It is absolutely clear, except to the most bigoted Democrat, that Obama's economic policy of borrow and spend and then borrow and spend more and more has been a total failure. A failure that will be greatly aggravated by the impending tidal wave of tax hikes that will appear later this year. Yep, folks, tax increases -- the economic equivalent of bleeding the patient -- are just the right medicine for a sick economy.

There are those who think that Obama is deliberately creating mass unemployment in the belief that this will create a permanent underclass who will sell their loyalty to the Democratic Party so long as the cheques keep rolling in. One can easily understand the emergence of this line of thinking given Obama's leftism, his loathing of capitalism, his contempt for the Constitution, his disgust for America and his disdain for Jo Sixpack, his callousness plus his insistence on steering an economic course that is obviously damaging the economy.

Now there was never any doubt in my mind that Obama is a leftwing revolutionary who despises his country. One only has to examine his personal history -- the one the corrupt media covered up -- to learn the truth of this statement. But I don't think promoting unemployment was ever part of his game plan. It seems to me that he believed he could successfully carry out his leftwing agenda -- the one he didn't run on -- while using Keynesian economics to solve the unemployment problem.

By restoring full employment this would legitimise his agenda, rescue congressional Democrats from a November debacle thereby simultaneously securing a second term thus giving him and his fellow socialists the opportunity to firmly impose a state directed economy on the US. In other words, a fascist economy. So part of the key to getting enough Americans to accept the need for a massive expansion of government was to bring about a substantial cut in unemployment. He failed.

What the vast majority of people do not understand is that the difference between a fascist economy and a socialist economy is merely one of appearance. In a fascist economy the state -- through its central planning agency¹ -- decides the quantity and 'quality' of goods to be produced, how much will be invested, where each individual will work and what his role in society will be; capitalists become mere state managers and their property is theirs in name only (Immelt of General Electric is only just getting the), entrepreneurship ceases and 'profits' are only allowed to the extent that they serve the interests of the state which in turn represents the people. Hence the Nazi slogan: "The common good ranks above private profit" (Gemeinnutz geht vor Eigennutz). As Pitigliani, an Italian Fascist, stated:

The function of private enterprise is assessed from the standpoint of public interest, and hence an owner or director of a business undertaking is responsible before the State for his production policy. Thus the State reserves to itself the right to intervene and to take the place of the individual, should he misuse his rights. (Contributors: Fausto Pitigliani, The Italian Corporative State, Macmillan, New York, 1934, p. x.)

Obama or any member of his leftwing gang could have written this nonsense. (It needs to be recalled that Roosevelt, like General Juan Peron, was a great fan of fascist 'economics'. I mention Peron because his economics wrecked the Argentinean economy.) In the 1920s and 1930s fascism was admired as the "Third Way". However, a growing number of Americans are expressing the opinion that if Obama's big government strategy is doing nothing for unemployment and growth then what good is all this spending, borrowing and regulating? Moreover, might it not be hindering recovery?

I honestly think that Obama did not expect this would happen. Didn't Romer and the rest of his tame Keynesian economists assure him that unemployment would not exceed 8 per cent and that it would quickly fall again? So what went wrong?

Fascist economics suffers from the same problem as Marxist economics in that it has nothing to do with real economics at all. S. G. Strumilin, a Marxist 'economist', made this clear when he forcefully declared: "Our task is not to study economics but to change it. We are bound by no laws". (Cited in Robert Coquest's Harvest of Sorrow, Pimlico, 2002, p. 112.) Well, we all know how that worked out. To a certain extent the same can be said of Keynesianism. In his foreword to the German edition of his General Theory (1936) Keynes cheerfully admitted:

The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory.

But a sound grasp of economic theory reveals that Keynes was as wrong on this point as he was on so many others. The Austrians pointed out that the Keynesian magic was nothing more than a monetary trick, one that used inflation to lower the cost of hiring labour, a fact that Keynes himself admitted:

Whilst workers will usually resist a reduction of money-wages, it is not their practice to withdraw their labour whenever there is a rise in the price of wage-goods [consumption goods]. (The General Theory of Employment Interest and Money, Macmillan-St. Martin's Press, 1973, p. 9.)

The success of the trick depends on the existence of the money illusion. However, as soon as people detect that prices are rising they adjust their behaviour accordingly. For example, unions will demand wages be adjusted for inflation. Once this happens unemployment will tend to rise again. However, in a totalitarian state the people must suffer in silence, as in Cuba and North Korea². Therefore no state can escape the laws of economics. And that includes Nazi Germany.

Austrians stress that money is not neutral. Therefore expanding the money supply will misdirect production. To maintain its existence this misdirected production will require greater and greater monetary injections to survive. Eventually the monetary brakes are applied. If the state is powerful enough it can survive the economic consequences of its policies by holding the population in fear. In a democracy they throw the bums out.

Unlike the Austrians who believe that the key to avoiding economic busts is to avoid booms Keynes argued that the real problem is how to keep the boom going. As for misdirected production being a problem, he would have none of it though he did admit in the General Theory that misdirected investment does take place he brushed it aside as of no consequence³. Yet in the same work he recognised the emergence of bottlenecks which he also dismissed. But the Austrians use capital theory to demonstrate that bottlenecks are produced by misdirected production. They are in fact the product of malinvestments that will have to be eventually liquidated.

Now if Keynes had been right about the nature of booms and busts then his policy of letting loose with the money supply while forcing down interest rates would have created a permanent boom after WWII. Instead, the world is now in a grave financial mess and America finds herself 'led' by a man who detests her and whose policies are at best a recipe for stagnation -- even if full employment was restored. At worst they will result in a steep decline in the standard of living, except for his billionaire pals and his Hollywood fan club.

¹ In Nazi Germany planning was carried out through the Reichswirtschaftsministerium and in the Soviet Union it was done through Gosplan.

² When Hitler became Chancellor in 1933 the official unemployment rate exceeded 25 per cent. Six years later there were acute labour shortages. During this period there was a massive increase in public spending. However, as the demand for German labour rose real wages fell significantly. Another point is that the fall in real wages meant that consumption was severely cut -- a deliberate policy of the Nazi regime -- which refutes the popular idea that a fall in personal consumption would reduce the demand for labour and deepen the recession.

³ In his Treatise on Money (Vol. I, Macmillan and Co. Limited, 1953, p. 92.) Keynes admitted that money is not neutral but did not follow through on this. Henry Thornton was a far greater monetary theorist than Keynes ever was (An Enquiry into the Nature and Effects of the Paper Credit of Great Britain, 1802) as was Malthus (Edinburgh Review, February 1811, pp. 363-372).