THE GREAT SWINDLE
Never before has it been clearer that our social and economic future will be disastrous. The trend is not our friend. Most recently our loose money and credit policies created an unsustainable boom that turned into a bust. Attempts to reignite the boom aren’t working and the failure of welfarism in Europe threatens to capsize world economies.
It’s hard to comprehend the mess we’re in. Almost half the people are on some kind of government dole. A significant percentage have character issues that render them unemployable.
Entitlement costs are out of control. The big spenders aim to spend more. The welfare state is marching towards bankruptcy and oblivion.
As government deficits rise and the economy stalls money creation will rise dramatically. An economic collapse will be postponed by issuing new money out of thin air. Inevitably this form of counterfeiting will cause goods and services to become shockingly expensive. Since our spending sins are so outrageous the inflationary consequences will be agonizing.
No one ever explained the damage that inflation does like the great Libertarian writer for Newsweek and the New York Times, Henry Hazlitt (1894 – 1993). He wrote, “When the Federal Reserve banks buy government notes or bonds in the open market, they pay for them, directly or indirectly, by creating money. This is what is known as ‘monetizing’ the public debt. Inflation goes on as long as this goes on.”
The consequences are dire indeed. “Inflation must always end in a crisis and a slump, and worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflating, but by the inherent defects of a free market.”
Hazlitt warned, “It is harmful because it depreciates the value of the monetary unit, raises everybody’s cost of living, imposes what is in effect a tax on the poorest…wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals.”
He continued, “A period of inflation is almost inevitably also a period when demagogy and 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.”
Mr. Hazlitt explained further, “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.”