Worshiping at the Altar of the Inflationary God

“Bow down before the one you serve. You’re going to get what you deserve.”

– Trent Reznor

I listen to Peter Schiff’s weekly podcast “Wall Street Unspun.” He said something in a recent edition that stuck with me. He said that his father, Irwin Schiff (who was also a prominent opponent of the inflationary policies of the US Government) denounced the politicians and central bankers of the world in books such as The Biggest Con: How the Government Is Fleecing You. Peter said that his father described inflation as a “god that they worshiped.” These days it would seem there’s hardly any room left at the altar. 

The power of the ability to create money from nothing was marveled at when it was first discovered. Critics were sure that no one would accept Lincoln’s Greenbacks when they were first issued to help pay for the civil war. The notion that people would accept a paper money that had no backing just because the government told them to seemed rather dubious at the time, but the general public did accept them. The possibilities were not lost on the thinkers at the time.  If fiat money could be created with a printing press and accepted by the general public, then why not use the printing presses to make us all rich? Continue reading Worshiping at the Altar of the Inflationary God

On Patriotism

My good friend Taylor recently posted this comment:

Not sure I would use predictions from Mahmoud Ahmadinejad to bolster my opinions. Actually that last graph was pretty unpatriotic. Why not put your efforts more into the “here is what I think we can do to see that this country remains/becomes great” instead of “I will enjoy watching you burn.” There are enough nay-sayers on the net already, I think people would rather read and contemplate ideas of salvation (for the economy and country) rather then have reiterated the doom and gloom they already are getting from the media (not to mention from their investment statements).

I see a trend on your blogs to gloat at the circumstances we are in. You do offer alternatives but few seem viable (i.e. returning to the gold standard). I guess what I am trying to convey here is that I want to read your opinion on what can actually be done to better the situations you comment on.

– How can we practically reduce entitlement program spending?
– How can we practically buy out our debt?
– How can we practically curb inflation, raise home value, bolster jobs and growth?

Anybody can tell me the situation is bad…put your efforts into educating us instead? If there is something to be learned from you I want to know it.

It’s not that I respect the words of Mahmoud Ahmadinejad that caused me to quote him. After all, how accurate can someone be when the claim that there are no homosexuals in their entire country? But when he is one of a chorus of voices saying that this is the end of the American Empire, it’s worth noting. 

In regards to your charges of my lack of patriotism, that would depend entirely on how you define it. If you define patriotism as the willingness to make sacrifices for your country, then I am clearly not a patriot. As far as I’m concerned, I think I’m getting a raw deal on the taxes I pay and I’ll be damned if I sacrifice anything more. But if you define patriotism more broadly to be acting in support of the ideals of liberty on which this nation was founded, then I feel I am being very patriotic. 

Our founding fathers, whom we consider paragons of patriotism, were clearly not patriotic to the causes of the British, the ruling government of the time. As Jefferson wrote

“The spirit of resistance to government is so valuable on certain occasions, that I wish it to be always kept alive. It will often be exercised when wrong, but better so than not to be exercised at all. I like a little rebellion now and then. It is like a storm in the atmosphere.” 

I feel Jefferson would be proud of the people speaking out against our government today. I feel he would call us patriots. This, of course, just reinforces the saying that “One man’s patriot is another man’s terrorist.” 

In regards to what can practically be done to improve our current situation, my answer is this: nothing. The American political system has rotted to its core. The realities of fiat money have combined with powerful corporations to ensure that what is in the best interests of the people will be hardly given any consideration at all. If that we’re enough, mass media and polling have enabled politicians to shift the political dialogue away from anything meaningful and towards such chestnuts as abortion, gay marriage, and the “War on Terror.” I watch in abject horror as every year our politicians seem to get dumber and more empty. Just when I though George Bush was as low as we could go, McCain dug up Sarah Palin. 

That’s not to say that there weren’t meaningful candidates running this year. One person was running for President who say this crisis coming a long time ago, and he was running as a Republican. But the Republican establishment was not ready for someone like Ron Paul. They distanced themselves from him and even went so far as to form a collation to deny him the delegates from the State of Louisiana

Since you work in the corporate world, here’s a corporate analogy for you. Pretend you were brought in as a consultant to clean up a failing company. The problems with the company were obvious, but when you proposed the obvious solutions, you were told none of them could be undertaken because management wouldn’t allow it. Would you not then call for the ousting of management?

You are asking for new insight into this problem. It seems to me almost as if you were asking for a magic bullet. “Please don’t talk to me about the gold standard and the dangers of fiat money.” you seem to say, “I just want to know what policies we can adopt that will fix this situation (and allow us to go on just as we have been).” Were there is no magic bullet. Nothing will fix what is so clearly broken. You can add all the fertilizer you want. the tree of our nation’s governance died long ago. 

The solutions to this problem are as simply as they are unpalatable. Take all powers to control money away from the government entirely and outlaw fractional reserve banking. The resulting monetary system will be run by private institutions who are closely audited by their depositors, and precious metals (or whatever the free market decides) will be the unit of accounting of commerce. Suddenly the government will have to raise in tax revenue all that it spends. When such a day comes, you will notice a sudden and drastic curtailing of government spending, including entitlement programs. Meaningless wars will suddenly shift from convenient exercises to gain public support to the truly horrible actions that should only be taken as a dire last resort that they really are. 

None of these ideas are new. Jefferson wrote about them in the late 1700s, as did Murray Rothbard in Man, Economy, and State in the late 1900s. If you’re looking for a sample of Dr. Rothbard’s work, check out his essay on “Taking Money Back.” Times may change, but our situation is not new. But then again I think you knew this. I suspect you’re now saying to yourself how impractical all of these hard money ideas are in our current environment. “There must be some other way to fix the system,” you might ask. 

Let me assure you, there is not. Attempts at fixing our current system is as meaningless as rearranging deck chairs on the Titanic. The system is broken, but few seem to realize it. Until the system is allowed to collapse, we are powerless to improve the situation. You yourself once ridiculed me for being a Libertarian as “wasting my vote.” So you now claim to think that there is some meaningful action that I can take? 

The system must be shown to be what it is: a failure; a sham; a tragic disaster. It is only from its ashes that we can meaningfully move forward. Only once people clearly understand the folly of the life that they have been leading can we make the hard decisions to take back our liberties from the all powerful nanny state we have built to take care of us all. That is why I am contently and excitedly watching the decay and collapse of the system. I believe I am going to outlive our current system, and it is what lies on the other side of it that excites me. 

 

 

 

 

Answering Nat’s Questions

Nat, good friend and now a blog reader, asks two questions:

BTW, Preston, I am about halfway through you book. It’s a good read, especially considering the recent economic catastrophe. I am curious why you think gold should be the standard of monetary policy as opposed to some other commodity. Though problem: If gold were still the standard and in the future we discovered gold on another planet…how would that affect the economy? Supply and demand would dictate that gold would immediately see a reduction in value because of increased supply. I am curious as to your opinion on owning land.

I just read an article that suggested that due to the U.S. making a deal with OPEC to only accept the dollar back in the day that technically, the U.S. dollar is backed by oil…i.e. the OIL STANDARD. What’s your take on that theory?

Let’s take gold first. A lot of what I’m going to say was already well argued by Dr. Murray Rothbard in What Has Government Done to Our Money. As Rothbard argues, the advantages regarding gold is that it has intrinsic value. To argue otherwise is to go against at least 4000 years of human history. Human’s like gold. Always have, always will. Now they also value a lot of other things (real estate, diamonds, art, oil) but the advantages of using gold as money is that it is reasonably easy to transport (unlike real estate), is a dense way to store wealth (unlike oil), can be stored for long periods of time without loss, and can be broken down into fundamental units of accounting to make exchange easy (unlike diamonds). There are few other forms of wealth that meet all of these requirements. 

Now how much people value gold changes over time. Some estimate put the “gold to dollar” exchange ration at about $3000 in the Middle Ages. The entire European What happened next should help to answer Nat’s next question about what if we suddenly found a source of gold that would drop gold’s value relative to everything else, because that’s exactly what happened. The New World was discovered and with it the vast golden wealth of the Incas and Aztecs. The value of gold suddenly dropped to roughly $800 or so. This caused inflation as the cost of goods and services went up in comparison to gold because of this sudden increase in supply, but after this happened the economy went right on about it’s business. There was no calamity. 

Now in regards to your other question, yes I do feel that the US government has made deal with Middle Eastern governments. In fact, John Perkins discusses exactly how the United States got third world governments to play along with our economic wishes in his two books, Confessions of an Economic Hitman and his followup book The Secret History of the American Empire. Perkins books are fascinating because they are basically an inside account of how the American empire was build coming from someone who was involved from the inside. I believe that the CIA engineered the Shah’s rise to power. Similarly, it is common knowledge that we the US government has long been an ally of the Saudi Royal family. That is why the so many of the 9/11 hijackers were Saudis: the Saudi citizens hate the ruling family but feel that they can not get rid of them unless the United States allows it.