Money and Power

We have noted how money and power have been gravitating to establishment interests. As I mentioned in "Three Enemies" (below), this has been going on for a long time. Today we are on the verge of economic collapse(1). This is because of debt, and not just federal deficit spending, but because of personal debt. The Bush administration's spending with abandon on the illegal and unnecessary wars in Iraq and Afghanistan, on social programs that are needed only because of all levels of governments taking so much away from people, and on the vigorous enforcement of unconstitutional laws as exemplified by the proliferating drug laws and gun laws, is running up debts so big that nobody can comprehend them(2).

Coupled with that, the Bush administration at least claims to be determined to cut taxes. However, anyone who can do grade-school arithmetic knows that something has to give at some point. Drastic spending cuts are very unlikely by either this administration or the next one, as both old parties favor big government and the basics of the present policies, and new parties have been stonewalled by the two old parties. A tax hike would likely throw the incumbents out of office.

So, how is all this spending going to be paid for besides a tax hike? It will have to be paid for at some point, there’s no getting around that. There is only one other way, and that is for the Federal Reserve to create money out of thin air to pay off these debts. Those new dollars in the economy chasing existing goods and services will cause prices to rise, causing inflation. In fact, rather than a cause of inflation, it is inflation! As stated, Mises and Rothbard wrote extensively about this. I will not belabor it; rather I will urge you to study this very important material so that you will see what is really happening.

The neoconservatives swear by one of the darlings of the Left, John
Maynard Keynes. Keynes' theories are unsound. In fact, they are a disaster. To compare Keynes with Mises or Rothbard is like comparing astrology with astronomy. In fact, Keynes' theories are yet another tie between the neoconservatives and the Left.

The Keynesian/neoconservative propaganda is that the economy is doing really well right now. It does well when people are spending. It is exactly that: propaganda. Your instincts tell you that you will be better off in the long run if you curb discretionary spending and put something aside for the future. Your instincts are right! It is only common sense. You cannot spend yourself rich.

What really concerns me the most (next to terrible monetary policy) is the fact that so many people are deeply in debt. Students graduate from college thousands of dollars in debt. Statistics vary, but they all say that a large number, if not a majority, of people are in debt to the tune of five digits. Between that and the tax burden, people either cannot or will not save, when saving is of paramount importance.

What is going to happen to these people when the inevitable inflation I just mentioned hits the economy? Supply and demand will go haywire.
Businesses will discover they have miscalculated the demands for their products and will lose money. Many businesses will have to downsize, laying off employees. This has been happening already. It will get worse. People, already in debt, will lose their jobs and will be unable to find new jobs. Many will have their homes foreclosed.

Meanwhile, prices will soar because of the inflation, while people pray for price reduction. Of course, Fed Chairman Bernanke has said that price reduction ("deflation") is a must to avoid.

Now, we mustn't allow wealth to slow its gravitation to establishment interests, now must we Mr. Chairman and Mr. President? No? I didn't think so.

Yes, I am bitter, thinking of what this will do to the middle class.
Moreover, homeless people, your ranks are growing! Oh well, we need a bigger homeless and government-dependent voting bloc.

But seriously, what will these people, many of whom are responsible for small children, do? What can they do?

They will do the only thing they know how to do, absent any economic freedom to start up a small business without Big Brother's permission, and absent education that taught self-reliance. They will turn to the Federal government for money and help. What the government is likely to do is similar to what it did in the wake of Hurricane Katrina. Now, I am speculating, since economic collapse and a natural disaster are two different things. However, we will have the same people, or people of the same mentality, in charge. The government will “help” people by taking what little they have, preventing donations of medical care, money, and other necessities from reaching them, not being there when needed, and being there in the way when not needed.

Government will have succeeded in attaining its goals, claiming wealth and power to itself and making people dependant on government.

With conservatives like these, who needs socialists?

(1) I realize I have been saying this for years but this is because I have seen it coming for years, ever since I have understood the reason for economic ups and downs. Ludwig von Mises pointed this out in Human Action and Murray Rothbard did in America's Great Depression and Man, Economy and State. The cause of depressions is known, but the timing is not. So, although I still maintain that economic collapse cannot be avoided without a complete monetary policy and fiscal policy turnaround, I do not have any idea if it will be tomorrow or twenty years from tomorrow. I just have a very bad feeling about our relatively immediate future.

(2) As I write this, the federal government has just raised the "debt ceiling" yet another time and it is way up in the trillions now.