This is the first of a two part article on the state of American life in the 21st century. It is the prologue for the second part which will be next week’s article.
Instead of the comforting lies espoused by elected officials and propagated by the sycophants in the main stream media, this article explores the uncomfortable truths too many refuse to discuss or even comprehend. Sadly, but unsurprisingly, Americans are deceived and manipulated, even lied to outright, by the very people that are supposed to represent them. Nearly every elected official offer scapegoats and straw man arguments to deceive and manipulate the very citizens they were elected to represent.
These people are not statesmen nor do they qualify as leaders. The statesmen and leaders of yesteryear have been supplanted by ideologues well-versed in the use of sophistry.
If we are the sole and only rightful owners of our lives and our bodies, then we have an individual responsibility to preserve our own lives. We preserve our lives through the use of our physical and intellectual abilities. In others words we produce. In the simplest sense each person would produce the basic necessities to sustain life; food, shelter, and clothing. Beyond the basic necessities people produce goods or services desired by others in society. Perhaps a blacksmith created tools and wares which were desirable by others. The blacksmith exchanged his goods with the goods of a tanner that created boots, belts, saddles and other leather products.
The exchange of goods and services was done directly (barter) or indirectly through a medium of exchange such as gold or silver to the mutual benefit of both parties. This is the essence of free markets. Moreover, it is a natural extension of personal and economic liberty.
Today, most people do not produce any basic necessities. Instead people choose to produce other goods and services desired by society. In return people are compensated with currency (money) which they use in the free markets to exchange for other goods and services. Typically, basic necessities are procured before all other wants and desires are met.
Imagine a society that functions purely on barter. A farmer grows crops that his family consumes and he barters excess crops for other goods and services. The farmer may store crops to use months or years later for barter. Likewise, someone may clean houses and in return they receive real goods or services such as food or shoes, or their automobile is repaired in exchange for cleaning services.
What happens if the farmer’s crop is destroyed, stolen, or confiscated? The farmer is unable to sustain his self or his family. What he produced by his own ability is no longer. This is true of anyone that produces a good or provides a service. If someone steals the farmer’s crop it is a criminal act.
Now, what if government comes along and takes a percentage of the farmer’s crop for their own purposes? First, the farmer’s ability to sustain his self and his family is diminished. Secondly, the farmer has fewer goods available to barter for other goods and services of he desires.
Instead of a barter system we use money to facilitate indirect exchange for goods and services. Goods and services are exchanged for money which is used to procure goods and services we desire. Money is what we have as a result of our work product. Money is the surrogate for the goods and services we produce and the medium to purchase things we need or desire.
Money, in and of itself, has absolutely no value. The only value money has is its ability to procure things of value. In the case of the farmer he has a real good – food. In the case of the shoemaker he has a real good – a shoe. When you have money it is worthless unless you can use it to buy things of value.
Money also serves another purpose. Money serves as a store of wealth or purchasing power. In society there are three groups of people; net producers (savers), net consumers (debtors), and net zero (one that consumes everything they produce, but doesn’t take on debt). Net producers have excess money which is typically saved through banks or investments. This is no different than someone under a barter system with excess goods that are stored “saved” for future exchanges. Money functions in the same manner. It is saved and can be used at a later time to purchase things of value.
The one key difference between money and real goods and services is the former is controlled by a central bank and can be “printed” into existence. Whereas the later comes into existence by producing something that society wants. Real goods and services cannot come into existence at the whim of a central banker.
Therefore, money as we know it is nothing more than an abstract view of real goods and services in the world. Numerous problems arise due to monetary policy by central bankers. First, bankers can print money at will. To some this may not appear problematic. But if real goods and services remain constant and the money supply increases then prices for goods and services rise. More money chasing the same quantity of goods and services results in higher prices for consumers. You can purchase less real goods and services with the dollar in your pocket. If it now costs you two dollars for a loaf of bread when it used to cost one dollar, your purchasing power is diminished. This is also true of those net consumers that receive money (property of a producer) via government programs such as public housing or public welfare (i.e. food stamps). The purchasing power of food stamps is impacted by inflation as well. If prices rise the purchasing power of food stamps is decreased. Even the net consumers are impacted by the central planner’s monetary policy.
Simply stated, inflation makes people poorer. Inflation is taxation without legislation. Systematically, government can reduce wealth, savings, and purchasing power by simply increasing the money supply. Printing money create a temporary illusion of wealth. It cannot and does not create real goods and services and only real goods and services creates wealth and prosperity.
Deficit spending occurs when government expenses exceeds tax revenues. Government borrows the difference. Government has accumulated nearly sixteen trillion dollars of debt. This debt is backed by the U.S. government which means it is backed by the people. Which means it is backed by our labor. Which means it is backed by our property, our money.
Moreover, the government debt is denominated in the very same currency used to represent your work effort and your savings. Your money — what you use to procure real goods and services and what you save as your store of purchasing power — is completely under the control of a few well-educated, egotistical, technocrats in Washington D.C.
Government bureaucrats and elected officials offer scapegoats to cast blame on anyone but themselves. The rich don’t pay their fair share of taxes. Greedy corporations are pushing wages down. These are two of the more popular excuses used to influence thoughts and votes. Since both the rich and corporations are a very small minority and the remainder of society represents a substantial voting block elected officials pander to the majority at the expense of the minority.
In 2008, the top 3% of income taxes filed had an adjusted gross income above $200,000. That group paid 52% of all individual income taxes. Moreover, corporate taxes are merely an expense item just like any other expense. That expense is passed on to the consumer. To believe that corporations actually pay taxes is absurd. We as consumers of goods and services pay for corporate income taxes.
What isn’t discussed is the devastating effect monetary policy has on most Americans. From 1800 to 1913 (year the Federal Reserve started) a dollar increased its purchasing power. What you could buy for $1 in 1800 you could buy for 58 cents in 1913. Now, from 1913 to 2010 the purchasing power of a dollar has decreased significantly. What you could buy for $1 in 1913 would cost you $21.78 in 2010. Another way of stating this is what costs you $1 in 2010 would only cost you 5 cents in 1913.
Real wages in constant dollars (i.e. adjusted for inflation) decreased from 1961 to 2011. In 2011 constant dollars, 1961 wages averaged just over $49,000 per person and 2011 wages averaged just over $47,000. What cost you $1 in 1961 costs you $7.57 in 2011.
More importantly, people fail to understand that future tax revenue will be used for future expenses not to pay off past debt. The debt will be paid off by past earnings that were saved by the net producers in society. As a result of currency debasement inflation will erode, gradually, then suddenly, society’s savings and purchasing power. In this manner, government can pay off the debt, save the system, and destroy the currency and everything else along with it. Imagine those people that have worked their entire lives to save for their golden years and those that are currently working and trying to save, have everything destroyed, wiped out, eviscerated by decades of deficit spending and failed monetary policy.
The net effect of government intrusion into the banking system is that banks are now deemed too big to fail. In real terms it means banks privatize rewards and socialize risks. Moral hazard is shifted from the bank to the people. What follows are mindboggling explanations of how government acted to save the people by saving the banks. Out of the other side of their mouths blame is placed on the banks, evil corporations, or the rich when it is simply the failed fiscal and monetary policy of the United States destroying the very fabric that holds society together. The rich and corporations are sacrificed on the altar of rhetorical politics to avoid telling you the uncomfortable truth about the decline in real wages and purchasing power. Government circumvents their constitutional authority and violates private property rights, individual rights and liberties to simply preserve the Federal Reserve System and government itself. Ultimately we the people shoulder the burden to pay off government debts.
Instead of telling you uncomfortable truths politicians tell you comforting lies. Government engages in extend and pretend nonsense that does nothing but exacerbate an untenable situation. Instead of focusing on failed fiscal and monetary policy politicians distract a complacent populace with scapegoats and straw man arguments.
We have a front row seat to the modern day equivalent of Rome’s bread and circuses.