Or is it? That’s a question I’ll pose in relation to the following:
You can line up 100 professional war historians and political scientists to talk about the 20th century, and not one is likely to mention the role of the Fed in funding US militarism. And yet it is true: the Fed is the institution that has created the money to fund the wars.
In this role, it has solved a major problem that the state has confronted for all of human history. A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions. Keep in mind that this is only a problem for the state. It is not a problem for the people. The inability of the state to fund its unlimited ambitions is worth more for the people than every kind of legal check and balance. It is more valuable than all the constitutions every devised.
That’s a great observation from Lew Rockwell who is a bigger ally of the left when it comes to war than many are willing to accept. That quote is from a recent piece titled War and Inflation.
Booman knows me, and he knows I’ve been harping that the credit system was going to break and inflation was going to run amuck back in 2002… Here we are, housing bubble busts, credit system in the ditch, and inflation running away rampantly in food and energy. Hello brave new world, and both Republicans and Democrats are each scratching their arses in response.
Well, that, and they’re looking for scapegoats to deflect the blame for rising prices. Let’s see: Oil companies; foreign countries who hate America; gouging gas station owners; evil profiteering speculators; and the list goes on. (At least the discussion on environmental castration of the domestic energy infrastructure is now open to debate on both sides of the aisle, although we still have spoiled kids in Congress telling us their constituency simply won’t have new refineries or exploration!)
But few, if any, in politics are fingering the primary culprit: The privately owned and operated Federal Reserve and its banking cartel system. This system has blown open the money supply over the last 20 years, and after giving the impression to consumers that Sir Al Greenspan had actually found monetary alchemy (printing money actually lowered prices), the backside of this inflation in money is hitting us hard and right between the eyes.
Certainly the front side of inflation, like most experiences before this one, was a fun one, where freshly minted money (minted out of thin air!) flowed into assets we all loved to see rise in prices: stocks, mutual funds, houses, bonds, etc.
But that was then, and this is now. In 2000 stocks hit the skids. In response, the Fed cranked it up further, and lifted the economy into a housing and real estate bubble, and an even more delusional credit bubble. Both have now broken, and as the tide of false money recedes, revealed is one unsustainable asset value and business project after another. In the meantime, since 2001 the dollar has been steadily losing its exchange value to those things you can’t print so easily as fiat, paper currency — like those Federal Reserve Notes backed not by gold, or anything, other than debt!
So, back to Llew Rockwell — the full article is well worth the read, especially if you’re tired of war. However, Rockwell does point out a dilemma: Lefties (oops — i mean, “progressives”) can’t have their cake and it eat too:
“So long as the state has unlimited access to the printing press, it can ignore the pleas of ideological groups concerning how the money will be spent.
Note that the Federal Reserve is not a political party. It is not a recognized interest group. It is not a famed lobby in Washington. It is not really even a sector of public opinion. It seems completely shielded from vigorous public debate. If we truly believe in liberty and decry the leviathan state, this situation cannot be tolerated.
I say to the sincere Right, if you really want to limit the state, you will have to give up your dreams of remaking the world at the point of a gun. Wars and limited government are impossible. Moreover, you must stop ignoring the role of monetary policy. It is a technical subject, to be sure, but one that we must all look into and understand if we expect to restore something that resembles the American liberty of the founders.
I say to the sincere Left, if you really want to stop war and stop the spying state, and put an end to the persecution of political dissidents and the Guantánamo camps for foreign peoples, and put a stop to the culture of nationalism and militarism, you must join us in turning attention to the role of monetary policy. The printing presses must be unplugged. It’s true that this will also hit programs that are beloved by the Left, such as socialized health care and federalized education programs. But so long as you expect the state to fund your dreams, you cannot expect that the state will not also fund the dreams of people you hate.”
Which is why I”m not terribly optimistic about the future of the U.S. economy. Both Republicans and Democrats are far too in love with the levers of power to give up their ability to print themselves the means to their ends. Moreover, I’m given the general economic illiteracy of the average voter, I can’t say they’ll do much more than reward demagogues spouting rhetoric that pacifies populist sentiment: price caps, windfall profit taxes, penalties, rationing, etc., all which have been tried before and have failed precisely because they make less efficient the natural market’s effective allocation of scarce resources, subjecting it all to political whim and convenience. Perhaps that’s why Churchill once wryly observed, the best argument against democracy is a five minute conversation with the average voter. Indeed, in a democracy the people deserve to get what they want — And good and hard!
As was said around Rome some 2000 years ago, “Mundus vult decipe, ergo decipatur.”
That said, there’s not much you or I can do about it other than try to spread the word. In the meantime, b sober yourself, and act accordingly.
