"When they allow a talk show host to play them like a two-dollar banjo, they demonstrate what kind of backbone they'll bring to the job later on, if we elect them. After they get elected will they continue to allow Jeff Crank to put a nickel in them and wind them up every Saturday morning?"

Barry Noreen, former columnist, Colorado Springs Gazette

Wednesday, November 4, 2009

THE DEFICIT PIT


By Robert Harkins

What has been will be again, what has been done will be done again; there is nothing new under the sun. Ecclesiastes 1:9

In 400 B.C., Aristophanes, in a mockery of Athens’ ruination of its currency, wrote this poem in his play, The Frogs.

I’ll tell you what I think about the way

This city treats her soundest men today

By a coincidence more sad than funny,

Its more the way we treat our money.

The noble silver drachma

That of old we were so proud of

And the recent gold coins that rang true

Clean-stamped

And worth their weight throughout the world

Have ceased to circulate

Instead the purses of Athenian shoppers

Are full of shoddy silver-plated copper

In 70 A.D. Flavius Vespasianus, continued the debasement of the Roman dinarius. The Empire was broke and as Vespasianus could not safely squeeze more tribute from vassals or taxes from Roman citizens he embarked upon other means, as old as civilization itself, the debasement of Rome’s currency, or to say it plainly, imperial theft. Rome paid its obligations to the citizen and soldier with silver Dinarius, once worth its weight in silver. When profligate consumption, and the cost of welfare (bread and circuses), bellicosity and war exceeded Vespasianus’ take in tribute and taxes, Rome paid its debts to citizen and soldier with a silver dinarius insidiously alloyed with copper. Because the Romans were not nearly as ignorant as the Emperor thought them to be, the price of all goods and services rose inversely to the quantity of copper worked into the Dinarius.

From the onset of the Caesars, from Caesar Augustus in the first century to Diocletion in the first century, the denarius lost 95% of its value through debasement. Ultimately, the continuous debasement of the Dinarius impoverished the Roman people, fatally compromised Rome’s national security, created despair and cynicism among its citizens, and contributed to the fall of Rome in the fifth century. Rome did not simply fall; first, its emperors drove it broke. Byzantium, the last citadel of ancient Rome survived. However, Byzantium too debased its coin, the Solidus by thinning extremely the once hefty gold coin. In the years before Byzantium’s collapse, the solidus was minted so thin that it could be bent in half in the fingers of one hand.

Today, the members of the Federal Reserve decree—with an authority as potent and unchallenged as the imperial authority of a Vespassian, or a Caligula— that the dollar shall be worth precisely what they say it is worth, no more and no less. Anne Nelson, in her new book, Red Orchestra, describes the consequence of Germany’s intentional debasement of its mark, a practice identical to Federal Reserve policy today in its technological debasement of the dollar.

By 1923, Germany had entered its infamous phase of hyperinflation. The government’s presses ran overtime printing worthless bills, and the value of German currency sank to over four trillions marks. Millions of citizens lost their life savings. Pensions accumulated by workers through decades of struggle, vanished overnight, along with their trust in middle-class values of diligence and thrift.

The German government’s printing of worthless marks worked an even greater tragedy than middle class impoverishment. Hyperinflation created a feeling of hopelessness, desperation and fear, a sense of betrayal and cynicism, and in too many an anger that would make them susceptible to the tortuous National Socialist propaganda that Germany’s defeat in World War I, was caused by Jews who “stabbed Germany in the back”.

Still, the idea that the economic destruction of the middle-class was caused by the German government’s plan to pay off an unconscionable war debt by the printing of worthless marks was nearly unthinkable. After all, Germany, notwithstanding the war, existed at the very pinnacle of modern European civilization. Germany was a leader in the sciences, in music, poetry, literature and philosophy. Germany was civilized. It simply could not be that the German leadership would betray and sacrifice its middle class by a means so sordid as the theft of its citizens’ life savings, retirements earned over decades of faithful service, and the purchasing power of its remaining marks, all this, by running the presses until the mark was worthless.

In his book End The Fed, Congressman Ron Paul marshals irrefutable evidence that past administrations and in particular, the current Administration, have used the Federal Reserve to cast Americans into a pit of national debt so deep that now, the insidious confiscation of American wealth— by oppressive taxation and the imposition of incalculable deficits including billions upon billions in payment of deficit interest— may well make of the national debt, a permanent, exhausting and obscene fixture of the American economy.

While it would be unfair to place the blame entirely on the present Administration, it is also true that in his first ten months of office the President and his party have incurred a debt that dwarfs the total of national debt incurred since the Founders met in Philadelphia in 1787 to draft an American Constitution. Included in this count are debts incurred from two world wars, a Korean and Vietnam war and a burgeoning welfare state that exists because there is a Federal Reserve to debase the dollar and a “progressive” ideology willing to use the police power to confiscate against their will the wealth of American citizens.

Today, however precarious is the existence of middle class wealth, the Administration nevertheless has pledged itself to a new and perilous path to social utopia. The Federal Reserve need not debase the currency with base metals. Now, simply by the stroking of a computer, the Federal Reserve, unchecked by congressional authority, may increase the money supply, immediately diminish the worth of every dollar, eliminate payment of interest on middle class savings, buy time to service the debt, put in place another bubble, and finally, avoid for a little while America’s day of reckoning.

Americans, therefore, have reached the precipice. The question is whether the President’s proposed cure for a recession caused by bald political and ideological corruption, a consequent housing bubble, bloated, blue-sky securities and financial collapse is worse than the disease. The critical question, of course, is what measures must be immediately taken to reduce the conflagration of national debt? But the question is not asked. The issue is not debated. Steps have not been and will not be taken. There is no plan whatever to slow or stop the American citizens’ descent into the pit. Instead, Americans are told by an Administration that has promised transcendent and purifying change, that trillion dollar deficits will and must continue for decades, or in other words, to a time long after this Administration has strut its bleak hour upon the stage of American government, and passed mercifully into a well deserved obscurity.

Americans are told that if the deficit is to be reduced, they must dig themselves deeper into the pit. They are told that the only means to deal with the debt is to spend trillions of newly minted dollars on a “stimulus package” and perhaps a second “stimulus package”, that they must pay hard cash so that others may purchase new automobiles, all this, so that unemployment will not exceed 8 percent, and to guarantee that the government will “create or save” three and a half million jobs.

Well, Americans have heard the promises and seen the results. It is this same Administration that promises solvency in return for a decade of trillion dollar deficits. Of course, the Administration will also raise income taxes, capital gains taxes, estate taxes, fines, penalties, a Health Care Mandate, and by its imposition of additional Medicaid costs upon the states, insure that the states will also impose punitive income taxes on Americans.

Americans are assured that while every government scheme to provide free medical care to the masses, Medicare, the Medicare Supplement Plan, Medicaid and the Massachusetts Plan, are now pitifully bankrupt, and rife with fraud and waste in the billions, Americans are once again assured— that by the infusion of trillions of debased dollars into the economy over the course of a decade or more— Americans will at last ascend from the deficit pit. They will— by the mindless embracement of repetitious oratorical platitudes and the addition of base metals to the American coin— become again an affluent society.

The question should be asked: how will these trillions in debt be paid? What federal programs will be trashed? What sacrifice and austerities will government impose on itself? What taxes will it forgo? Will it substantially reduce federal salaries so that they are equal to the salaries that taxpayers earn? Will it abolish the yearly $350 billion dollars in taxes it will squeeze out of the private sector in the name of Cap and Trade? To these questions alas, elegance fails and only crude words are capable of telling the raw truth. Here finally and at last, as it is revealed to Americans, in deficits and sophistry, in plain and transparent mendacity, is the change promised in 2008.

Still it is good that we Americans will finally learn something about imperial theft: as did Athens during the life of Aristophanes when they discovered their drachmas were “…full of shoddy silver-plated copper;” as did the Romans when they too discovered that their pure silver dinarius was corrupt with worthless copper; as did the citizens of Byzantium when paid in a solidus minted so thin they could bend it in the fingers of one hand; and finally as did the German people when confronted with the truth that the national impoverishment of the German people was a cornerstone of German government policy.

Well Americans, whither the dollar?

And what is to be done?

This Administration has promised Americans something new.

But there is nothing new under the sun.

What do you think?

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