not be re-paid, is not ownership in real terms. It is a fiction.
  3. Republicans saw what was happening.  Look back at Wall Street Journal editorials in 2002-2004.  By 2005, some Republicans were yelling about it.  They should have been screaming. Democrats blocked the chance to stop the wreckage.
  4. Mark-to-market accounting rules, adopted under Clinton, but also pushed under the Bush SEC made solvent banks appear insolvent.  That became re-enforcing and the snowball effect became real.  Banks and hedge funds which saw this early, passed on much of the problem to other countries. That was not nice, but capitalism has no morals.
  5. TARP stabilized the banks with half the appropriated money.  The government should have then stopped.  It did not and it will not.  It will make things worse. It is too late to stop it.

What should I do?  My answers:

  1. Stay in law school, or economics school. Obtain your degree.
  2. Instead of drinking and going to the bars at night, learn some useful skills.  Learn to sew so you can repair your socks and sweaters.  Learn to plumb and to wire and to hammer, so you can repair your home or flat.  Learn to fix your car.  Learn to grow food.  Know how to do something basic that people need to know.  Your parents have allowed you – just as we American parents have allowed our children – to grow lazy and overly reliant on an economic system that does not have to work and on an American military that does not have to remain strong.  I hope the economy works and America can protect you forever; but, in case my hopes do not come to pass, learn to help yourselves – especially in the basics of life.
  3. Money and greed are essential for capitalism to work.  That is the macro view.  But in a micro sense, money will buy you nothing of value other than subsistence living.  Beyond that, it is just money.  Trust in your religion and your family and be a good person.  Religion is largely dead in Old Europe and in much of America.  Do not let that happen to you on a personal level.  If you do not like your parents’ denomination, find another.  God is God, be he worshipped as God or Jehovah or Allah or under many other names.  Fundamentally, the human sole needs God.  Without Him, the rest means nothing.
  4. Optimism is what we need. But, be prepared, nevertheless.

Most American Professors who visit here and other European countries paint a picture of Obama as the savior and strong government as the solution.

My friends, we have lost Academia, we have lost the press, we have lost the Congress and the Presidency and the census.  We are giving money to Hamas and we are debasing our currency.  We are raising taxes nationally at the worst possible time.  We are forcing states – through mandates – to raise taxes locally.

Our last hope, I believe, is the 10th Amendment.  Governors should just say no.  Bobby and Sarah should lead the way.  Let California go bankrupt.  As a Floridian, I do not want to pay for their mistakes.  At some point, I will not.

Invest, if you can, in skills, religion, guns and gold.  Some scotch would probably help.

I hope, I pray I am wrong.  My gut tells me I am not.  It is over and we are on our own.  Ultimately, however, that is the nature of the human condition.  May God protect us all.

_______

“Let it be said, I fought the good fight, I finished the race, I kept the faith.”
Paul, Second Timothy 4:7, The New Covenant.

Steve Willis
Professor of Law
University of Florida College of Law

Visiting Professor of Law, University of Warsaw

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