Let's Get Back to Basics

The United States’ economic system has unsustainable national deficits and monetary inflation.  The massive government bureaucracy is an unwieldy morass, spending is untethered to any consideration about debt repayment, and the American people keep conjuring up “rights,” for example, that man is born with a right for others to provide him with healthcare.

Sometimes when a system is unraveling it is best to get back to basics.  What are the fundamentals of the system?  What are the core assumptions?

It is really quite simple.  For an economic system to work, men’s lives must be sustained.  Contrary to Harry Truman‘s assertion about “freedom from want,” what actually drives men to sustain and add value to their lives and those around them is want:  Want of success, want of glory, want of luxury.  This is not evil in and of itself.  It is how these things are attained that can be determined as good or evil.

Taking what one did not earn and is able to work for is wrong.  This is no different than forcing one to labor on your behalf, whether personally or through the agency of government.

To dispel an illusion that is being created by the entitlement mentality, our heavy service sector worklives, massive make-work bureaucracy, ho-hum union jobs, and insane and unprecedented amounts of personal and government debt, economics is not just about outputs, it is about inputs.  There cannot be one without the other, because Nature does not automatically provide for our wants.  We must fulfill them ourselves.  If we do not fulfill them ourselves, someone else is doing it for us.

There is an ethical way to fulfill our own wants, and that is to work and to trade value for value.  Pushing a broom has value, but not as much value as performing neurosurgery.  The scarcity of a good or service and how much people desire it or need it determines its value.  How widespread something is wanted indicates opportunity for more production, and more gain.  This provokes mass production, lowering prices, and tending towards the affordability range for most people who work and add value to the economic system.

What denominates value is currency.  When a currency is stable, men know the relative value of the goods or services being effectively traded, by proxy of currency.  When the central bank manipulates the currency, grave distortions can occur in the economy, and ripple throughout society.

Intentional inflation, the policy pursued by the Federal Reserve, and interrupted only for brief periods in its existence, dilutes the currency.  This means, in effect, that those with savings lose value, and those with debt gain value.  Those in the know can benefit wildly from this phenomenon through careful buying and selling; the rich truly get richer, and the poor get poorer.

Is it “greed” that is causing the gap between the rich and the poor to unfairly grow?  Nope.  It’s good old-fashioned monetary policy. (And by “old-fashioned, I mean Louis XV-style.)

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. — Thomas Jefferson to John Taylor, Monticello, 28 May 1816.

Bank-paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs. — Thomas Jefferson to John Wayles Eppes, Monticello, 24 June 1813.