Friday, March 9, 2012
Up, Up, and Oops
It's a shame more people don't understand what inflation really is. It's
even more of a shame that many economists don't understand it either,
because of all people they are supposed to be the ones who do know. The
only academics who have a solid grasp of what it is and the enormity of
its dangers are those in the Austrian Economics school.
I was taught in college by mainstream neo-Keynesian goofuses that
inflation is "rising prices." Supposedly the two reasons were "cost-push"
and "demand-pull." Out of the four classes I took one professor briefly
mentioned the truth – that inflation is caused by "an increase in the
money supply." One sentence out of four classes. He never said one
word (probably because he didn't know) about the Federal Reserve
Bank's unconstitutionality, about its illegal money and credit expansion,
or how its inflationary schemes cause the horrendous boom/bust cycle in
our economy. He never even bothered to explain how inflation causes
rising prices (because more "money" chasing the goods bids prices up).
And that I'm sure he did know.
Neither he nor any of my other professors told us that government-caused
inflation is what has brought down civilization after civilization
throughout history. The best-known example of this collapse is Rome,
which was followed by the 500 years of the Dark Ages. Mostly what my
"teachers" did is draw irrelevant, indeed useless, graphs and algebraic
equations on the blackboard.
None of them said one word about how the inflation-caused false boom
in the economy leads millions of people to invest their hard-earned
money in the hopes of making a quick, easy buck. Inflation, which is the
theft of the value of our money, seduces people into being imprudent,
sometimes even into being foolishly proud because of how smart they
think they are. How many of the Seven Deadly Sins are in that preceding
During the '90s, Alan Greenspan, who is a perfect example of why
pillories should again be erected in public squares, pumped hundreds of
billions of worthless dollars into the economy. This money went into the
dotcoms and the stock market, causing both to skyrocket. Millions of
people saw those 30%-per-year profits and shoveled their money in.
They were being imprudent, even though they didn't know it. But how
can anything give you 30% profits, year after year? Some people
smirked about how smart they were. They're not smirking now.
I put a little bit of money into the stock market. I knew it was going to
bust sooner or later. I just didn't know when. I pulled my money out a
year before everything blew. Others, who knew what was going to
happen, also sold their stocks. The naive snapped them up, thinking the
market would just keep going up and up. The ones at the end of the
buying line were the suckers.
The above is not how a good economy works. It's not supposed to be a
gamble where those who get in early win almost everything and those at
the end lose almost everything. If it hadn't been for massive government- engineered inflation all those CEOs would not have been able to cash in
their stocks and walk away with billions while the workers ended up
unemployed or with collapsed portfolios. The "money" would not have
existed for these criminals to do this.
It wasn't the free market that allowed them to walk away with all that
money. It was the government. And now the government pretends the
problem wasn't its fault and instead is trying to falsely blame it on the
"excesses of capitalism." Maybe we should just all adopt more socialism
and be like Cuba or North Korea.
For the first 140 years America had stable prices because we were on the
gold-and-silver standard – a standard that evolved the world over
because of thousands of years of experience. The government couldn't
inflate because everyone would trade their paper dollars for precious
metals. Since the creation of the Federal Reserve Bank in 1917 the dollar
has lost 99% of its value. That's why my grandfather paid a nickel to go
to the movies and I pay five dollars (are movies today 100 times better?).
Richard Nixon took the country completely off of the gold standard in
1971. It only took until 1984 for government-created inflation to really
start to roar. There was nothing left to stop the government from
cranking up the printing presses. A lot of dim-bulb academic economists
even thought it was a good thing. Hey, they babbled, it creates jobs,
right? Not a word about how these jobs always disappear in the bust, or
how inflation always causes a long-term decline in wages. And since
1984, the dollar has lost 45% of its value. Not a word about that, either.
It used to be, until about 30 years ago (the same time the U.S. went
completely off of the gold standard), that an American could graduate
high school and almost immediately get a high-paying job. These jobs
are now gone because of inflation, deficits, taxes and regulations. You
can't just thank head of the Fed alone for our current problems. You can
thank everyone in the government. And who voted them in?
Usually workers in those days had enough money buy a house and car,
pay their bills, save a decent amount and still have plenty to spend. It
was fairly easy to be wise and prudent because the money was honest.
This is why many people who are retiring now have oodles of money and
are traveling the country in their RVs. These days, unless the government
quickly changes its ways (hah!) I think a lot of people who are supposed
to retire in the next 20 years...won't.
Right now the Fed, desperate to get us out of the economic doldrums
we are in (that he mostly caused!), is again foolishly – or is it insanely? – pumping billions of inflated dollars into the economy. The money went into two places – the housing market, and weapons manufacturers.
The first busted. The second is indicative of the war economy dragging nearly everyone down, because of the administration's decade-long coming Adventures in Bringing Democracy to Barbarians.
Yet, all of these problems can be fixed in a year. All the government has
to do is go on the gold standard (which will stop inflation), cut taxes
massively (like 90%), close down much of the federal government (like
90%), and get rid of all the bureaucracy, red tape and regulations (like
90%). And many people will rapidly go from being foolish to being
prudent again. They'll have to.
In many ways, it's just that simple. Of course, we all know I'm just dreaming. For now, at least. But let's see what the future brings.