The era of our founders and framers created a society formed upon principles never before instituted in the history of mankind. The era of our founding generation built a society based upon a bottom-up approach where the people are the sovereigns, the masters, and the government is the servant. A society that was void of monarchs, aristocracies, or theocracies ruling over the people.
Modern society is a mere shadow of the founding era principles that reigned throughout the Union 200 years ago. Modern society has degenerated into the Era of Debasement. Society has debased its most cherished belongings including the Constitution, the currency, free markets, and unalienable rights. The cumulative consequence is the debasement of society itself. Modern society no longer represents freedom and liberty, the Rule of Law, or the unalienable right to exercise autonomous judgment and self-direction to preserve and improve one’s life. Modern society more closely resembles feudal societies from Medieval Europe.
Constitutions matter, until they don’t. The former Soviet Union had a comprehension Constitution yet people suffered greatly under tyrannical regimes. A Constitution only matters if it is upheld and enforced. Those that swear an oath to uphold the Constitution must be held accountable every time they violate it. Unfortunately, the checks and balances placed in the Constitution to constrain federal usurpation of power are no longer enforced. Thomas Jefferson said, “The two enemies of the people are criminals and government, so let us tie the second down with the chains of the Constitution so the second will not become the legalized version of the first.” The chains have been replaced with wet noodles, and the latter have indeed become the criminals that are no longer prosecuted or held accountable.
For all intents and purposes the Constitutional is nothing more than mere parchment. Whenever a statutory law, regulation, or rule is enacted that is in conflict with the Constitution, the Constitution is supposed to win. The country has a miserable track record of enforcing the Constitution. When the Constitution is enforced the government is compelled to live under the Rule of Law. And, whenever the rule of law is violated we have lawlessness. Modern society no longer lives by the Rule of Law instead society is based on the Rule of Man. Consequently, the debasement of the Constitution results in the debasement of society.
Free markets are a natural extension of our unalienable right to contract and association. Markets are created by the desires of individuals to exchange goods and services. The adjective free denotes the voluntary act between two people to engage in an exchange for their mutual benefit. Goods are produced so long as there are members of society desiring those goods. On the whole society benefits as only those goods desired by society are produced. Moreover, scarce resources are properly allocated to goods people want. When people no longer desire a good that good is no longer produced and resources are reallocated accordingly.
Government intervention in free markets reduces or removes the concept of free from the market. In other words, government intervention retards the natural demand for goods. This happens in a variety of ways. First, through taxation government removes capital from the economy and redirects it to government centric preferences. Those preferences include paying for government itself. However, in modern society capital is redirected to specific industries, companies, constituencies (such as unions, non-profit groups, etc.). Government grants and subsidies also redirect capital according to government preferences.
Consequently, many industries are either supported or decimated by government. Bank bailouts and the bail out of General Motors are examples where an industry or a specific government was resuscitated because of the government. For a free market to function properly those providing goods and services must adapt to the demands of society.
Once the automobile was invented and society began to purchase automobiles instead of horse and buggies, the horse and buggy industry was severely reduced. Would it make sense for horse and buggy producers to continue creating these goods if there was no demand for them? Of course not! It is natural for goods to disappear from the free market if there is no demand for them.
However, if government props up a business or industry, it results in the misallocation of scarce resources and retards the normal function of a free market. If the government bailed out the horse and buggy business and continued to subsidize it to keep it afloat how does that reflect the desires of those in society? It does not! It reflects the desires of government.
Secondly, and perhaps more importantly, government ignores price signals when it interferes in free markets. Whenever government subsidies an industry or company, prices are manipulated. In a free market prices are free to rise or fall depending on supply and demand. An oversupply of a good may not clear at price x, but when the price falls to a point where there is demand for the product the goods will clear the market. For instance, 10,000 Ferrari’s are produced every year and generally sold for $300,000. However, if the supply was increased to 50,000 Ferrari’s and there wasn’t demand the Ferrari’s would go unsold. Would Ferrari continue to produce (supply) that number of cars if the demand were 1/5th of the total production? If they want to stay in business they would reduce supply. But how does the market clear the overproduction? The goods are cleared because prices fall to a point where additional demand is generated. Perhaps the price to clear 40,000 additional Ferrari’s falls to $100,000 each.
As long as government is involved in free markets, markets cannot be free. Markets are now government controlled markets and the market does not accommodate society’s demand for goods. If the government were to intervene and subsidize the Ferrari business so the 40,000 additional Ferraris produced sell near the original price of $300,000 the government has manipulated the market. Not only has government redirected scarce resources (capital, which it first has to take from the private sector) to subsidize Ferrari production, but it has artificially held prices higher. In other words, government intervention caused prices to remain higher than they would in a free market. So, society ends up paying higher prices and capital is wasted on a good that is not in demand by society.
Today’s markets are driven by growth in the global credit debt market. That is, GDP growth is inextricably tied to credit expansion. Credit expansion occurs through the fractional reserve banking system as well as monetary policy. Interest rates are simply the cost of money over time, and the Fed controls interest rates. The Fed holds interest rates near zero to spur consumer demand for more credit which in turn drives consumption. As borrowers use credit money to buy homes, automobiles, or other goods it is supposed to increase economic activity which the government measures through the GDP. It is not the production of real goods and services that drives GDP growth. Instead it is the cheap credit money being lent to borrowers that is driving demand. However, those debts must be repaid.
The following excerpt if from an article by Murray Rothbard on the price clearing mechanism.
“If production is too large in relation to consumption, then obviously this is a problem of what is now called “market failure,” a failure which must be compensated by the intervention of government. Intervention would have to take one or both of the following forms: reduce production, or artificially stimulate consumption… Stimulating consumer demand has long been the particularly favored program of interventionists. Generally, this is done by the government and its central bank inflating the money supply and/or by the government incurring heavy deficits, its spending passing for a surrogate consumption. Indeed, government deficits would seem to be ideal for the overproduction/underconsumptionists. For if the problem is too much production and/or too little consumer spending, then the solution is to stimulate a lot of unproductive consumption, and who is better at that than government, which by its very nature is unproductive and even counterproductive?”
We do not need government to have a free market economy. We need people that want to freely engage in economic transactions with one another. Government subsidized industries and monetary policy are interventionist actions meant to manipulate what otherwise should be a free market. In a free market, the people would determine the market bottoms and market tops. The people would create equilibrium between supply and demand. Only those goods and services desired by society would be produced; which implies an efficient allocation of scarce resources.
Government intervention in the economy debases free markets and society as a whole. Free markets are the ultimate expression of decentralization where power is dispersed to the lowest possible level; the individual.
A currency that is not backed by something of intrinsic value is a fiat currency. The Federal Reserve Note has not been backed by anything of value since Roosevelt removed the U.S. from the domestic gold standard in 1933. Internationally, the dollar served as a surrogate for gold until Nixon removed the U.S. from the international gold standard in 1971. Before 1971, foreign central banks could exchange Federal Reserve Notes for gold. In fact, the dollar was the only currency that could be exchanged for gold.
As I written many times, the value of the dollar today is worth 3 cents when compared to the value in 1913 when the Federal Reserve started. The government controls the printing of our currency. Which means the government can print money at will. There are numerous ways the Fed manipulates the currency. Deficits are funded by borrowing money. The Treasury sells securities through the Fed and as a result takes in money. The money is then used to fund deficits. Eventually, the securities come due and the securities are redeemed for their principle plus interest. More recently, the Fed has been buying securities outright. Meaning the Fed buys the security. It does this by printing money (electronic money). Whenever the Fed prints money the base money supply expands which fuels the fractional reserve banking scheme. When the money supply expands it results in more money chasing the same volume of goods and services; which results in higher prices. This phenomenon is called inflation.
What this means to the consumer is the purchasing power of a dollar is decreased. It also means any savings/wealth denominated in the currency is debased. Whenever taxes are increased people understand this means less purchasing power because the government takes more money from everyone. When the loss of purchasing power happens secretly and invisibly the people don’t understand why things cost more and why the items they bought a year ago cost more this year. Naturally, people want to blame someone for their misfortune. Politicians use this to their advantage. To blame the rich, the private sector, banks, the one percent, or whoever is the bogeyman today.
What most people fail to realize is how the currency impacts their very existence. In other words currency debasement is a debasement of your life. The scarcest resource a human being has is time. You have a limited quantity of time. You use your labor over a period of time as a means of preservation. Your labor is translated into currency which is then used to sustain life and to engage in free markets. In other words when you devalue the currency you devalue a person’s life and the time they’ve labored to receive the currency as compensation. An anonymous commenter wrote this on currency debasement:
“It’s a lot more than debasing trust, it’s debasing the most inherently limited commodity a human can have: time. Money is the translation of our labor over time into a common unit of exchange. When you destroy it, you are not just destroying paper or perception, you are devaluing the human beings themselves that rely upon it. There’s a word for when people are forced to labor and not compensated for it: slavery.”
Under chattel slavery people were property and whatever the slaves produced was taken by the slaveholder. To rephrase, the people labored to produce a good or service which another took from them. If a slave spent ten years working and the slaveholder takes all the slave produced what does the slave have to show for his labor? Nothing! Likewise, when you work for many years and the government confiscates your compensation (currency) through a process of inflation, the government has taken from you’re the very same thing the slaveholder has taken from the slave. Without question slavery is immoral. Just because the government passes laws – which are in conflict with the Constitution – and uses violence to ensure compliance doesn’t make the law moral. Legality doesn’t imply morality. And what is illegal to do privately is not magically legal because the government enacts a law that is used against the people to plunder their property.
If through the process of inflation the government can erode the value of your savings and wealth to by 50%, 80%, or 100% then the government has not only debased the currency, but government has debased your life and your life’s work. More importantly, your scarcest resource – time — has been confiscated. Consider this proposal. If given the choice to work for 40 years and save enough money to retire and live another twenty years would you spend a lifetime doing that if you knew the government would confiscate your life’s savings the day you retire? Would you work as hard? Should the government have the power to destroy your life’s savings? Was it worth your time to labor so hard for so long for that outcome?
We live in the Era of Debasement where nearly every aspect of daily life is controlled by an authoritarian government that uses institutionalized violence to enforce compliance. The Constitution is mere parchment. Free markets no longer exist. The currency continues to be debased. Our lives are of no consequence to the DC’vers.
The debasement of the Constitution leads to lawlessness. Lawlessness begets more lawlessness. The debasement of free markets leads to government mandates, dictates, rules, regulations, etc. to control the people and the markets according to government centric preferences; usually to meet some political or social outcome. In fact it has reached the point where the government now mandates that you engaged in economic transactions against your will. The currency is the lynchpin that ties our unalienable rights to life, liberty, and property together as currency is our compensation for our labor and, therefore, our rightful property.
Nobody, including the government, has an unalienable right to your labor. To believe someone else has an unalienable right to your labor is to condone slavery.
But, when government debases the currency, government debases our unalienable rights to life and liberty. Because property rights are the implementation of those unalienable rights, we are the rightful owners of our property. When government confiscates property through currency debasement (inflation) government believes it is the rightful owner of our property. The government acts as though it is the master and the people are the slaves. This is how society is transformed from liberty to tyranny.
These are the ingredients for the Debasement of Society.