Under the Shadow of Inflationomics
Inflationomics indicates the sway of inflation thought in education and the affairs of government. It permeates political life and behavior, especially when economic policies are discussed and decided. It speaks well of an increase in the amount of money by a central bank and of deliberate expansion of bank credit in order to finance government deficits and stimulate economic activity. Inflationomics is a basic ideology of our time. FULL ARTICLE
Comments (34)
Another great picture for the article!
Published: June 1, 2006 8:22 AM
this cannot be good for us
Pentagon: Iraq Insurgency Strong Into 2007
Published: June 1, 2006 9:16 AM
Henri, what's that got to do with the article?
Anyways, good article. We can take solace in the fact that the American state literally will implode on this course, along with the dollar.
Published: June 1, 2006 9:40 AM
Angelo,
can we really take solace in a disaster for human beings? If the assumption is that some brilliant leadership will come out of such a crisis and make the world a better place, what is the historical precendent on which you base that assumption? Or do you expect France, Russia, China or Mexico to provide meaningful leadership to the world on the way to liberty?
"We can take solace in the fact that the American state literally will implode," would seem a pretty ignorant statement to me.
Published: June 1, 2006 10:08 AM
I agree Don. I want freedom from government too but not through a collapse such as in Somalia. Slow privitization is good for me and a better guarantee that a new revolution will not be a Marxist one. I think radical statements such as Angelo's do a great disservice in bringing people to our side.
Published: June 1, 2006 10:23 AM
To me the real issue is that we know the dollar's going to collapse, we know it's going to lead to a global economic chrises. So how does one avoid getting creamed?
Is there another country, another locality, some place that can be traveled to? Perhaps the countryside? Perhaps natural resource rich areas with decent economic freedom like Albertia, or Nevada? I really don't want to be in a major city (eg LA) when it all implodes.
Published: June 1, 2006 10:44 AM
For an entertaining work of historical fiction dealing with the founding of the Bank of England (and other historical events) I would highly recommend Neal Stephenson's Baroque Cycle:
http://www.reason.com/0502/fe.mg.neal.shtml
Throughout the three novels Stephenson is very critical of state controlled money.
Published: June 1, 2006 10:45 AM
When the American state collapses, it won't be pretty, particularly when people find out that all those T-bills represent actual debts that their holders expected would be paid. And this will be after many decades of importing ignorant, low-income individuals whose political philosophies, to the extent they have them, tend either towards plutocracy or Marxism.
But will the American state collapse? If hard money can be indefinitely subdivided as purchasing power increases, why can't paper money be indefinitely aggregated? The Japanese measure their national debt in the quadrillions of yen. Is there a single historical example of Mises' "crack-up boom" resulting in the markets forcing a gold standard on a country?
Obviously, the process of inflation has limits. But my father reminds me that when he was a boy in the early 1950's, there were people who had been predicting the collapse of the dollar since the 1920's.
OTOH, the level of public and private debt carried by the US appears (to me, anyway) unprecedented in human history.
Published: June 1, 2006 10:50 AM
The US will implode only if the inflation gets out of hand. At the "low" levels we have experienced for the past two decades, the current inflationary regime could carry on for generations. Besides, compared to Europe and China, we're angels when it comes to inflation. Europe is more likely to collapse than we are.
Based on history, especially that of Germany in the 1920's, hyperinflation will lead to dictatorship, not an "implosion." That's because human nature abhores chaos more than tyranny. Hyperinflation leads to chaos which encourages people to surrender their freedoms in exchange for order. That process has repeated itself many times in history.
Published: June 1, 2006 10:51 AM
Roger,
My fervent hope would be that people convince their States to leave the federal union to avoid liabilities that cannot possibly be repaid. Since its very founding though, the federal government has pursued policies to erode local allegiances in favor of loyalty to the central government. And many of the States are themselves heavily in debt in dollar-denominated instruments.
Published: June 1, 2006 11:19 AM
V. Vuk,
I understand that you're a young chap, literally, and with that, certainly, no probs.
While I truly agree with the tenor of your sentiments(as above), please, be wary of them.
That the next Revolution, is based on the Evolution to Devolution is, no doubt, to me, the best of all possible ways forward.
Our perferred choice, though, like in so many things, may not be available.
In the meantime, do not believe that the choice in front of us is solely binary: the Current State or Somalia(.S.A.).
Or, Current State v. "Marxism", though if you'd like to enjoy the idea, our current state, platitudes to the contrary, is Marxist in far too many ways.
And, given the future, there Are: no guarantees.
Only the Prepared, and those "less so".
But, the best way to guarantee the Future is to work, now, to prepare for its eventuality.
Remember, Freedom is a risky business, and Liberty can be a corrupting vice, those that need the platitudes laced with Aspartame and their "reality" stripped of salty tears are, more than likely, not Fit for either.
Angelo, I do not know, may well be the type of individual, that the posts following his comment, alluded to. I doubt it, though, in any case, he is but one voice. More than likely, he was giving rise to the idea that we can take solace in, in his view, the coming fall of the State itself and that we may, again, have the opportunity to pursue Happiness on trails less festooned with Fiat potholes and state-appointed "toll keepers".
Change, no matter how or when, is always a threat to someone. That is problematic, no doubt, though, change is Life. Away from such, I choose not.
Mark Brandly, article earlier posted on mises.org, gave rise, well, to the costs imposed, on the current, by those who ascended to power on the basis of "the needs" of the "unfortunate". The truly unfortunate. among us, are not yet--They are, our Future, yet to be.
Past all that, keep up the good thinking, stay well, and see if you find any trace of an open marketplace while N.O. is being "rebuilt".
Published: June 1, 2006 11:24 AM
I sympathize with Angelo's view. It's no fun watching the current, slow-motion train wreck toward social and moral collapse. And I am optimistic. Hard times create hard people. There is a strong, if I may, "reactionary" movement out there that dissents from the current view of liberal democracy as history's golden fleece.
Published: June 1, 2006 11:39 AM
M E,
“…and Liberty can be a corrupting vice…�
This is one of the nastiest of the state promulgated lies known to man.
Liberty is the absence of aggression and coercion. It is respect for property and contract, is derived from reason, and is necessary to obtain justice and order. There is nothing corrupting about it, nor is it a vice.
Published: June 1, 2006 12:10 PM
"Liberty is the absence of aggression and coercion. It is respect for property and contract, is derived from reason,..."
In which case, it appears to be a pursuit fit only for rational, peaceable folk of sufficient intelligence to control their impulses. The world is full of individuals unfit for liberty.
Published: June 1, 2006 12:32 PM
A little perspective might help lift the gloom and doom. We are leagues ahead of any place but Hong Kong in liberty. Europe is much farther down the path to destruction, with much higher deficits, debt and state control of everything. We're watching their death spiral now.
We've come a long way, too. Look in your history books about the FDR decades. We were a socialist country in all but name. Read about what Nixon did to the economy and the integrity of our dollar. We've hit a plateau since Reagan, but we can recover.
You might check out this article in today's American Spectator online: http://www.spectator.org/dsp_article.asp?art_id=9892. It's the story of a lefty who turned libertarian. He writes "The freedom movement, libertarians, and free market economists, he writes, have done a poor job of defending the social legitimacy of business, economic freedom, capitalism, individualism and free markets. The message should be that business, working through free markets, has arguably been the world's greatest force for human progress and our collective well-being, delivering increased prosperity, less poverty, extended longevity and democratic freedoms."
We need to do a better job of marketing!
Published: June 1, 2006 12:35 PM
Roger,
I'm not sure how the point could be made much clearer, particularly with the collapse of the former Soviet economies. I submit that, for all its faults, the US has learned the lesson. We may always put up w/ real tax rates of 50% and misguided efforts to create a social safety net but bottom line, most people in the US agree that the free market generates wealth. The British and Europeans, on a very basic level, simply do not appear to understand this.
Interestingly, I see an increasing threat to our prosperity not from the socialists, whom nobody listens to at this point, but from the plutocrats, the elite who game the banking system, financial markets, and corporate governance in their favor.
Published: June 1, 2006 12:56 PM
The U.S. Dollar is the Gold of yesteryear. The pricing of world crude in dollars makes the Dollar the reserve currency.
All nations must aquire U.S. debt to purchase oil. In turn, the Federal Reserve debases that debt at a greater rate then the interest rate it offers.
Subjecting the Dollar to continually debasement is bound to lead to the destruction of Europe within the decade.
Either the Europeans cut wages to compete with the Chinese and Indians for U.S. dollars or they remain out to lunch indefinitely. Oh, and those dollars they will be vying for to purchase the oil that they have none of, will of course be taxed courtesy of the Federal Reserve.
Published: June 1, 2006 1:05 PM
P.E.,
"There is nothing corrupting about it, nor is it a vice."
I'll purport that, when One has Liberty, there are, as always, many comely paths, and sonorous Sirens, that can(oops, CAN) lead one astray( to/toward corruption).
vice 1 (vs)
n.
1.
a. An evil, degrading, or immoral practice or habit.
b. A serious moral failing.
c. Wicked or evil conduct or habits; corruption.
2. Sexual immorality, especially prostitution.
3.
a. A slight personal failing; a foible: the vice of untidiness.
b. A flaw or imperfection; a defect.
4. A physical defect or weakness.
5. An undesirable habit, such as crib-biting, in a domestic animal.
6.
a. Vice A character representing generalized or particular vice in English morality plays.
b. A jester or buffoon.
--------------------------------------------------------------------------------
[Middle English, from Old French, from Latin vitium.]
--------------------------------------------------------------------------------
Published: June 1, 2006 1:17 PM
Reactionary,
“The world is full of individuals unfit for liberty.�
It appears this way only because so many have been raised to believe the aggressive state is justified. But outside of this, for the most part, people are inherently cooperative and ethical. There are criminals, but they represent the minority. Give people no choice to vote for their favorite thief and murderer, and they will gladly focus their attention on their own affairs instead. Put people under no compulsion to pay taxes, and they will happily apply their resources towards much more productive uses including intelligent charity.
Published: June 1, 2006 1:20 PM
Roger M., I believe you are very much correct. Dictatorship will follow economic collapse, just as surely as Greece elected a dictator to clean up the mess after their first extent dabbling with "democracy". Or for that matter, Roman Republic devolving into dictatorship, etc etc etc.
It will be easy in America, because police and military obey their orders. People have been accustomed to obeying, as they were not in 1775. Just get the mainstream media to all agree this is a "good thing" for the country. A way to "weather the storm", to "pass through this emergency the likes of which the Founding Fathers could never have imagined."
Sure it's lies, but with generations of public school students never taught how loose fiscal policy destroys civilizations, the great mass of people will not know it for the Big Lie it is.
Reactionary, I disagree that "the US" has learned any lesson. The idiots in power are spending faster than ever, demonstrating that they have indeed learned nothing. Like the former Soviet Union, the collapse of the US economy will not result in invasion from the outside, but I dearly hope it will result in dissolution of the individual states into truly separate political realities.
Lots of sci-fi has been written with this as a primary event, the breakup of the United States into several regional units and city-states, and while the failure of such a large "free trade zone" will certainly be a loss to humanity in general, it is the syphoning out of money from that huge free trade zone into the hands of a small group of individuals which has put us into this situation in the first place.
Published: June 1, 2006 1:34 PM
ME,
And without liberty, which of these vices is ruled out? None, i would say, with the added problem that vice-ridden people are given license to aggress against non-aggressors.
Published: June 1, 2006 1:34 PM
P.E.,
Maybe I do not understand my own writing as well as I imagine. Please point out to me where I am suggesting Liberty should be curtailed in any way.
Published: June 1, 2006 1:57 PM
Curt,
I know the US political elite are corrupt to the bone, but I think most US citizens realize the basic lesson: markets, not governments, create wealth. There is still a libertarian streak in the US collective consciousness that has simply never been there in most countries of the world.
Published: June 1, 2006 2:03 PM
I don't think failure is guaranteed, nor success. We've made a lot of progress since 1980, but have a very, very long way to go. I see two dangers:
1) The continuing "low" rate of inflation makes inequality worse, because the wealthy can hedge, but the poor rely on wages which don't keep up with inflation. While the Federal Reserve is largely responsible for the widening gap between rich and poor, free markets get the blame.
2) With the collapse of the USSR, the "third way" has become very popular. This "third way" is nothing but a return to state control of the economy that traditional societies have now, and most societies had before the advent of capitalism. Republicans have figured out that they can keep the political right with conservative social values and pick up some of the left with bigger government spending and control of the economy. Evangelicals turning to big government is a dangerous trend. See this: http://www.opinionjournal.com/taste/?id=110008434
Published: June 1, 2006 2:31 PM
M E,
I'm not suggesting you are advocating the curtailment of liberty, i am only suggesting that the alleged connection between liberty and personal vices is a false one and yet a connection the state perpetuates and profits from.
It is in our nature to be prone towards vices. However the presence of coercion neither reduces our affinity towards them, nor reduces our tendency to partake in them. If anything, i would think it is the opposite.
I just think it is an important point to make: “Liberty can be a corrupting vice�, is false.
Published: June 1, 2006 2:45 PM
I’m surprised Professor Sennholz would claim “The rise of individual and corporate tax payments pushed the Federal budget into an extraordinary surplus for four years, beginning in 1998.’ http://www.publicdebt.treas.gov/opd/opdpenny.htm shows the debt has increased every year for decades. If there were a surplus, the debt should have gone down in those years. Our government has been running deficits every year for decades. I think the last surplus was in the early 1950s.
Published: June 1, 2006 2:46 PM
Reactionary, as much as I would like to agree with you I cannot. The "conservatives", traditionally pro free-market, have demonstrated their complete lack of understanding by supporting the present supposedly "conservative" regime.
Issue politics, abortion, Social Security, the idiocy of "flag burning", the War on Some Drugs, have become so much of the focus of the supposed "conservative" and "liberal", that those who understand what a free market is have become very few and very far inbetween. That's why the two factions of the Party of State Power have taken 90%+ of the every vote in election after election, the few exceptions so rare as to be ranked with school shootings and other statistical noise, with free market candidates consistently left in the 1% and less region.
With crisis come people who promise to "do something" about it. The bigger the crisis, the more the average voter looks to someone to "do something" about it. The fact that "doing anything" about it via government coercion is the antithesis of the free market doesn't enter into the average voters thought processes.
We're doomed.
Published: June 1, 2006 3:59 PM
You guys shouldn't be so pessimistic. If the US was going to collapse because of the idiots running the show, it would have happened just after the 1970s.
Things could be a lot better than they are, sure. But they won't collapse into utter chaos.
I'm a libertarian though, so I see why you are so pessimistic. Things really are very screwed up compared with what could be.
Published: June 1, 2006 11:32 PM
I too have little faith that the popular mob will give up the welfare state. But in all fairness, I renember when Carter threw the economy off the cliff and people voted in Regan. I renember when Clinton tried to go all the way with statisim, and the voters revolted and elected Newt and friends.
One scenario I see is that the economy will fall off a deflationary cliff before this next congretional election. The voters will rebel and vote in a bunch of democrats. The Republican party will then likely implode and split into a libertarian side, and a religious right side. The Democrats and Bush will then procede to drive the US economy into a hyperinflationary collapse. Next election, the public will be outraged, all the social programs will be financially worthless anyhow, so they will vote in the Libertarian Republicans (I bet on Ron Paul as president). The economy will then return to the gold standard, recover in a super-boom, and the two big parties in the US will be the religious right republicans from then on. The Democratic party, with no welfare base, will likely die.
Published: June 2, 2006 12:03 AM
The fact is, partisanship has become a religion for most 'normal' people, especially the kind that enjoy calling themselves citizens. We have seen where fanaticism to the red or the blue has led: a big purple gooey ugly sore.
This is the main process that any democratic government instantly undergoes.
In a standard autocratic state, the people are ruled by fear. Or, the tyrant like Saddam or the king or whomever doesn't give a damn about the people and doesn't do much to them unless they try to threaten him.
Yet in democracy, the same thing happens in a different but still ugly way. Either it is a republic with some sort of 'constitution' and 'principles' that the politicians instantly destroy, and it becomes taken over by partisanship.
Each wolf begins leading the sheep to fight amongst themselves to select the top wolf. The sheep clamor for favors and for their wolf to 'win'. The wolves enter every aspect of society including the market. Thus, every republic of any kind is always doomed to corporatism/fascism.
Published: June 2, 2006 2:59 PM
Beg my pardon, but I forgot to write the rest of this. My apologies
Either it is a republic with libertarian pretenses that morphs to corporatism/fascism, and usually an Empire then, or it goes the 'social democratic way' with instant tickets to collectivism and socialism.
This is different from your usual instant-socialist experiment like the USSR, because a socdem has a "third way" is the USSR in slow-motion, kind of like seeing an autopsy frame by frame.
That way leads to the State crashing faster, because it has no pretenses of capitalism or freedom and is so batsh*t crazy, and knows it, that 'planned chaos' happens.
The corporatist Empire burns grinds slower even still.
Well. Chaos is chaos either way, and you always get there by force (government).
Published: June 2, 2006 3:05 PM
It seems to me that the most fruitful path this discussion almost took is how can we prepare ourselves for whatever happens? This is something I've been working on for a long time. It bothers me a lot that I feel like I suck at it, but I shall continue trying to do what I think is the best way to prepare: Make friends. Get to know people. Strengthen your community. Share the principles of freedom when they will help people with a problem they're having.
My wife has some friends whose husbands are police officers. These are people I want to keep in touch with. When stupid laws get passed, I want to be one of the people the cops overlook.
I hope to see more discussion of what kinds of things fall apart first during stealth hyperinflation. The cost of energy and shelter...? Perhaps it's time to buy some solar panels...
Published: June 3, 2006 10:51 PM
You might remember a comedy group originating in the 60's named 'Firesign Theatre' that used a character called "The Once Honorable Bosco Hearn". This individual in one of his presentations about money said something like this: What was 10 is now five . . .What was five is now one . . . and what was one is now nothing. Need I say more?
Published: June 6, 2006 8:19 PM
"In the footsteps of President Herbert Hoover, President Bush may even call for more trade barriers, which would turn the recession into a depression and breed much international conflict."
Now wait a minute here, Herr Sennholz. The 1930s Depression was not the result of protectionism and trade walls. Didn't a former Fed Chairman give his agreement to that?
Trade walls in the latter 1800s gave us all-time national surpluses.
Published: June 27, 2006 1:44 PM