During the Great War (a.k.a., World War I), both sides
insisted on running head-on against the other, despite the fact that military
technology had advanced far beyond tactics.
Nevertheless, the leaders kept on using tactics that were at least half
a century out of date. Yards of
territory were gained or lost at the cost of hundreds of thousands of lives.
The current economic situation bears a strong resemblance to
that ultimately pointless conflict. It is
due (in our opinion) to the fact that all the experts today, the Ph.D.
economists and politicians, are in substantial agreement. They all insist on using a financial
technology and an economic assumption that was proven fallacious more than
three centuries ago.
Frankly, using the Federal Reserve the way Bernanke is using
it is analogous to using a machine gun like a bow and arrow. We doubt very much if Federal Reserve
Chairman Benjamin Bernanke — or any of the dime-a-dozen economists on tap — can
even define a bank of issue or central bank properly. The economic and political guildsmen continue
to insist, in the face of all evidence to the contrary, that all banks are
banks of deposit, and that only government debt (or, for the pseudo reactionary
elements, gold and silver) can back the currency.
The result is that government power has increased
exponentially throughout the world. This
is precisely as Harold G. Moulton predicted in 1943 when the Keynesian “new
philosophy of public debt” began dictating global monetary and fiscal policy:
“It
will be necessary to make a choice. With
unlimited debt expansion we cannot prevent inflation without the use of
totalitarian methods of control. No
compromise or half-way measures can adjust the difficulties. The choice is between regimentation and
inflation.” (Harold G. Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution,
1943.)
The problem is that you can’t keep the lid on forever. At some point a currency backed only by
government promises starts to collapse when people realize the government can’t
keep its promise. That is what happened
in Germany in the early 1920s, when the Reichsmark that in 1914 was 4.2 to the
U.S. dollar reached an official exchange rate of 4.2 trillion to the dollar,
and the black market rate was anywhere from 12 trillion on up. It’s what’s happening in Greece right
now. It’s what will be happening here, possibly
even before the end of 2013 — unless we get busy and push for the passage of a
Capital Homestead Act.
#30#