Peace on earth is a wish that gets extra emphasis this time of year. But in a world facing challenges like inflation, were told to pray for it, wish for it, keep it forever in our minds. So why dont we have it?
The short answer is money. War is profitable to some. Its profitable enough that profiteers in private industries influence government, which stays home and orders others to do the fighting. War costs money. Where does the government get it? Visible taxes (income, corporate, and payroll) cover abouttwo-thirds of government revenue.The rest comes from borrowing and inflation.
In the US, the central banking cartel known as the Fed stands ready to fund almost anything the government wants, especially wars. The Fed does this by creating money from nothing and buys government debt instruments, the accounting name for which is assets. The destruction of the dollar is the residue from the asset-buying sprees of the Feds Federal Open Market Committee, an operation which its members and most of the economics profession insist is necessary for a prosperous economyand to keep the bad guys at bay in obscure places on the planet.
Government cant supply bombs to proxy warlords using tax money alone. Outlays in the hundreds of billions must be stolen surreptitiously, which is why government created a central bank and abought-and-paid-for economics profession. No matter the propaganda spewed by its lapdog media, taxpayers will eventually make the connection between war and a cheaper dollar.
History and theory prove we dont need a committee cranking up the money supply to make the price of money more appealing, that on a free market increases in the money supply come about from the usual profit and loss forces. A miner brings money to the market as a hat maker brings hats, neither one violating anyones property rights. But a committee such as the FOMC doesnt go mining lathe Seven Dwarfs to bring something people want to the market. Thats way too restrictive. Far better to create the money as a child would while playing make believe.
The Fedas the federally-certified monopoly counterfeiterperforms the childs magic. In doing so, it steals wealth. Nothing is exchanged for something.
Surely, I must be wrong
To suggest the economics profession supports a monopoly counterfeiting operation to run the economy is too ludicrous to accept. It would mean the government works against our interests. It would mean government is our enemy. There must be more to the story. There has to be.
Allow me to quote directly from a primary source, in this case one of the most controversial federal reserve chairmen in recent history. Ben Bernanke, chairman from 2006 to 2014,summa cum laude at Harvard, PhD at MIT,TimePerson of the Year in 2009, awarded the Nobel Prize in Economic Science in 2022, and now serving asan economist for the Brookings Institutionand advisor for the financial services firmCitadelmade this speech before the National Economists Club in Washington, DC on November 21, 2002, which he entitledMaking Sure It Doesnt Happen Here. You might want to read this passage twice, as its so off-the-wall your inner economist might find it impossible to digest:
[T]he US government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of US dollars in circulation, or even by credibly threatening to do so, the US government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.
Of course, he continues, the US government is not going to print money and distribute it willy-nilly Hes right. The governmentor the Fed as its assigned counterfeiterensures that Willy doesnt get the newly-printed money until much later, after its circulated through the economy and put upward pressure on prices and downward pressure on Willys real wages, sucking the purchasing power from his wallet. The first ones to get the new money benefit because it arrives immediately, too soon to affect price levels. Call them the favored few. Call them connected. Call it the government. Call this the Cantillon Effect, and see Jonathan Newmans graphical expression of the subterfuge in four charts.
The It in Bernankes title refers to the danger of deflation, or falling prices. Since deflation increases the purchasing power of the monetary unit, its puzzling that an economist of Bernankes stature would find that objectionable.
Moores Lawhas been a deflationary phenomenon since it was first identified in 1965thirty-seven years before Bernankes speechand has led to the proliferation of tech throughout the economy. Among other things, it has meant businesses and individuals can buy more for lesscertainly a key indicator of prosperity. And he regards this as a danger?
But he later expands his definition of deflation to mean ageneraldecline in prices, with emphasis on the word general. Using his general understanding he says:
The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demanda drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers.
The economy-wide aggregates Bernanke describes are an instance of credit expansion and its tampering with the free-market rate of interest, Rothbardexplains. Projects thought to be profitable turn out not to match consumer demands. Thus, we see firms slashing prices to save themselves. The cure is not deficit spending, but to let the free market breathe, to make most efficient use of the existing stock of capital.
Since an inflation-driven economy benefits debtors at the expense of creditors, but debtors will sleep better knowing Bernanke and his subsequent replacements are certified fiat-money inflationists making sure It never, ever happens here. For details,see the BLS inflation calculator.
Conclusion
Because deflation is considered a monetary failure, we get perpetual inflation instead, which is just what a belligerent government needs. Deflation in an economy using sound money is a natural result of competition and improved methods of production. The latter part of the 19th century, even witha government-controlled gold standard, blossomed inblessed deflation.
While no era of US history was free of conflicts, the period following Reconstructionwhen the income tax and the Fed were yet to intrude on our lives, thus limiting government revenuewas one of the most peaceful ever. We should never feed an institution that thrives on war. End the Fed. End the income tax. Starve the beast.
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