Jul 20, 2011

Fw: The contagious failing economy


When we venture into the field of finances, our teachers are  generally left at sea, for by their own admission, most of them are notoriously poor economists, and ye the economic facets of the breakdown of constitutional government are too important to ignore.  In this instant we rely on the moderate businessman and the few teachers of economics who do not peddle fiscal nonsense.  They tell us that a  government which is unsound economically is one which is in danger of general collapse, and to this observation the historian can add the comment that modern dictatorships often arise in periods of economic as well as political breakdown. 
Fiscal solvency is one of the strongest props of constitutional  government as well as a monarchy; whereas unemployment, inflation, and rising debt are always among its deadliest foes. The latter three factors have been present with increasing force ever since the end of World War II,  and about to reach a point where their disruptive influences will result in chaos.  Unemployment presents opportunities to those seeking to institute totalitarian rule, for fathers who
cannot feed and support their families are desperate men without hope. They are the ones who will follow any ranting demagogue who promises bread and jobs. The unemployed are a reservoir of potential revolutionary danger in that
they may b e used by an elite seeking to  establish dictatorial rule.
To say that no jobs can be found for millions of people is to infer that the need for the hands and brains of ordinary men and women has become static, or to say that jobs can be found when no industry abounds, is the counsel of foolish despair or worse. If we put to work on this great human problem as much money and brainpower as was expanded on World War II, a solution will be found.  However, the best solution well within the American tradition, is for the federal government to  get out of business and industry activities, while at the same time reducing taxes and restrictive regulations. Encourage rather than hinder, free enterprise, so that investment cash may flow into private businesses, creating millions of new jobs. Instead of giving "stimulus packages to Wall Street.
In addition to those who are unemployed, all sectors of American society suffer from inflation, that is every sector except that tiny group whose income or wealth is too great to allow them to feel any squeeze, so long as what they possess
is not totally expropriated. To some extent big labor and big business are able to brace themselves against the shock of surging inflation. The unions react by striking for, and obtaining higher wages, while big businesses respond with price increases.  Prices always stay ahead of wages, and as the two chase each other up the economic staircase, the pressures of spiraling inflation intensify.
Those who are poorly informed should not jump to the erroneous conclusion that I am saying that  rising wages and prices are the cause of inflation.  These factors are only the symptoms of economic illness; they do not cause inflation any more than fever and chills cause sicknesses. Governments cause inflation by debasement of the currency, by deficit spending, and pouring extra billions of dollars into circulation  which is far in excess of any amount warranted by increased productivity. Whenever there is more money to spend that there are good and services to buy, inflation results.  Inflation now  is threatening to ruin the middle class in industrialized nations around the world. Inflation since World War II has gone up more than 200% on many items.
The nightmare grows in part out of the dollar's shrinking value.  According to government's figures, its value is derived by comparing the purchasing power of the contemporary dollar with some base that is not fixed. At one time the base year was 1939,  but as the dollar grew smaller in comparison with that unit, the government's experts would move the base up to a year of greater inflation, so that the comparison would seem more encouraging and much smaller. If the 1939 base had been retained, the dollar today would have to be pegged at fifteen cents or less.
Remorseless operation of economic laws have much to do with the economic distress whenever money is debased, for it loses value by printing huge amounts of dollar bills. or by failing to back up the dollars with a sufficient quantity of precious metal. The United States has allowed the gold reserve to shrink.  Only public trust in the credit and financial solvency of the government has prevented a spectacular collapse. How large the federal debt can become without precipitating further economic collapse is a matter of conjecture.
No government can place itself outside the rule of economic laws, although governments do have one avenue of relief not available to corporations or industries, or individuals. This mode of relief is the repudiation of a nation's debt. As Greece is considering. Totalitarian dictatorships might use debt repudiation without economic ruin, but governments such as a republic  would be extremely lucky to survive a measure so desperate and so utterly a variance with its economic tradition. The monetary unit would collapse,and financial panic would sweep the country. Collapsing banks would precipitate a run on the entire  banking  establishment, including savings and loan associations. The scale of pandemonium and despair would make the stock market crash of 1929 look like a minor local upset by comparison.  The final result only could be institution of a tyrannical form dictatorship.
Somehow the debt has to be reduced, for at some future date its presence could represent a source of political strength to those who control the central government. Powerful  financial interests who own government bonds naturally are loyal to the ruling element, for they have economic ties with the government, and must protect their investment.  Alexander Hamilton in the  early days of the Republic saw this fact, so he advanced the notion of creating a public debt, as
a means of cementing the "right" people's  loyalty to the newly-established  government.
Economic interest therefor places a powerful lever in the hands of the master class who seek to gain support from the wealthy upper classes and their intellectual  allies. a threat to confiscate investment portfolios, or to repudiate part of
the debt, can force these reluctant groups to go along with whatever political  action the power elite contemplates. This is coercion, but there is also the lure of reward.  They could be promised refinancing of their holdings at more attractive notes, if they supported those who usurped total  political power. ( I am so happy that I was able to study economics before Maynard Keynes deficit program was foisted on the rich nations)
In order to reduce the debt that represents so many dangers to constitutional government, one of the major guidelines must be economy. As painfully unused as it is to economizing, the federal government has to trim its swollen budget. The process has to begin with Congress, it appropriates vast sums of money with light-hearted unconcern; they need to be taught economics before campaigning for Congress, and the value of money.  there are two key reforms needed—one, which is anathema to the bureaucrats, and the other which will arouse the massive opposition of the international bankers who control our money. And perhaps the change that can be engineered is first to repeal the income tax amendment.
This will save the middle class from being wiped out by oppressive taxation, reduce the huge size of the federal government, and sharply curb federal power, and restore to state and local governments the power usurped from them;   returning the funds they need to operate without federal handouts or controls. One can expect the federal bureaucracy to  fight desperately against this proposal.
Heaviest guns of the money masters will be brought against this reform:  abolish the Federal Reserve System---that private banking agency foisted on the American people in 1913 by a most amazing  conspiracy in American History. Only Congress truly or legally has the power to make our money and to regulate the value thereof. The international bankers have gained control of our money by illegal means, and have since netted Billions and Billons in interest.  A large portion of the national debt could legally be  eliminated at the stroke of a off the system, repudiate the interest paid on "nothing",  and resume issuance of debt-free money, amounts of which will be regulated by increases in productivity of the national economy. Which can be done by producing more at home, and lesser imports...This can be accomplished only if conservative, patriotic Americans, determined to restore our constitutional republic..the radicals and liberals of the two major parties will coalesce, and the American political system will be divided between conservatives and liberal as it once was.
The fight to balance the budget is not as complex as Congress and Obama make it out to be....first, both should forget about cutting down on Social Security and Medicare... this money is not tax, but are premiums paid for a pension plan and medical care..what the government need to do is to stop robbing these accounts..
There are myriad other ways in which individual freedoms have been reduced, and no segment of the American Society is immune to the inexorable degradation of our cherished political traditions— and the gravest danger is that constant exposure breeds a sort of resignation  and in time what was once regarded as an evil becomes an accepted way of life. What we Americans now accept as the normal course of events would have driven our forefathers into flaming rebellion against what they would have considered "an intolerable tyranny."  How true, then, is the statement, "Yesterday's  radicalism becomes tomorrow's conservatism!"

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