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Jim Cook



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

Commentary Of The Month
August 26, 2010
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Ever since Barack Obama fooled independents into giving him the keys to the car (his metaphor), the talk about economic judgment day has increasingly intensified.  But what, exactly, would have to happen to bring about a total collapse of the U.S. economy?

One path to economic judgment day is for the government to allow market forces to rule, which, because of decades of government meddling in the economy, would surely bring about a full-scale deflationary depression.  Though the iPod, flat-screen-TV, eat-out-four-nights-a-week crowd doesn’t want to hear about it, the truth is that a deflationary economic judgment day would be a good thing because it would cleanse the economy of artificially high wages, profligate spending, and mal-investment.

In a deflationary scenario, most people, to be sure, would be much worse off, but a small percentage of folks would actually come out ahead.  That’s because a deflationary depression is a time when, in effect, property is returned to its rightful owners.

The second possibility for economic judgment day is runaway inflation, which I have been predicting for the past thirty years.  This would almost certainly lead to social chaos and anarchy, more likely than not followed by a dictatorship.  The reason runaway inflations tend to result in dictatorships is because the natives become restless when they discover that government’s paper money is worthless.

Having said all this, I must admit that I sometimes feel like Wile E. Coyote.  Every time I believe the government is trapped by economic reality, I hear that infamous “Beep Beep” and end up scratching my head.  With its high speed printing presses, its ability to borrow virtually unlimited sums of money, and a monopoly on the use of force, government always seems to escape the consequences of its actions and lives to see another day.  But unless someone figures out how to make gold out of paper money real soon, the inevitable is already written in stone.

It is American entrepreneurs who have held up the U.S. economy for all these years by doing what they have always done best:  create wealth.  It is they, not government, who create jobs and increase living standards.  But if BHO continues to press the welfare pedal to the floor – which he clearly has every intention of going – an inflationary ending is virtually assured.

Remember, the continued onslaught of valueless paper money disrupts the market and causes confusion, apprehension, and, eventually, panic.  People are afraid to enter into long term contracts, because they have no idea what money will be worth in the future.

Businessmen decrease investments in new plants and equipment (as they are now doing), because they do not know if their real profits will be worth the risk.  The latter causes shortages, which leads to even higher prices.

If inflation is not eventually curtailed, a final collapse of the economy begins when people start to guess at what future prices will be.   This sets off a chain reaction where sellers increase prices even faster than the supply of money increases.

At that point, government faces its last chance to avoid a total collapse of the economy.  Henry Hazlitt put it well when he said, “Every inflation must eventually be ended by government or it must ‘self destruct.’”  This self destruction is exactly what has happened to nation after nation throughout history.