In the Kingdom of the Blind, the One-Eyed Man is King
by L. Carlos Lara
The average American citizen simply wants to be able to live a peaceful life, be financially secure and debt free. Why then, do so many of us fail to attain this noble goal and 98% suffer from cash flow problems till the day we die? Is it ignorance? Is it poor judgment? Is it our lack of time to properly research every aspect of money decisions, or is something else occurring that we simply are totally unaware of?
Unfortunately, there is something at work in our social, economic and political system which promotes an environment of increasing impoverishment and is, for all practical purposes, invisible to the eyes of the general populace. The problem I refer to has existed, in one form or another, for centuries and has caused most of mankind to be subjected to a life of bondage, hard, back-breaking work, a decreased life span, and virtually no hope whatsoever for the future. For thousands of years, the idea of freedom lived in the hearts of men mostly as a dream until, in what seemed almost miraculous, that condemning trend was reversed. With that change, there came soon thereafter, a new idea for a society of people; the creation of the United States of America.
Unfortunately, the problem could not be kept locked out for long and it found its way into the new country’s government before the ink had even dried on its constitution. The effects of its process, now in its more modern form, has manifested grievous consequences upon our nation in the last 100 years and especially in more recent decades. The net effect is that we are once again losing the most precious thing we have and with it, our wealth. These huge losses, that we would never willingly allow had we known exactly how they come about, now occur routinely without our knowledge or consent and move us backward and closer toward a place where we really don’t want to go. John Maynard Keynes (1883-1946), the most famous economist of the 20th Century, stated it this way:
“There is no subtler or surer means of overturning the existing basis of society than to debase the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which only one man in a million is able to diagnose.”1
The debasement of our currency, how, why and when it is done, alludes the general public, but even the most astute are unable to detect it. In order to further explain this controversial puzzle, I want to pause here quickly to make an important and clarifying statement. I write today from the viewpoint of, not as an economist, but rather as a student of economics. I am also a business man, a father of three children and a grandfather of four. Additionally, I am a military veteran, but more importantly, I am a concerned citizen. To discern this mystery we must first realize the fact that man, in general, desires to live and prosper at the expense of others. The annals of history bear witness to this truth. This is the main reason all societies eventually establish government. This fatalistic desire leads man to pervert even the laws of government and it uses the law to violate property instead of protecting it. When this happens, everyone wants to participate in making the laws, either to protect oneself from what is now clearly “legal theft”, or to use it for theft themselves. In time, it turns into an entire system where there is an attempt to enrich everyone at the expense of everyone else i.e., to make theft universal under the pretense of organization. If we are to have any hope of stopping its advancement, we must first be able to see how this system manifests itself in our daily affairs. We must be ever vigilant and never take our eyes off political power, especially, government’s power over money. To see this clearer, perhaps we should start by asking a question more relevant to our own time.
Where is government getting all the money to bail out the financial markets?
Thoughtful Americans everywhere, regardless of political party preference, or whether or not they have a background in finance or economics, are now asking this very powerful question; if not openly, certainly to themselves. And, of course, this question demands an answer. It is that type of question that emerges from that uneasy feeling inside so many of us these days that says to us that something has gone terribly wrong in our world and that the answers we are getting from the media, from financial institutions, financial experts, and from our political leaders don’t quite make sense and, therefore, do not fully satisfy. We sense, that in the end, we are personally going to be hurt. The sad truth is that we are right, because there is no such thing as an unlimited amount of money, or is there? We ask ourselves, “Can it be so terribly complicated that no one seems to be able to agree on the answers or the solutions? Is it possible that the average person with common sense is somehow incapable of understanding it? Surely there is a non-complicated answer to all of this, an explanation that does make sense? Or, are we really just sheep, the “Joe six-packs “and “Soccer and Hockey Moms” of America that don’t really need thorough explanations because we wouldn’t understand them anyway.”
You most likely would agree with me that it is safe to say that there is a certain segment of society who is content not knowing the details. With more than 50% of the populace now totally dependent on the government, this makes it all the more factual. There are those too, who out of fear or because it is all too depressing, do not really want to know the truth. There is certainly the indolent that makes up a part of society and then, of course, there is the productive person. The productive person is always engaged in producing, having left the responsibility to protect our production to government. However, when things get as bad as they are now, the productive person is forced to stop producing and take a closer look at what is really going on. I am very confident in expressing the opinion that the average productive person can understand what is underneath all of this. The problem can be disclosed and fully understood to all those that genuinely have a desire to know. That desire to learn is usually triggered by financial pain, the loss of wealth or the sense of increasing financial danger. These are powerful motivators and can serve to increase our knowledge. If you find yourself among this group then you are in the presence of good company. You will find that this article may be of some help.
Government can only spend what it takes from its citizens.
Please remember this important fact, “a government can spend only what it takes from its citizens.”2 No great economist, dead or alive, would dispute that statement and that statement alone can answer the public’s main question. Where government actually gets the money and how it ultimately takes it from its citizens is what is not fully understood. Also, keep in mind that your and my war is not against certain people or political parties’ per-se, but rather against an “idea” which is false, unjust and delusional. It stands alone and removed from our personal intentions in that we actually profit from it without really wanting to and suffer from it without really understanding the cause of the suffering. Our own human nature places all of us there. Nevertheless, it is crucial to at all times keep in the mind certain undisputable facts. Principally, that Government is not a wealth generator; therefore, it can not grow the economy. The more government spends, the worse it is for the health of the economy and thus for economic growth. Our war is with legal theft.
Monetary Inflation, the indirect tax
Government extracts revenue from society through taxes and it has two methods which it can use. The direct tax, which comes in many forms, is openly visible and by nature has a limit; otherwise society will rise up against it. The indirect tax is “monetary inflation” and is mostly hidden; consequently it is used repeatedly and without limits. It is difficult to explain exactly how monetary inflation works and it certainly can not be fully addressed within such limited space, however, one large part of the problem, and which works as an ally to government, is the general population’s confusion with the word “inflation” which most people take to mean the high cost of living, or high prices. Additionally, most citizens are completely lost as to how the Federal Reserve Bank actually functions.
Government has a complete monopoly on money. The main instruments of government for monetary and credit manipulation are central banks, the banking and financial system in general, and government lending institutions. The main means by which governments attempt to manage the economy are by reducing and expanding credit and the money supply which is the true definition of inflation. Reductions of credit and money, which is referred to as monetary deflation, is not popular. Therefore, monetary inflation has been the rule, and deflation the exception. In consequence, government’s inflationary policy has been destroying the value of the currency for decades and has resulted in the piling up of huge debts, now at $31.4 trillion in 2023. This is the debt of the American citizen which at some point will need to be paid. In the meantime, prices on everything will continue to rise.
Increases in Money Supply drives up prices
Adding to the problem is the foundational economic thinking of our current social, economic and political system. The essence of this thinking and which takes in most influential economists is “Keynesian Economics.” All the creation of the money poring forth to solve our current financial crisis is the Keynesian economic model and is the same Keynesian policies we have been subjected to for decades. In fact, the current crisis is the outcome of these policies. John Maynard Keynes, the mastermind of this economic way of thinking, held that one could not have complete trust in a market economy, that ultimately it would self-destruct. Therefore, he advocated the need for government and central banks to manage and control the economy by direct intervention. Successful management under this framework is done by influencing the overall spending in an economy. According to Keynes, it is spending that generates incomes. The more money that is spent, the better it is going to be for society. What drives the economy is spending, not saving. Since the largest segment of spending in the economy is consumer spending, consumer spending is seen as the motor of the economy and must be constantly fueled, especially in recessionary periods.
However, as traditional economists have continually pointed out, trouble erupts when money is created “out of thin air” by the central bank and the fractional reserve banking of commercial banks. Such money gives rise to consumption, which is not backed by any production. It leads to an exchange of “nothing for something.” It actually undermines wealth generators (the producers) and impoverishes all individuals, except for those who get the money first; government and mega-bankers. It leads to increases of the money supply in circulation and drives up prices on all goods and services. Only the first to receive the new money benefit from the expansion, but always at the expense of everyone else. Not only does this inflation of the money supply create nonproductive consumption, but it sets up bubble activities that can not be indefinitely sustained and eventually must burst sending the economy back into an even worse recession. All rescue packages aimed at saving the economies of the world are just laying the foundation for more recessionary misery in the months ahead. Needless to say, this state of affairs is not good.
One of the best ways to look at all aspects of what we have stated is to take a closer look at the Welfare State in the United States and its center piece, Social Security.
Point No.1: The primary concern of Welfarism is the distribution of goods and services and not production.
Welfarism’s political theory has to do mainly with changing government from its role of maintaining the peace by punishing offenders to the provider or distributor of goods and services. In essence, it separates production from distribution by separating the fruits of labor from their producers. Unless it is tied to capitalism, in one form or another, it has no plan for production. Politicians are expected to gain office by promises of a better distribution of wealth and favors. In turn, followers are rewarded by a larger slice of the pie.
Clarence B. Carson in his economics text book makes this enlightening statement about Welfarism:
“Those who view welfarism as a system of social justice would undoubtedly characterize it in other terms, but that is the face it wears as a politico-economic system. At any rate, welfarism has its roots in socialism. In the United States the socialists roots are unavowed, mainly, one suspects, because avowed socialism has been decisively rejected at the polls.”3
To this, Professor Paul A. Cleveland adds the following summation:
“The imposition of welfare policies in a nation is best understood in the context of socialism. In this country it would be the evolutionary form of socialism. That is, in an effort to eliminate property rights, socialists begin by proposing gradual policies of change. The implementation of welfare programs serves as a useful beginning for they undermine property rights. These policies veil the force of government behind a mask of benevolence even though the thrust of them is the gradual erosion of property rights and the development of socialism. Often the proposals are willingly accepted because their stated end is to alleviate the suffering of the poor.”4
The fundamental problem with socialism is that eventually it turns the force of government upon the people. It takes away individual effort and keeps people from accomplishing productive tasks. The more socialists redistribute income in a society, the less income they find available to redistribute. The full evolvement of socialism is oppressive.
Point No. 2: The Social Security program most nearly resembles a pyramid scheme economically.
The early beneficiaries at the top of the pyramid get the greatest advantage from the redistribution while those at the bottom bear the financial burden and stand in danger of not getting out what they have put in, even if they should live long enough to do so. Additionally, social security is not actuarially sound even though at one point it was called “old age survivor’s insurance”. It is based on an illusion that an endless number of people can all receive more in benefits than they have paid in, consequently the program has reached the crisis of running out of funds.
At its core, Social Security is the classic example of a collectivist and redistributionist plan. Neither the individual who is taxed, nor his heirs, will necessarily receive anything from the money taken in to pay for retirement benefits. The money is forfeited to the general fund when it is received, and any given person can only receive benefits when, according to changing laws, one becomes eligible or qualifies. A person, however, might die before he retires and never receive any benefits at all. It is redistributionist in that the money is paid out not according to whose money it was, but what ever the existing program mandates.
Social security is now nearing the limits. The tax on wages has already reached the point where it is a great financial burden on the employer, the employee and the self employed. The only recourse in order to continue the program is to reduce benefits in the near future.
Social Security, however, is only one of the many welfare programs of the United States that have been in existence for decades; other redistributionist programs include the various Farm Programs, the Federal Housing Administration, The GI Bill, government support for schooling, and tax money support for colleges and universities. There is the government Food Stamp Programs, Medicaid, the various Public Health Services, Special Schools for the Handicapped, the number of “entitlement programs” for this, that and the other, seem almost endless. The cost to pay for all of this is astronomical!
Furthermore, the United States has practiced welfarism not only here at home, but abroad. Since WWII, the government has expended huge amounts of money in all sorts of aid to foreign countries. And, since government is not a producer of goods, that means that it takes goods from those that produce them and redistributes them to its favorites i.e., those that have the power to govern. Make no mistake, many of these welfare programs take from the “have- nots” to give to the “haves.” Some of these have been lucrative military programs, huge construction projects where the beneficiaries are often builders, construction companies and top management personnel. The medical, pharmaceutical, and insurance professions have reaped huge bonanzas over the years from government programs. Urban Renewal meant for the poor, reaped huge profits for the wealthy and actually drove the poor from the inner cities.
“Welfarism turns the rules of economy upside down and wrong side out. It operates on the assumption that the problem of production has been solved and that the problem is one of distributing the wealth more efficiently and properly.”5 – Clarence Carson
Point No.3: Evolutionary Socialists require government regulation, taxation and monetary and credit manipulation to pay for it all.
The tendency in most modern western countries has been to leave productive property in private hands in order to foster welfare programs rather than to take complete control over it all. After the dismal failure of Socialism in Britain after WWII and the collapse of the Communist Empire, most “evolutionary socialists” were convinced that government ownership of the means of production was neither politically desirable nor necessary for the attainment of their ends. They could have welfarism without such government ownership and plan the economy through government regulation, taxation and monetary and credit manipulation.
Its premises, as earlier discussed, are that there are surpluses of goods, of labor, and that society is made up of abundance when the science of economics clearly teaches that our world is a world of scarce resources. It supposes that economic activity is spurred by the buying of consumers when, in actuality, it is the productive that provides the means of economic activity. Again, Carson writes:
“The logical consequences of such a topsy-turvy economy would be poverty, widespread hunger and deprivation, and want. After all, redistribution only works when there is something–indeed, a great deal of something–to distribute. Welfarism turns the incentives toward consumption and away from production.”6
In effect, it has been the tempestuous alliance between capitalism and welfarism that has kept the system going this long. The worst of the consequences have not been economic as much as moral, ethical and societal. The currency, of course, has been debauched by welfarism. By this I mean that the value of our money has been progressively destroyed where the value of our dollar is getting to the point where it is worth less than the paper it is printed on.
“Government has not found it expedient, since they are popularly elected, to raise the money to pay for the mounting debt of redistribution by direct taxation. They have as a major supplement, turned to the hidden tax of monetary inflation, thus laying hold of the wealth of the productive, without appearing to do so.”7 – Clarence B. Carson
The savings and the means of saving by using our money have been taken away, stolen, as it were. The welfare state depends, too, on taking away large portions of the property produced through earnings by direct taxation. Above all, much of the independence of the people has been given up or eroded by an increasing dependence on government and its privileged businesses and institutions.
So far as government has taken over the responsibility and the means for looking after the well being of people, the people have tended to yield up their own responsibility for doing so. It is as if most of the people in America have now concluded that it should be only the theoretician, the economist and the historian that should concern themselves with the long term consequences of the government’s interventions. In the meantime, one must live, and in the meantime, “long live the king!”
Message of Hope
What do you think of when you hear the word “Revolution”? Do you think immediately of acts of physical confrontation with government? Raising barricades in the streets, fighting policeman, or storming government buildings? Let me change that picture for you and impress upon you a different way to look at it. A Revolution is a mighty, complex, long-term process. It is a movement with many vital parts and functions and it includes people of all different walks of life; with each person having its unique part to play in the great complex. A long term movement set on accomplishing what seems impossible through an idea; a process that includes the abiding belief that its idea can change the world.
“Take for example the major movement of the great classical liberal of the seventeenth, eighteenth, and nineteenth centuries. These, our ancestors, created a vast sprawling, and brilliant revolutionary movement, not only in the United States but throughout the Western world that lasted for centuries. This was the movement largely responsible for radically changing history, for almost destroying history as it was previously known to man. For before these centuries, the history of man, with one or two luminous exceptions, was a dark and gory record of tyranny and despotism, a record of various absolute States and monarchs crushing and exploiting their underlying populations, largely peasants, who, lived a brief and brutish life at bare subsistence, devoid of hope or promise. It was a revolution, a classical liberalism and radicalism that brought to the mass of people that hope and that promise, and which launched the great process of fulfillment. All that man has achieved today, in progress, in hope, in living standards, we can attribute to the revolutionary movement, to that “revolution”. This great revolution was our father; it is now our task to complete its unfinished promise.”8 So wrote Murray N. Rothbard in 1969.
Even though government has gone a long way toward establishing its dominance over American society since WWII, it has done so in contention with our freedom. Despite the current trends in the world, there is still great cause for optimism about the future of liberty. Private libertarian institutes through out the United States are in high gear as never before with publications, students, scholars, conferences, seminars, media exposure, and new professorships–all are soaring to new heights. Great numbers from all over the world have been drawn to these think tanks of libertarianism and the classical Austrian School of Economic thought that has always refuted Keynesian Economics since its inception.
Nearly everyday, the financial press references the Austrian School of thinking, particularly in our precarious financial world. Inspired by great thinkers such as Mises, Rothbard, Hayek, Hazlitt and others who spoke boldly and truthfully, and when they were threatened and ordered to shut up, they refused. They paid a high professional price, but their influence is for the ages.
We must fully realize that a people that believe in a planned society by government will never restore liberty or the protection of the fruits of our labor. At the same time, a people that believe in liberty will never be lorded over by an oppressive government. What makes the crucial difference is the world of ideas. These private institutes, funded with no connections to powerful elites, are the home of such people. They are places for learning the economic principles that our children and grandchildren should be taught. Places where the flame of liberty remains bright and an expectancy that a dramatic change in the political and social landscape can happen nearly overnight—when the ideological conditions are right. Every conscientious citizen should become a part of one.
When we look at each case in history, when revolutions happened, we find something in common to all of them. Intellectuals dedicated to liberty were out in front and ready to make the case. They took risks. They told the truth without fear. They worked to see their visions realized in their lifetimes. Never give up hope. We are far from being alone in this fight. Continue the pursuit of education and, in turn, educate others.
Join us.
Notes
1. John Maynard Keynes, The General Theory of Employment, Interest and Money, Published 1936
2. Ludwig Von Mises, Human Action, 3rd revised edition, Contemporary Books, Inc.
3. Clarence B. Carson, Textbook: Basic Economics, Second Edition 1988, Boundary Stone Publishers
4. Paul A. Cleveland, Ph. D., Study Guide to Basic Economics, Second Edition 1988, Boundary Stone Publishers
5. Clarence B. Carson, Basic American Government, Copyright 1993, American Textbook Committee, 3105 Fourth Avenue, Phoenix City, AL 36867, Boundary Stone
6. Clarence B. Carson
7. Clarence B. Carson
8. Murray N. Rothbard, the Libertarian Forum, Vol.I, NO. VII, July 1969