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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Jim Cook
December 21, 2006
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THE ROAD TO RUIN

Our central bank controls the issuance of money (and credit). There’s no competition. This monopoly on money becomes a tool for politicians to pay the bills for ever-expanding social programs and military escapades. It’s called inflating. If government spends too much, they cover the deficit by printing or creating new money.

Without inflating, social programs can’t expand. Thus the creation of new money became an indispensable ingredient to the goals of populist politicians. Easy money aids the spread of liberal policies and big government. Inflating and socialism go hand in hand – you can’t have one without the other. The left in this country has an open-ended commitment to supporting the rapidly growing underclass. Helping the poor has become a huge growth industry, providing scores of government jobs and growing political muscle. Call it the poverty business. When we pay for our runaway social spending by creating new money to pay the bills, we water down the value of our money. Eventually it’s the road to depression, hyperinflation and national ruin.

The underclass of every race costs the nation an astronomical sum. It used to be that a public defender was a part-time duty in most communities. Now there are scores of these lawyers on city and county payrolls earning in the high five figures. Facilities for incarceration, prison and jail guards, probation officers, judges and court employees all have exploded in number. Two million children now have parents in prison.

The underclass was cemented into place years ago with the advent of the dole. Since then a blizzard of social programs, including public housing, food stamps, welfare payments, medical care, heating bill payments, homeowner grants and a dizzying number of lesser programs have been introduced to ease their struggle and keep them uninterested in personal achievement. As a byproduct, 25 million fathers have turned support of their children over to the government.

Consider the plight of North America’s indigenous people. After a century of government assistance, the human condition on the reservation is worse than anything that ever existed on the planet. Have we learned anything from converting these once highly self-sufficient people into helplessness? Not at all. Social sympathy still runs amuck. Liberals remain oh so compassionate, especially when spending money that isn’t their own.

The Fed will do everything in its power to keep inflating, even while it claims to be fighting inflation with tiny raises in the interest rates. The economist Murray Rothbard saw through this. "…the drumfire of propaganda that the Fed is manning the ramparts against the menace of inflation brought about by others is nothing less than a deceptive shell game. The culprit solely responsible for inflation, the Federal Reserve, is continually engaged in raising a hue-and-cry about ‘inflation,’ for which virtually everyone else in society seems to be responsible. What we are seeing is the old ploy by the robber who starts shouting ‘Stop, thief!’ and runs down the street pointing ahead to others."

We must either inflate or face deflation and a credit collapse. We are not going to take the necessary, but bitter, deflationary medicine now. However, the consequences are profound. London Times Editor William Rees-Mogg wrote, "Inflation gradually pushes the whole community towards speculation, since ordinary life begins to require speculator’s skills." The free market thinker, Henry Hazlitt summarized, "In a free enterprise system, with an honest and stable money, there is dominantly a close link between effort and productivity, on the one hand, and economic reward on the other. Inflation severs this link. Reward comes to depend less and less on effort and production, and more and more on successful gambling and luck."

Another great monetary thinker, Elgin Groseclose, explained the process we’ve employed in America for many decades. "By mortgaging the future, pledging the productive power of unopened mines, uncut forests, unbuilt factories and unborn generations, a tremendous demand may be created for wares already produced in the markets."

When you hear the media and left-wing politicians renouncing business, it brings to mind Henry Hazlitt’s explanation. "A period of inflation is almost inevitably also a period when demagogy and an antibusiness mentality are rampant. If implacable enemies of the country had deliberately set out to undermine and destroy the incentives of the middle classes to work and save, they could hardly have contrived a more effective set of weapons than the present combination of inflation, subsidies, handouts, and confiscatory taxes that our own politicians have imposed upon us."

If we keep expanding credit, there comes a time when too many people no longer want to hold the money. They want to exchange it for goods and assets. Quite suddenly prices begin to run away and nobody wants to hold dollars because they are depreciating too fast. The economist Hans Sennholz said it best. "The ultimate destination of the present road of political fiat is hyperinflation with all its ominous economic, social, and political consequences. On this road, no federal plan, program, incomes policy, control, nationalization, threat, fine, or prison can prevent the continuous erosion and ultimate destruction of the dollar."

The Fed feverishly pumps out additional money and credit to forestall a collapse. It’s an unhealthy system where only more debt can save us. Dan Denning described this perverse predicament. "The scope of the debt problem in America hasn’t been fully understood. The single distinguishing feature of the current version of American capitalism is credit creation. So much debt has been created in the last twenty years that it requires huge amounts of new credit simply to keep the system liquid. The necessity for ever-larger amounts of credit to keep the system liquid weighs on the ability of the Fed to reflate. It’s like pouring more and more water in the bathtub with a big hole in the bottom."

It’s interesting to read what Andrew Dickinson White wrote about the great French inflation in the 18th century that destroyed the currency and economy of France, and compare his comments to the monetary expansion of today. "Whenever a great quantity of paper money is suddenly issued, we invariably see a rapid increase of trade. The great quantity of the circulating medium sets in motion all the energies of commerce and manufacturers; capital for investment is more easily found than usual, and trade perpetually receives fresh nutriment."

He describes the consequences. "There arose the clamor for more paper money. At first, new issues were made with great difficulty; but, the dike once broken, the current of irredeemable currency poured through; and swollen beyond control. It was urged on by speculators for a rise in values; by demagogues who persuaded the mob that a nation, by its simple fiat, could stamp real value to any amount upon valueless objects. As a natural consequence, a great debtor class grew rapidly, and this class gave its influence to depreciate more and more the currency in which its debts were to be paid. The government now began, and continued by spasms to grind out still more paper; commerce was at first stimulated by the difference in exchange; but this cause soon ceased to operate, and commerce, having been stimulated unhealthfully, wasted away. Manufacturers at first received a great impulse; but, ere long, this overproduction and overstimulus proved as fatal to them as to commerce.

"A still worse outgrowth was the increase of speculation and gambling… For at the great metropolitan centers grew a luxurious, speculative stock-gambling body, which, like a malignant tumor, absorbed into itself the strength of the nation and sent out its cancerous fibers to the remotest hamlets. At these city centers abundant wealth seemed to be piled up. In the country at large there grew a dislike of steady labor and a contempt for moderate gains and simple living.

Mr. White continued, "… how easy it is to issue it; how difficult it is to check its overissue; how seductively it leads to the absorption of the means of the working men and men of small fortunes; how heavily it falls on all those living on fixed incomes, salaries, or wages; how securely it creates, on the ruins of the prosperity of all men of meager means, a class of debauched speculators, the most injurious class that a nation can harbor – more injurious, indeed, than professional criminals whom the law recognizes and can throttle; how it stimulates overproduction at first and leaves every industry flaccid afterward; how it breaks down thrift and develops political and social immorality."

Are we any smarter about economics and monetary affairs today? We have highly educated men in charge, considered to be brilliant. Mr. White wrote, "The men who had charge of French finance….. were universally recognized as among the most skillful and honest financiers in Europe."