Saturday, August 23, 2014

Are you a victim of innocent fraud?

"The term "innocent fraud" was introduced by Professor John Kenneth Galbraith in his book, The Economics of Innocent Fraud, which he wrote at the age of ninety-four in 2004, just two years before he died. Professor Galbraith coined the term to describe a variety of incorrect assumptions embraced by mainstream economists, the media and, most of all, politicians. 
The presumption of innocence, yet another example of Galbraith's elegant and biting wit, implies that those perpetrating the fraud are not only wrong but also not clever enough to understand what they are actually doing. And any claim of prior understanding becomes an admission of deliberate fraud - an unthinkable self-incrimination."

Words from the Prologue of Warren Mosler's game-changing book, The Seven Deadly Innocent Frauds of Economic Policy. Get the PDF here, or buy the book. It will alter your worldview - in a good way!

If you think you have a decent understanding of what makes for a good economy and you haven't read this book, the chances are very high that you are a victim of an innocent fraud. Whether you think of yourself as a Conservative, Liberal, Tea Party, or Libertarian  - the economic framework that underpins your political views are deeply flawed.

Yes, that's a bold claim. Don't believe me? Here's my challenge - read this book and I guarantee that you won't be able to think the same way again. And don't worry - it's a small book and written in plain language - you don't have to be an economist to understand it!

Here's a quick test to see if you're a victim:

  • You think government's spending is constrained by its ability to tax and borrow. 
  • You're concerned about the rising national debt, and what it will mean for the next generation.
  • You think the government's involvement in the economy is almost always bad and getting government out of the way will help restore prosperity.
  • You think Social Security is running out of funds and should best be privatized before all hope of having any future payouts are gone.
  • You worry about trade deficits and the amount of money we owe to China.
  • You're afraid we're going to have higher interest rates and higher taxes in the future because of all the irresponsible government spending. 

If you answered "yes" to any of these, I'm happy to tell you that you're being honest, and that's the first step to recovery. The next step is to let your curiosity get the better of you, and start re-learning what you think you know.

Get this book. Read it. Or at least start by reading all the Money Myths on this blog which cover many of the same principles... just not as well as Mosler.

Will you take up the challenge and follow Alice down the rabbit hole or are you afraid to learn you've been a victim of fraud?