What’s wrong with America? Many of us point to moral decline at every social level.
Almost half of American children are now born outside of wedlock. The black community has rotted from the inside out, destroyed by the Great Welfare Society. Sexual licentiousness is touted as personal liberty. True liberties are disappearing as quickly as the government can establish new regulations and departments to carry out the task.
Funded by our grandchildren’s sweat and blood the industrial-defense complex, the one Ike Eisenhower warned us about, has grown like a cancer. The US spends 40% of what the entire world spends militarily. War has become the center of American foreign policy. US troops are spread as broadly across the world as an empire can manage.
All of these problems have been enabled by easy money.
Imagine an America that could not borrow. An America with a military the fraction of its current size, and a government reduced to spending only what it could bring in with tax revenues. Yes, it’s imaginary.
Sound money is necessary for a sound nation.
In 1969 LBJ went to Congress to break the connection of the US dollar to gold. Then, in 1971, President Nixon ended the ability to exchange US dollars for gold. Their actions went directly against the US covenant with industrialized nations of the world in 1944 called the Brettonwood Agreement. In exchange for becoming the dominant currency of the world, the US promised to maintain convertibility of the US dollar with gold, upon demand.
Promises were meant to be broken, it seems. The entitlement and welfare programs championed by LBJ, as well as the war in Viet Nam, championed by LBJ and Nixon, broke the bank. The wise men in control decided that having paper money that could be printed, borrowed, and spent at will was the answer.
The years since 1971 have seen the devastating effects of living off a credit card. Like the government, so went the society. Frugality and savings were replaced with credit-funded lifestyles and debt. Between then and now personal and government debt is off the chart.
Economically, it’s called moving consumption forward in time. Obligating our future labor to pay for today’s expenses. Plus interest. The money we would have earned in the future we spend today. That leaves us with some of work in the future being done with no pay.
When credit is easy to come by, all is well. You keep moving forward tomorrow’s consumption. Having your cake and eating it today. Until. Until your job goes away. Until you make less than you used to. Until the cost of living goes up.
Worse, there’s something that happens to the soul of humans when there is no connection of income to expenditure. We start enjoying things we can’t afford. Borrowing no longer stings. Credit limits become a status symbol, rather than a sign of weakness. We lose the connection of our sweat and labor to the value of goods that we can acquire by it. We enjoy our something for nothing. Or so we pretend.
At the government level, the fast and easy flow of funny money corrupts politicians. They can promise voters unreasonable benefits. Rob from future generations to buy votes today. Crony’s have easy access to credit to find money to bribe and influence. Government grows without restraint.
The results have been predictable. Wars and welfare have increased. Materialism has grown like an out-of-control fungus among us. Our homes are bigger and require multiple garages to make room for our increasing number of automobiles, RV’s, boats, and motorcycles. Or just to make room for the increasing amount of trinkets we can no longer find room for in the house. And if that isn’t enough, there’s Derrel’s Mini Storage.
Why wait for that old appliance to break before buying a new one? Revolving charge accounts (monthly payments) and lay-away plans gave way to multiple credit cards in every wallet and purse. Then gold credit cards. Then platinum.
The stock market is now a grotesque distortion of capitalism. Once a rich man’s game, the government carefully lured the average man to Wall Street. Mutual funds, IRA’s and 401/403 plans sucked the common man’s money into promises to turn molehills into mountains. The only mountains are owned by the tycoons on Wall Street.
Most of us buy the lie that the fix can be had politically. Every election cycle we give in to Lucy’s invitation to take one more kick at that football. Oh, we know that she has never kept it in place and we have always ended up looking at the sky. But we want to believe that men have the power to run this world in a good way. Silly, aren’t we?
The only fix is going to be experienced economically. Bubbles grow until they pop. Our own debt. Our government’s debt.
It’s not hard to figure out the likely details. Imagine that you have no money in the bank and you have reached your credit limit. Your income is not growing and may be shrinking. Your expenses are increasing each year. Your application for a higher credit limit is declined.
Can you just print some more money? If you are the deadly duo of government and bank, you bet. Now carry that to the logical conclusion—eventually so much money that is only worth the paper it is printed on. That twenty-five cent cup of coffee will become two dollars. Whoops. That’s already happened.
Will there be deflation or inflation? Assuredly, both. And in whatever form they come in they will be at unpleasant levels. How would the price of your home going down by 50% affect you? How would the price of food and health care going up several times its current level play out in your life?
But we aren’t there yet. And until then it’s a joy ride and party like there’s no tomorrow. Daddy is going to have to take our T-Bird away before all this fun stops.