Remember how we have talked about the disingenuousness of the liberal left and of their Fabian socialistic tactics? Well … the political machinations of the last couple of weeks is a classical expose’ of their modus operandi.
Let’s see what the issue was and what was done. The nation was and is facing an economic crisis of the first magnitude. In past few months our national debt has been approaching its legal limit, 14.5 trillion dollars ($14,500,000,000,000), that is 14.5 million million dollars … an incomprehensible amount of money, $48,333 for each man, woman and child in the United States of America; all borrowed money that is secured by bonds issued by the US Treasury. The bonds are for a time certain, which means that they must be redeemed in the near future and they bear interest that must be paid. Since the US government has no means of making money, as it is a parasite on the public, its only method of obtaining the funds necessary to retire its obligations is by taxation or out and out theft, both of which are liberally used.
Out and out theft? … pretty strong to say isn’t it? Well, let’s see. Last month we talked about “Money and Wealth” where we learned that real wealth is owning something tangible that can be traded for something else tangible … generally a commodity. We learned that a commodity can be money; throughout history, people have used big stones, cows, horses, grain, vegetables or any number of other commodities for money, but over the centuries the commodity metals, gold, silver and copper for the most part have become the standard of money because of their scarcity, durability and portability. The biggest clinker in the program came when bankers discovered that they could loan the money that they were holding in trust for you to others at interest. This worked very very well, because the likelihood of you or your co-depositors wanting all your money back at a point in time was very low. So low, in fact, that they found that they could loan out several dollars, generally paper notes, for every dollar of commodity money that they held on deposit. Of course, initially, the paper bills promised redemption in specie (metal coin) on demand to the bank. This process, called fractional reserve banking, is debatably the foundation of modern banking. At first, the bankers loaned 3 or 4 dollars for every dollar on deposit, but soon it became, legally sanctioned of course, as it remains, 9 or 10 or more dollars per dollar deposited. Although, on occasion, depositors became disenchanted with their banks and attempted to withdraw all their money en-mass which would quickly cause the bank to fail (a run on the bank) … go bankrupt … but this generally did not happen … that is, too often, as long as there was real money in the vaults. But then … enter the government!
After a long, tortured and convoluted history in the banking industry, suffice it to say, the industry was ceded to, in our case, to the US government who, contrary to the intent of the Founders of our country in the US Constitution, in turn ceded monetary policy to a consortium of private bankers who control the Federal Reserve Bank. At first, the Fed gathered all the gold and silver held by all the banks and deposited it in their vaults. From those deposits, the Fed began their own fractional reserve lending to their respondent banks by issuing their own paper money. In the beginning, anyone holding one of their notes could (ostensibly) present it to a member bank and redeem it (simplifying) in silver or gold at the rate of a one dollar bill for a one ounce silver dollar or twenty one dollar bills for a one ounce gold piece. But the government being the government, it soon found that the fractional reserve idea was not sufficient for its yawning mouth. The Fed soon was printing notes in numbers far beyond the traditional bounds of fractional reserve. The public was slow to catch on that there were far too many paper dollars in circulation, but slowly they did begin to catch on. This was first manifested early in FDR’s administration. Very quickly, as the number of bills in circulation exploded, the price of gold rose from the traditional rate of 20 dollars per ounce to 35 dollars per ounce which allowed those in the know to trade 20 paper dollars for an ounce of gold and then melt the gold into bullion and sell it back to the government for $35/oz. Roosevelt made it illegal for Americans to own gold and withdrew gold coins from circulation. (Manifestly un-Constitutional) The Fed then cranked up the presses and printed. Every new dollar put into circulation proportionally devalued every dollar already in circulation. Soon the international price of gold soared to $100/oz. or more, but not in the US, where the price remained $35 … by law. It wasn’t too long before Richard Nixon outlawed silver coinage and declared that neither silver nor gold was money. He then made the Federal Reserve note “legal tender for all debts, public or private.” And the Fed’s presses were modernized to high speed operation.
So where are we now? The first thing to understand is that gold and silver, the commodities, are real money, something of worth and that the Federal Reserve notes have no intrinsic worth and are therefore nothing but a fiat representative of wealth. As more and more Federal Reserve notes are printed, their buying power continually diminishes. Gold and silver, being commodities, vary only slightly in their relation to other commodities in a relationship to supply and demand, but are steadfastly a measure of real wealth. When the price of gold hit $1600 a few weeks ago, it meant that a commodity that could have been bought for $20 in reserve notes in 1929 now required one thousand six hundred of them. The dollar will now buy one eightieth of what it used to. Today’s dollar will not buy what 2 cents would when I was born.
So how does this affect you? The Democrats (and some Republican RHINOS), Keynesians all, believe that the increasing money supplied by the Fed is healthy. They know, if they are economically aware, that injecting more printed dollars into circulation is the sole cause of inflation. They may or may not know every per cent of inflation is mirrored by the same per cent of devaluation of the Fed’s “legal tender.” These profligate spenders say that 4 to 8 per cent inflation is “healthy.” If a dollar in your savings account or your 401(k) is making a gain of 5% per year and inflation is 8%, you have lost 3% of your investment that year. This is the government’s most subtle (and vile) tax, that is if you are in a forgiving mood, or just plain thievery if you are cynical like me. Deficit spending is inflation. The Fed has to print money to buy the Treasury’s bonds and when this is done, the Treasury puts that fiat money into circulation by paying the obligations of the government. This is totally disingenuous. Of course, if someone (China?) buys the bonds with dollars that we have previously spent on their goods, we have to pay them back with interest with our tax dollars … or we can print more money and pay them back with devaluated dollars. This is also totally disingenuous. The Keynesians see this as healthy, but many of us do not.
But back to the Fabians. The Tea Party Republicans, cognizant of the foregoing, saw an opportunity to stop the deficit spending (the amount that will added to the national debt this year) and to begin to get our fiscal tragedy under control by refusing to raise the debt limit. This far and no more! They determined not to raise the debt and additionally proposed to submit a Constitutional Amendment to the States for ratification that would prohibit deficit spending. Laudable!
The Fabians howled like mashed cats. They pointed out that they were the reasonable people in Washington … after all they had been projecting that they would need to borrow about 3 trillion more than the legitimate revenues due from the taxation of the people would provide, but after all … they were reasonable and would consent to spending only 1 ½ trillion more than revenues … they were willing to compromise by meeting the irrational Republicans and Tea Partiers half way.
(Here we should digress for a moment!) Do we remember the Fabian way? A ridiculous demand for twice what they want, followed by a “responsible” compromise. Do we remember why the Fabians do this? The intention of that early and prominent Fabian, George Bernard Shaw and his co-conspirators, men that he knew, men like V. I. Lenin, Trotsky, and Mussolini, (acquaintances and friends all) was to overthrow Freedom, Capitalism and the established order and to install the “Hope and Change” of a new world order … Utopian Socialism … Communism. They were prepared to use any and all methods to do this, but the most obvious and quickest way was to ruin the money of the old order and bankrupt it. If they could do this, they believed the result would be revolution, something for which they had planned decades to exploit.
So with their demagoguery, the help of the press, the impatience of the public, the intransigence of the President, the slavish condescension of the rank and file of the Democratic members of the US Senate to their leaders, not to mention the faltering will of the RINOS, the Fabians slowly but surely got the 1 ½ trillion that they really wanted by nebulous promises for future concessions that they will undoubtedly disregard or subvert to gain their compromise with the Tea Partiers.
The profligate spending will continue unabated; the dollar will continue to lose value; the savings of thrifty Americans will become more and more worthless. It is almost assured at this point that the dollar will suffer the fate of the German Mark of the Weimar Republic, or the money of dozens of banana republics. Our savings, stocks, bonds, annuities and money will all become worthless. Do you believe that with prices rising by ever escalating percentages that the obligations of Social Security, Medicare, Medicaid, Obama Care and a myriad of other Federal promises can be met? Will China and Japan be angry (or worse) when our bonds are paid off with dollars that have zero purchasing power? Who is going to pay the mortgages on houses and commercial property held by the banks when no one has a job and government regulation precludes anyone from offering a job? Why would graduates pay their student loans for the diplomas that they received for now non-existent jobs?
The charade of the past few weeks is an absolutely magnificent demonstration of the political maleficent disingenuousness of the enemies of Freedom and of the practical application of Fabianism that we have been blogging about here since we started our writings. It seems to me that we are beginning to see what is happening … but I don’t think our leaders are getting the picture … or maybe they are part of the problem.
Anyway … I told you so …