A reader sends along the following entertaining screed

Money is a promise of value given in exchange for value received. Like it says on the dollar bill: “This note is legal tender for all debts, public and private.” The owners of my corner gas station take my $10 because they believe the government’s promise that they can use the $10 for to acquire goods and services they want. And, of course, because they are required to accept my $10 by law.

Magic is not a basis for public policy. Value does not appear merely because we wish it to. Faith in a promise does not occur merely because we wish it to. Money does not have value simply because we wish it to. Reality doesn’t change just because we invest leaders with magical powers.

So money can be deprived of value by two events — regime instability and inflation, both of which call the issuing authority’s ability to guarantee promises about money’s future into question. “This note is legal tender for all debts, public and private.” Regime instability thwarts that promise by unpredictably altering the issuing authority’s guarantee: By the time the gas station owners spend my $10, they’re deprived of $3.00 that they now have to spend on employee dental hygiene training requried by the Department of Bullshit’s Safe Teeth for Kids Program. Inflation thwarts that promise by threatening the value being guaranteed: The regime is still the same, but the $10 I paid the gas station owners this morning is worth $1.00 by noon.

Governments who promise to spend more money than they have, have three options. First, they can renege on their promises. Second, they can raise taxes and suck up more money from the larger economy and use it to pay the promised amounts. Either solution is regime instability. I may have planned on retiring, but I can’t because my government-promised retirement fund has been abolished. I may have planned on sending my young son to college, but I can’t because the government is now taking another third of my income during the next ten years. What the government gives, it can take away — my retirement program may be restored, in whole or in part, and my taxes may raise or lower, in whole or in part, at any time. (This is why government bailouts haven’t done anything to revive the economy — businessmen can’t plan, because the bailouts hid the real effect of the financial crisis and they don’t know what Grand New Scheme to Screw With Your Investments may be just around the corner).

The third option is to inflate the money supply. More money = more ability to pay debts or even contract new debt. This is the most politically-attractive solution and will always be used before the state’s other options. Of course it also means that prices go up and wages go down, but that doesn’t bother anyone in power. Inflation benefits the early recipients of money, the elites who fund the Party, who get to use the new money before everyone else realizes that a dollar isn’t a dollar anymore. I may know my $10 is actually worth $8.85, but as long as the gas station owners don’t know it, I’m okey-dokey. Eventually, after the We-Brake-for-Politicians fat cats have bailed themselves out of their bad investments, even America’s peons will get the idea as prices rise but purchasing-power doesn’t. Inflating the money supply is like treating a severed artery with blood infusions, pretty soon you run out of blood, and pretty soon people run out of faith in the government’s promise to guarantee the value of a dollar. (This is why government bailouts haven’t done anything to lower unemployment — businessmen can’t plan, because the government’s willingness to inflate the money supply has effectively roundfiled projections of costs, profits, and the economic condition of consumers).

America’s peons are stupid, but we’re not that stupid. If there’s enough inflation and regime instability, we’ll stop behaving as though everything is fine. We’ll stop spending and borrowing. We’ll start hoarding. (Really dumb peons will actually save their money). The entire network of consumer debt holding the economy together will be threatened and, with it, the employment of large segments of the population. GM will lay off thousands because nobody will borrow $50,000 for a new car if they think their grocery or electric bill will go from $200 a month to $350 a month due to inflation. It’s a perfect storm — those thousands laid off demand more government payouts, increasing the need to inflate the money supply, and the tens of thousands of jobs depending on those thousands also start melting away, and so on.

The state has only one answer to this problem, because it’s the answer that everyone in politics longs for — total power. The government will institute economic planning and regulation to guarantee incomes, production, purchasing and costs, effectively ordering people sitting in a burning house to keep watching television and not mind the smoke. (If you don’t believe it, look up the National Recovery Act and ignore the accompanying propaganda about how big business was against it).

Regime instability is met with more regime instability. The government can destroy your business by changing a few sentences in the Code of Federal Regulations, requiring you to compete on price but pay mandated costs. And economic controls break down the minute they come into contact with economic activity that isn’t controlled — I may have to pay my employees $10 an hour and charge $20 for a widget, but that won’t help if my supplier can pay his employees $5 an hour and charge $40 for the materials. So the realm of state control widens, eventually embracing everything and everyone.

Informers, secret police, and gulags are absolutely necessary at this point, because the whited sepulcher of wage and price controls is threatened by any uncontrolled economic activity. I may have to pay my employees $10 an hour and charge $30 for repairing a car, but that won’t help if Joe can give Ted a case of beer to fix Joe’s car on the side. Somebody has to do something about Joe and Ted — and that will be an undercover operation mounted by an ICE team, so that neither Joe or Ted can really be sure if this is a business deal or a one-way ticket to a bad place. And a Bad Place it must be — punishments for black-marketeering have to be incredibly severe, otherwise they’ll just get factored into the cost of black-market business.

We won’t call it black-marketeering, of course. That’s too noir and trendy. We’ll call it economic terrorism. We’ll even have corporate-controlled news hacks inventing stories linking Joe’s and Ted’s car repair to the shadowy world of Al Qaeda. Or Eurasia. Or Eastasia. It really doesn’t matter at this point. The point will be that economic terrorism threatens the well-being of every American and the security of our children. If you want your car repaired on the side, you’d better be ready to be treated the way we now treat drug-dealers and child pornographers. (Tip to shoppers: If you’re looking for fresh produce, don’t use the telephone).

Totally-controlled economies lack a certain, shall we say, vitality. When shoe companies have their wages and prices set by law, and their market shares carefully-adjusted and guaranteed by ICE agents with submachine guns, shoes tend to become less shoe-like. Corrupt and defeatist shoe-plant managers doing perp-walks on the evening news will help, of course, just like it did in Bulgaria. But isn’t the sacrifice worth it? I mean, so you’re neighbor’s keeping an eye on your back yard as part of the Department of Agriculture’s “See Something, Call SWAT” program. So you have to stand in line for a few hours to buy more purple socks. So what. Don’t you want to show the terrorists that they haven’t won? These colors don’t run! (The socks are another matter).

When the government gets the entire country on board, there’ll be one little problem. Truth is not one thing in a small matter and another thing in a large matter. Controlled economies break down when they interact with uncontrolled economies. Our controlled economy will break down when it interacts with other countries’ uncontrolled (or differently-controlled) economies. We could climb down from the totalitarian impoverished mess we’ve created. But war is the easier answer. War not only acquires resources and destroys economic competitors, but it also reinforces state control.

In this election, only one party wants to bring about this future history by generating more unfunded debt to finance more regime instability. That party sells its program to some voters by promising to tax the rich, as though the rich had anywhere near the amount of assets needed to fund the federal government. The party also promises to slash taxes on the rich, as though the rich could generate anywhere near the amount of income needed to fund the federal government. Meanwhile, to paraphrase The Yardbirds, “The train keeps a-rollin all night long.”

I’m voting for the other guy.

I’m too much of an econ imbecile to comment.  But I thought some of you guys might enjoy arguing about this.

  • Scott W.

    The example of Bulgarian shoes sounds like a dead-ringer for P.J. O’Rourke.

  • Jamie R

    A promise isn’t magic. I don’t think your reader understands how money, or in fact anything, works.

    Unless your reader is a subsistence farmer (doubtful, since he reads your blog), his participation in the economy is based on sets of promises. This is as true under fiat currency as it would be under the gold standard. This is true even if the only currency is the actual metal itself. When the gas station takes a ten dollar silver coin from your reader, the gas station is acting on faith that it’s actually ten dollars worth of silver and that that coin will be usable by the gas station. Your reader is acting on faith that the gas hasn’t been debased. The value of money and the value of gas are going to fluctuate constantly relative to each other. This is true for any other commodity or service.

    So it simply doesn’t make sense to say that my ten dollars is worth $8.85 now. Your ten dollars is worth ten dollars. If the price of something else goes up, the value of the dollar goes down. Gas can go up because it becomes more expensive to do business, or because there is less gas, or because there are more dollars.

    Also, cutting taxes and cutting spending by a smaller amount introduces more debt, governmental instability, and unpredictability. If millions of people don’t know if they can buy food, it introduces uncertainty in the economy, for both the poor and for grocers. If you’re committed to lowering taxes without cutting spending by a larger amount than the tax cut (and assuming that cutting medicare in the future will happen), you’re introducing the same sort of governmental instability.

    • Timbot2000

      Good article, solid grasp of monetary theory in particular. Must have read his Austrians understanding the role of time-sensitivity and marginal utility like he does. That being said. Both parties support the massive corporatist/statist enterprise to the hilt! The country is heading off a cliff, but one party will take us over at 80mph, while the other insists we must go over at 50mph.

      • SpasticHedgehog

        “The country is heading off a cliff, but one party will take us over at 80mph, while the other insists we must go over at 50mph.”

        This pretty much sums up how I feel right now. Timbot2000 I’m writing you in for President and Congress.

      • http://funkydung.com/ Eric Williams

        Amen! I was cheering on the author until last paragraph. So frustratingly anti-climactic. :(

    • Timbot2000

      OK, now the fun starts:
      [A promise isn’t magic. I don’t think your reader understands how money, or in fact anything, works.]
      Stay classy dude! Love the snark. Are you still in college? If you are (or not), go online and look up the psychological concept of “magical thinking”. This is largely what the author so elegantly was trying to convey. This type of thinking largely underpins all of modern monetary economics (especially the brain-dead bong hit that is MMT), wherein the scarcity of the underlying specie (today digital zeros) is entirely arbitrary. Leading not only to distortions in economic calculation, but pernicious schools of thought (MMT).

      [Unless your reader is a subsistence farmer (doubtful, since he reads your blog), his participation in the economy is based on sets of promises. This is as true under fiat currency as it would be under the gold standard. ]
      No, its especially true under a fiat currency. It is only true to a point under hard money, which is moderated by physics, chemistry, and geology. To conflate natural scarcity with artificial scarcity is a large blunder.
      [This is true even if the only currency is the actual metal itself. When the gas station takes a ten dollar silver coin from your reader, the gas station is acting on faith that it’s actually ten dollars worth of silver and that that coin will be usable by the gas station. ]
      He probably will, but if he had any doubts a cheap gravimetic device (such as Coinstar) would quickly provide the necessary feedback, maybe even at the counter.
      [Your reader is acting on faith that the gas hasn’t been debased. The value of money and the value of gas are going to fluctuate constantly relative to each other. This is true for any other commodity or service.]
      Wow! just…..wow! You have just equated market exchange with central planning in the most elegant and efficient stroke I have ever seen. Good Show! One little problem. When market actors debase their products or services, they must bear the resultant actions of their customers, who might switch to other, higher quality suppliers. Good look doing that on a monopoly legal tender currency.
      [So it simply doesn’t make sense to say that my ten dollars is worth $8.85 now. ]
      Its called Purchasing Power Parity. A common metric in economics. Here’s the wiki if you never heard of it before
      http://en.wikipedia.org/wiki/Purchasing_power
      [Your ten dollars is worth ten dollars.]
      Wrong. That is the nominal value. It is “worth” what you get in exchange for it.
      [ If the price of something else goes up, the value of the dollar goes down. Gas can go up because it becomes more expensive to do business, or because there is less gas, or because there are more dollars.]
      No, if the price of something goes up, it goes up. Consumers in a normal economy will reduce their consumption of the more expensive good, or replace it, to whatever degree they can. Inflation, which is the increase in the money supply (check your dictionary), is not the same thing as price increases, which can happen in discrete sectors independently of inflation. Inflation has an effect more pernicious than does a simple price increase because it increases time preference, discourages savings, and destroys capital in a way that simple supply/demand price equilibrium changes do not.

      • Jamie R

        I’m aware of the concept of magical thinking. Equating an economy that runs on promises with magical thinking is what the reader did here, which is stupid. The economy runs on promises. The economy always ran on promises. This has never not been true. Unless the reader wants to reduce our economy to subsistence farming, with maybe a small amount of bartering, the economy will continue to run on promises.

        I’m not equating central planning to anything (well, I am, but not at that point of my argument). My point is that prices fluctuate. Even with silver coins, the supply of coins on the market will fluctuate, which will cause prices to fluctuate. If you’re whining about your money not being worth the exact same amount in the afternoon as it was in the morning, you’re not being very smart. Your house, your car, the gas in your car, etc. are all worth different amounts at different times.

        I’m not saying that inflation isn’t a problem. However, I am saying that connecting inflation to the fact that the economy runs on promises is dumb. Inflation happens because of bad monetary policy, not because of the existence of monetary policy. The economy can’t not run on promises. There isn’t an evil cabal trying to create uncertainty and instability. Voting for the other guy won’t have any positive effect on uncertainty and instability.

        • Ted Seeber

          The difference is that the promises, when the economy was more distributed and small, were promises between friends. Now they are promises between anonymous groups of people.

          It may just be my autistic paranoia, but I have to think that you are MUCH more likely to try to cheat somebody you don’t know, then somebody you’re going to see in Mass next week.

          • Jamie R

            It’s true that the economy was once more distributed. It’s not true that the promises that moved the economy were restricted to people who went to the same Church. There was a large amount of long-distance and international trade. Promises were enforced across generations. Do you think you can make a pilgrimage from England to Santiago or Jerusalem while only making promises with people you’re going to see in Mass next week?

        • Nonymous

          “Equating an economy that runs on promises with magical thinking is what the reader did here, which is stupid. The economy runs on promises.” I’m not sure that’s what the reader did there. He or she said, ” The owners of my corner gas station take my $10 because they believe the government’s promise that they can use the $10 for to acquire goods and services they want.” How is that not relying on promises? The reader didn’t say that was bad, just that that’s how economies work.

          As I read it, the piece said there’s a difference between magical thinking and the kind of reliable promises that can support an economy: “Magic is not a basis for public policy. . . . Faith in a promise does not occur merely because we wish it to.” I think that’s pretty clear that faith in promises is needed for economic activity, but can’t be wished or legislated into existence.

          “If you’re whining about your money not being worth the exact same amount in the afternoon as it was in the morning, you’re not being very smart.” That depends. If you’re in Weimar Germany you’re probably on to something. “Your house, your car, the gas in your car, etc. are all worth different amounts at different times.” True, of course, But if your income and assets are consistently worth less, that’s not price fluctuation.

          “I am saying that connecting inflation to the fact that the economy runs on promises is dumb. Inflation happens because of bad monetary policy, not because of the existence of monetary policy” Again, I don’t think that’s what the reader was saying. I think they were saying that economies run on reliable promises, and that bad monetary policy (that relies on magical thinking) makes promises unreliable or irrelevant, making the economy unworkable.

          “There isn’t an evil cabal trying to create uncertainty and instability.” The way I read it, the scary thing was that there didn’t have to be. “Voting for the other guy won’t have any positive effect on uncertainty and instability.” I’m not sure who the reader said “the other guy” was, except that he wasn’t Barack Obama or Mitt Romney.

      • Jamie R

        Also, it’s not a monopoly legal tender currency. You can leave. You can buy gold and silver. You can turn your fiat currency in to things with a more stable value, like oil, diamonds, or land. You can barter. If you don’t denominate your transactions in dollars, no one can force you to accept a dollar (generally). If you really don’t trust the dollar, nothing is stopping you from putting your resources elsewhere.

        • Ted Seeber

          All of that is against the current Supreme Court opinion of the meaning of Article I Section 10 of the United States Constitution, which basically gives Congress (and their current representative, the FED) a monopoly on the money supply.

          • Jamie R

            So, what keeps you from only bartering? You’ll have to pay your taxes in dollars, but since the dollar is constantly losing purchasing power, denominating all your transactions in something else will make doing your taxes harder, but you should be able to sell your ted bucks or bullion or animal pelts or what have you and still come out ahead.

  • Mark S (not for Shea)

    This Presidential election is a choice between Moloch or Mammon? Sauron or Saruman? Yosemite Sam or Wile E. Coyote? Pick your metaphor and pick your poison.

    Maybe you can make the case that Poison A isn’t quite as bad as Poison B. Just please don’t try to sell me either poison as palatable wine.

    Our nation is in a mess. Our culture is in an even worse mess. But if anyone thinks a vote for either of the major parties is going to help matters, then I have a bridge to sell you.

    • Kristen inDallas

      “They were both poisoned. But I spent the last few years building up an immunity to iocane powder”

      • Zac

        That was awesome. How can I award points?

  • tmrbeste

    Not that I am not an econ idiot, either, but idiocy about the subject never stopped me from a good argument. I was with the author and cheering on the premise until the end, until that very last line, when they lost me, “The party also promises to slash taxes on the rich, as though the rich could generate anywhere near the amount of income needed to fund the federal government. ” Now, I am unclear exactly which party they are talking about, so I am disappointed I have nothing to argue about. darnnit. I was looking forward to a nice argument today. What about that Biden GAffe? anyone?

  • thomas tucker

    Who is the other guy?

  • Irenist

    This tale of apocalyptic inflation is completely irrelevant to present conditions. The feds don’t need to either inflate or tax to spend more: there is a flight to quality in the sovereign debt markets, given the fiasco that is eurozone monetary policy, so investors are *paying* Treasury to be allowed to loan Uncle Sam money. This is true, important, and far too-little discussed: it renders many of our fiscal hobbyhorses moot.

    I’ll quote smug secular liberal Matthew Yglesias here, since he captures the situation nicely:
    “There are three ways a government can finance current expenditures. One is to conscript resources from the public via taxation. The second is to borrow money on financial markets. The third is to print money. Regardless of one’s views about what the appropriate level of expenditure is, it’s desirable to finance that expenditure in the way that imposes the least cost on society.

    Under normal circumstances, taxation is a relatively low-cost means of financing expenditure. Printing money would generate inflation and possibly generate expectations of accelerating inflation wreaking havoc with citizens’ plans, provoking capital flight from the country, and generally making everyone miserable. Borrowing money on a large scale, by contrast, tends to raise interest rates and “crowd out” private investment unless the central bank is willing to engage in inflationary low interest rate policies. But today the real yield on government debt is exceptionally low. As of yesterday, the government could borrow for free on a 20-year time horizon or borrow at a negative rate on a 10-year time horizon.”
    Source: http://www.slate.com/blogs/moneybox/2012/07/13/taxes_are_costly_when_money_is_free.html

    So the government, Yglesias goes on to say, should neither raise taxes *or* inflate the money supply in the near term. It should instead “borrow,” if being paid to take money even counts as borrowing. Now is the time for the government to fix every highway and bridge in the country, and do whatever else would improve our long term capital stock. There are myriads of idled workers, and we can borrow at *negative* rates.

    • godescalc

      How on earth does one get negative yields? Obviously it’s possible, given that it’s actually happening, but why do people choose that over putting their money somewhere they’ll get a positive return on investment?

      • Irenist

        I think when you have billions to invest, it’s sort of like having a stolen masterpiece to sell: there aren’t that many takers who can/will handle what you have. Better a safe parking spot for at negative rates than positive rates with, e.g., Europe.

    • http://ohnimus.wordpress.com Christian Ohnimus

      If this is true then why is it that the Federal Reserve’s purchasing of national debt is at an all-time high?

      • http://ohnimus.wordpress.com Christian Ohnimus

        (CNSNews.com) – Since President Barack Obama was inaugurated in January 2009, the Federal Reserve’s holdings of U.S. government debt have quintupled, according to the Fed’s official monthly balance sheet.

        On Jan. 28, 2009, a week after Obama’s nomination, the Fed owned $302 billion in U.S. Treasury securities. On April 25, 2012, the latest date reported, the Fed owned five and a half time that much in U.S. Treasury securities–$1.668 trillion.
        http://cnsnews.com/news/article/top-customer-under-obama-fed-s-holdings-us-debt-have-jumped-452

        Its my understanding that the Federal Reserve’s role here is to buy US debt when no one else will and, if Fed purchasing skyrockets like this it means that market demand to buy our debt is decreasing. Maybe that’s changed since April with Europe’s unstable economic position but I don’t find that heartening even if true. Instability does not lend itself to economic prosperity – quite the opposite – and Europe’s loss is not our gain. It may mean a short-term increase in demand for US debt but it also means a lot more negative consequences for the US economy than positive ones. Please let me know if I’ve misunderstood anything here.

      • Richard Bell

        The reason that the Fed purchases of national debt are way up, even with the flight of borrowers to quality, is simply that the US federal government is is overspending to the point that foreign sovereign wealth funds do not have the cash to float US debt issues.

        • http://ohnimus.wordpress.com Christian Ohnimus

          Yes, I did not articulate that clearly in my comments but the problem with our debt situation is that we are spending to such a ridiculous degree that, regardless of any increased “demand” for US debt our debt is ballooning so fast that the market can’t even keep up. The demand does not meet the supply so the Fed is buying unprecedented levels of debt and the result is more of the very inflation that politicians are supposedly trying to avoid (or so I’m told). Additions to the money supply line the bankers’ pockets but the purchasing power of the dollar is reduced, everything costs more and we’re all left worse off. Overspending = money problems. Who woulda thunk.

  • http://www.sff.net/people/john-c-wright/ John C Wright

    I do know something about economics, indeed, a great deal. Your commenter is spot on with his description of the causes and effect of inflation and hyperinflation. A return to a hard currency, a gold standard, would be a useful first step in averting the coming crisis. That is, if the step had been taken in the Roosevelt Administration. It is far, far too late now. The voters are addicted to the Welfare State, and have been since the days of Johnson.

    • Irenist

      Honored to be in the same combox with you, Mr. Wright. Your novels are a delight.

      I’ve always found Milton Friedman’s argument that the gold standard was a cause of the Great Depression to be pretty persuasive. It seems to me that fiat money could, in principle, coexist with a night watchman state, if that’s your preference, and that it has proven its value in moderating economic cycles. I know many Austrian economists disagree, but their arguments don’t seem persuasive to me. Acknowledging that this is not a matter for demonstration in a combox, is there a source in favor of the gold standard that you’ve found particularly persuasive?

      Many thanks.

      • Richard Bell

        The Great Depression may, or may not, have been caused by the Gold Standard, but what prolonged the misery, until WWII was the constant, counter-productive meddling with the economy. WWII ended the Great depression by forcing Roosevelt to stop interfering and let things run their course.

        The beauty of a Gold Standard over a fiat currency is that the economic shenanigans that enable a nation to forever put off paying its bills is eliminated– if the Federal Reserve does not have the gold, it cannot print the money, so only the debt that can be floated with borrowed gold can fund deficits.

        However, if a nation just decides not to spend more than it collects in revenue, it is not necessary to move from a fiat to a gold standard.

        Unfortunately, returning to a Gold Standard is difficult as gold no longer qualifies. A suitable material for a “Gold Standard” has to be both valuable, durable, and useless. Its relatively newfound applications in consumer electronics almost disqualifies gold, but the demise of photographic film, in the face of digital cameras, raises the possibility of a Silver Standard.

    • http://ohnimus.wordpress.com Christian Ohnimus

      You’re telling me. 108 million Americans are on welfare: that’s over one-third of the population and that doesn’t include federal programs Social Security or Medicare. This isn’t about providing a safety net for the needy this is unabashedly bribing Americans with their own money. Everything’s fine; nothing to see here. Take your government-issued economic tranquilizer and go back to sleep. http://ohnimus.wordpress.com/2012/08/18/over-100-million-americans-are-on-welfare/

  • portonova

    “I’m too much of an econ imbecile to comment”
    I’d say calling it a “screed” in the title was a comment.

    • Mark Shea

      ?

      • Irenist

        He’s taking screed as, roughly, “the shouting of a crank” or something like that. I think you meant it more like “diatribe” or “jeremiad.”

        • Mark Shea

          Yep. I rather liked it and the author is a good friend of mine.

      • http://www.likelierthings.com Jon W

        ?

        How come you get one-character replies? So not fair.

        • Mark Shea

          It’s to teach you patience in suffering.

  • portonova

    Right, a diatribe; a bitter and abusive speech or piece of writing. I assumed a negative
    connotation. If you weren’t trying to be negative, then I stand corrected.

  • Confederate Papist

    Bottom line: we’re screwed either way. Clouds are rolling in and we are perfectly comfortable staying in either a straw house or a twig house, both using sand as foundation.

    • Irenist

      But, but, the twig house is slightly sturdier! Twig 2012!

  • http://ohnimus.wordpress.com Christian Ohnimus

    Spot on except for one thing: both parties are ruled by corporate fascist principles and thus regardless of which one holds a majority or the presidency the result will be the same – unless you prefer one flavor of corporate fascism over another, my palate finds them all distasteful. This is why I’ll end up voting for some quixotic, doomed-to-lose candidate . . . again.

    Maybe eventually the Tea Party/libertarian/pro-life movements will influence the Republican party enough that it will someday be salvageable. However, presently all evidence seem to point to the opposite: that the Republican party is systematically commandeering these movements and corrupting them to knuckle under and accept its corporate fascist rule.

    • Blog Goliard

      Christian, there seems to be a valid point buried there somewhere…but the more you repeat the word “fascist”, the more likely you are to be dismissed as a crank.

      Not all people who use the word “fascist” don’t know what they are talking about…but a very large slice of people who don’t know what they’re talking about use the word “fascist” (even when they don’t actually know what it means).

      • Ted Seeber

        I use Mussolini’s definition. And by that definition, it is quite accurate to say that both the Democrats and the Republicans in the 21st century United States are fascists.

      • http://austrolibertariancatholic.wordpress.com Martial Artist

        @Blog Goliard,

        Your comment is correct insofar as it goes. But both major parties in the U.S. legislate as corporate socialists. Historically, the modern archetype of corporate socialism, which I freely grant took it to greater extremes than either GOP or Democratic legislatures in the U.S., was an originally obscure Italian political party headed by a chap named Benito Mussolini. His party took for its symbol a bundle of wooden sticks surrounding an ax in the middle, a Roman symbol of authority carried by bodyguards (lictors) in public before consuls, praetors, dictators, Vestal Virgins, governors, and commanders of legions.

        The party took its name from that device, referring to itself as Fascisti, or, in English, Fascists. So, the fact that a large proportion of the present generation’s ignorance of language is not an excuse to abandon accurate descriptions, unless we wish to beggar our own language in order not to offend or confuse the ignorant.

        IMHO the designation seems apt, given the failure of both major U.S. parties to refrain from manipulating the economy, typically in order to benefit their favored corporate constituencies.

        Pax et bonum,
        Keith Töpfer

      • http://ohnimus.wordpress.com Christian Ohnimus

        I use the term “corporate fascist” over “corporatism” because most people don’t know what the latter means and with the former I can give a better quick and dirty identifier without having to go into a long-winded explanation of what corporatism is and why its so bad. Our culture shrinks at the use of words like “socialist”, “communist” and “fascist” in politics – I think mainly because they’re used almost exclusively as insults. I’m using here, however, as an identifier. Both parties operate on a paradigm consisting of Big Government and Big Business cooperating together to the benefit of fat cats in both sectors and to everyone else’s detriment. Its a twisted “greed is good” form of capitalism with collectivist traits and central planning mixed in. Historical examples that come closest to what we have here in the US were generally referred to as “fascism.”

        • Scott W.

          Fascism should be stricken even if accurate because it simply has no persuasive cache anymore. I forgot the poet who said “language is fossil poetry”, but facism is one of the deadest fossils in the record.

  • John

    One way of looking at macro-economics is to overlay on the modern map of the world a medieval, feudal template…. the medieval kings and nobles owned the land… serfs and townsfolk paid rents on that land AND taxes to boot (and tithes to monks and church).

    So while serf and peasant and later villagers had some civil rights (and church rights), there was definitely one set of rules for them vs. an entirely different code for nobility and kings.

    How are we in the West (or indeed rest of the world) any different? In Communist lands there are the nobles (communist party members) and everyone else….. in the Western socialist regimes, the elites own everything via banks and even those of us who own our homes, cars etc. free and clear still need to pay taxes on them (rents). There’s still the double standard. Let any of us forget to pay our taxes and see what happens. But let Timmy Geitner, chair of the NY Federal reserve forget to pay taxes…and it’s a joke. Let us “lose” someone’s money….hell to pay. But let John Corzine lose a billion….no one goes to jail. Obviously there is one set of laws and expectations for the modern nobility and an entirely different code for everyone else.

  • Ted Seeber

    I’m a Catholic distributist who has read my Austrians and isn’t scared by them.

    One good option to this is an *actual* experiment by an Austrian Economist back in the 1930s. The town of Worgl is where the experiment took place, at a time when massive inflation was destroying the value of the central currency. They issued a local currency which was designed to be hyperinflationary *but* which was explicit in fighting inflation. A 10%/month (120%/year!) tax on savings for the new currency was issued, and production of the currency was balanced to pay for government directly, but also to disappear after 10 months.

    A minor miracle took place. In the midst of the Great Depression, Worgl’s economy was transformed from a manufacturing base to a tourist base. A world class municipal ski resort was built, soaking up the extra labor, lowering the unemployment rate drastically. Savings was low to non-existent, which spurred demand, which in turn created a new local market and more opportunity.

    Of course, the central bank soon shut them down, because it couldn’t handle the uncontrolled local economy.

    This could never happen in the United States- Article I Section 10 of the US Constitution makes friedgeld illegal. But if our government falls, if we are truly headed into a new Dark Age, it occurs to me that Catholic Diocese and Monasteries, can preserve a form of capitalism using this method LOCALLY.

    • http://ohnimus.wordpress.com Christian Ohnimus

      too bad competing currencies are illegal. Monopolies are wrong and illegal – unless its the government then they’re just “watching out for us.” I think that, instead of forcing people to resort to the dollar, allowing people to use whatever they want in their transactions would go a long way in solving many of our money problems.

      • Ted Seeber

        There are a few local currencies that are legal, and I support them whenever possible. Beaverton Farmer’s Market, for instance, has an ATM that deals entirely in $5 wooden tokens. Many casinos operate on their own currency system as well, allowing you to pay for food, drinks, even your room with chips from the gaming tables.

        I disagree strongly with recent court cases against the Liberty Dollar, but I have to admit that they existed and that the judges have a different interpretation of Article I Section 10 than I do (and in fact, the current interpretation of Article I Sections 8 & 10 is so strong that it overrides the 10th Amendment in most cases, and Obama’s dictatorship is a result).

  • Alfredo Escalona

    Ted, I would be interested in reading further on this experiment.
    Any links/searchwords/recommendations?

    • Irenist

      Try http://en.wikipedia.org/wiki/Local_currency

      Here’s part of it:

      “The Wörgl experiment that was conducted from July 1932 to November 1933 is a classic example of the potential efficacy of local currencies. Wörgl, a small town in Austria with 4000 inhabitants, introduced a local scrip during the Great Depression. By 1932, unemployment in Wörgl had risen to 30%. The local government had amassed debts of 1.3 million Austrian schillings (AS) against cash reserves of 40,000 AS. Local construction and civic maintenance had come to a standstill. On the initiative of the town’s mayor, Michael Unterguggenberger, the local government printed 32,000 in labor certificates which carried a negative 1% monthly interest rate and could be converted into schillings at 98% of face value. An equivalent amount in schillings, deposited in the local bank as cover for the certificates in case of mass redemption, earned interest for the government. The certificates circulated so rapidly that only 12,000 were ever actually put into circulation. According to reports by the mayor and economists of the day who studied the experiment, the scrip was readily accepted by local merchants and the local population. It used the scrip to carry out 100,000 AS in public works projects involving construction and repair of roads, bridges, tanks, drainage systems, factories, and buildings. The scrip was also accepted as legal tender for payment of local taxes. In the one year the currency was in circulation, it circulated 13 times faster than the official shilling[citation needed] and served as a catalyst to the local economy. The heavy arrears in local tax collection declined dramatically. Local government revenue rose from 2,400 AS in 1931 to 20,400 in 1932. Unemployment was eliminated, while it remained very high throughout the rest of the country. No increase in prices was observed. Based on the dramatic success of the Wörgl experiment, several other communities introduced similar scrips.

      “In spite of the tangible benefits of the program, it met with stiff opposition from the regional socialist party and from the Austrian central bank, which opposed the local currency as an infringement on its powers over the currency. As a result, the program was suspended, unemployment rose, and the local economy soon degenerated to the level of other communities in the country.”

  • http://chicagoboyz.net TMLutas

    There is another solution to the economic conundrum we face, legalizing economic activity that is currently not permitted. If you are not currently issuing timber leases on federal lands, start issuing them and take your fees and taxes from this new economic activity.

    • Irenist

      “There is another solution to the economic conundrum we face, legalizing economic activity that is currently not permitted.”

      Cannabis taxes, anyone?

      • http://chicagoboyz.net TMLutas

        Sure, cannabis taxes, also selling off land to broaden the tax base for property tax, legalizing fish pedicures, jitney transportation, monks making caskets, and the whole CATO/Reason list of economic activity that is currently either formally illegal or under big pressure by the politicians to drive people engaging in these activities out of business.

        Obviously you want to keep murder for hire illegal and the “victimless crimes” category is a set of hard cases. But we have plenty of activity that we routinely ban or tie up in red tape that is simply not sinful and is only restricted because of corporatist payoffs by competitors who do it to thin out the competition.

        • http://arkanabar.blogspot.com Arkanabar

          Not merely corporate payoffs — there is also in this land of ours a rich, thick mulch of professional guilds which do their best to ensure that entry into their respective professions is (almost) prohibitively difficult. They demand a licensing board for their profession, promptly capture it, issue licenses to all current members of the professional association, and then use the licensing board to ensure that supply of professionals is outstripped by demand in order to drive up prices: http://arkanabar.blogspot.com/2009/10/meddling-with-prices-restricting-supply.html


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