A Case for Secession-Monetary Policy

By Patrick Samuels, author of: “Memories of a Former American”

(Editor’s Note: I’m trying to show how important monetary policy will be to a seceding state by showcasing other writers’ viewpoints.)

In this part of our case we are going to explore Washington’s monetary policy, focusing on two areas. First, who is driving our monetary policy and why. Second, what will be the result of this policy for us as individual Americans. These are crucial areas of inquiry because economics affects everything. The fundamental ability to buy and sell to meet our basic needs, to say nothing of our wants and desires, is at stake. If Washington is no longer following monetary policies, or even the dictates of common sense, for our benefit over the long term, but is instead seeking to line the pockets of a few for the short term and in so doing is putting the nation itself at great risk, something must be done. If it is systemic, which I believe it is, then it is more than reasonable to consider detaching ourselves from such a corrupt and insane system before we are sucked into the abyss of total economic collapse.

Article one, section eight of the Constitution gives the power to the congress to “coin money and regulate the value thereof”. The people, through their representatives, are supposed to be the ones driving monetary policy in this country. This is no longer the case. Nearly one hundred years ago we turned this most crucial regulatory power over to the Federal Reserve and a group of unelected bankers. The promise was that a central bank would even out the business cycle, tempering the highs and protecting us from the lows. In less than twenty years there were two depressions, one which we labeled “great”. Yet the folly continued and does so to this day. Why? Power and money, pure and simple. Through monetary policy the Fed can move the economy and by doing so make or break elected officials. It can also use its power to create and regulate the value of money and its increasingly broad regulatory powers to benefit those whom it chooses. This creates an incestuous relationship between national politicians and the “money men” who run the bank. It is the first and greatest special interest.

Let’s look more closely at this relationship. Who are the Federal Reserve and the Treasury populated with? Men from Wall Street. Particularly Goldman Sachs of late. Who are these men and women going to be concerned with pleasing? Investors and bankers on Wall Street. It is a cozy relationship that leaves most of us on “Main Street” out in the cold and footing the bill. Why should “we the taxpayer” be on the hook for hundreds of billions or even trillions of dollars in bailout money for private businesses? Why should we pay to protect the investments of insiders while our own investments have plummeted in value? Where did this idea come from that anyone or any business in this country is “too big to fail”? Failure is a essential part of the free market economy. Capitalism is the survival of the fittest and it is the fittest that provides us with high quality goods and services. The failure of businesses that become sloppy or inefficient provides entrepreneurs the opportunity to provide a similar good or service at a better price or with better quality. However, if a business knows that it has a government safety net and government help through regulation, it can afford to be sloppy and inefficient and remain confident a new small business will not come along and threaten its monopoly. Is it any wonder that Lehman Brothers, a primary competitor of Goldman Sachs, was not “too big to fail”? Or that General Motors, with all its union contracts, was bailed out while the independent dealers, who are small businesses, were forced out? Government should not be in the insurance business at all, at any level. It should not insure deposits at Bank of America, it should not insure homes in Florida, it should not insure the viability of General Motors. These are our tax dollars, money taken from us and given to others who were not smart enough to protect their own assets or run their business efficiently. Why should an employee at Ford be forced to have his money taken from him and given to General Motors? Why should my money be taken from me to rebuild a home in South Carolina after it has been washed away for the third or fourth time? Why should you be fleeced to pay the deposits of someone who put their money in a failing bank when you did your homework to ensure your bank was sound? None of it is right and we should not put up with it or expect to benefit from it.

When government relinquishes its role as referee among businesses, ensuring a just playing field, and becomes a partner with business, business decisions becomes political decisions with all the baggage that brings with it. Political considerations, corruption and special interests dominate decision making on both sides. On the business end, service and quality suffer because the primary goal of the business is no longer to be efficient and profitable but politically astute, because its survival depends more on the people it knows in government than on the customer. On the government end, special interests and lobbyists multiply, corruption abounds and the primary consideration of politicians is reinforcing their power through cooperating with or shaking down businesses, large businesses in particular. The big loser; we the people.. We are no longer the focus of the business model and therefore the quality of goods and services we receive falls. We are denied opportunities to compete as small businesses because the friends big businesses have in government tax and regulate us to the point where it is difficult, if not impossible, to compete. The playing field is no longer level. Government is no longer focused on our desires as constituents. It passes laws and regulations to benefit the big businesses and big labor regardless of how much they cost us in money and freedom. This is not the people’s government, it is no longer even a representative republic.

Now let’s see what grave consequences this abdication of responsibility and common sense has wrought. Consider first the great “hidden tax” that is the result of our absolutely insane monetary policy. The amount of debt and fiat money we have created to pay off special interests and create programs of dependency has led to inflation, the rate of which has varied over the years. Consider that in the first 124 years of our history before we had the Fed the dollar actually rose in value. Since that time it has fallen over ninty percent. Right now we consider it benign but there have been times where it has gone into double digits and destroyed wealth just as surely as a stock market crash. Look at it this way. Let’s say that inflation is a rather modest three percent. You put your money into a bank CD that has an APR of 2.75. At the end of the year the money you have invested will have lost buying power yet you will be taxed on the gain, stealing more of your wealth.

Inflation results from two things in our case. One is too much money. Anytime the there is too much of something, its value decreases. It is the law of supply and demand. Unfortunately, the people in Washington no longer understand basic economic reality. By printing money in the vast amounts we have been, we are making each individual dollar worth less. And this is not just the printing presses at the treasury we are talking about. It is the money the Fed creates out of thin air, simply adding zeros to its ledger to loan troubled banks and then being paid back in “real” money. The only thing keeping inflation in check now is our depressed economy. Know this, however. The only way Washington is going to extract itself from the insurmountable burden of debt and obligation it has created is to inflate the currency, making the debt shrink in real terms. Such hyperinflation may solve that problem but it will create true hardship among “we the people”. The second cause of inflation is the perception people have of the worth of the medium of exchange. In our case, the dollar. Pull a dollar our of your pocket and look at it. What is it worth? Only what you and I think it is worth. It is just paper and ink and it represents no tangible asset. Once upon a time it was backed by a certain amount of gold, but no longer. For the dollar, this issue is complicated by the fact that since World War Two, the dollar has been the reserve currency of the world. This means that it no longer depends only on what we think it is worth but what everyone else in the world thinks it is worth. Having one’s currency be the reserve currency can be a great benefit but it also comes with great risk. Today we see the risks. By piling up debt, printing money and engaging in tax and regulatory policies that weaken our economy, we have put ourselves in a weak and dependent position. We depend on foreigners to purchase the instruments of our debt in order to finance all the spending. As the Bible says “The borrower is the servant of the lender” (Prov 22:7) We have already allowed our foreign policy to be held hostage by our lenders but at some point those lenders will no longer see us as a good risk and will cease to believe the dollar is worth what it once was. If those foreign nations, particularly those who are less than friendly with us, decide to drop the dollar as their choice of investment and international exchange, our dollar will fall in value like a rock. I don’t think most of us understand what that would mean. We could fall from being the first first world nation to a third world nation virtually overnight. If the dollar becomes essentially worthless, with what will we purchase goods from other countries? We will have no credit, we produce so little in this country any more and we have put so many of our natural resources off limits. The people themselves will be reduced to poverty. All our investments, all the assets that exist in a series of ones and zeros in some computer will be gone. We will be much like the Soviet Union, perhaps more so than just economically. We will have a strong military that will become more ineffective over time because we will be unable to develop new technology or maintain the old. The people themselves, however, will be reduced to poverty. What will be on the shelves if imports dry up? Luxury goods will become scarce and there will be shortages of even the basic staples.

What will make this so much worse for us? Washington will be unable to ride in to rescue all the dependent people it has created. Washington under FDR could afford to experiment during the Great Depression. The fundamentals of the economy were strong. We had a manufacturing base that was the envy of the world We were utilizing our natural resources. We had had a sound basis for our monetary policy. The people themselves were capable of meeting their own needs and had strong communities and families for mutual support. None of that exists today. What will happen in our cities when the welfare checks stop arriving? We have removed morality and created dependency among so many that when the support structure is removed, chaos will result. If the poor of the cities riot and destroy property and lives as a result of a sports event or judicial decision, what will be the result when their basic needs are no longer being met? Is it far fetched to believe our cities will be burnt to the ground? That thousands of people will die? And for what? So one more politician could create one more program to pay off one more special interest or make one more person dependent so that one more person would vote for them and that politician could maintain their power.

We have dug ourselves a deep, deep hole of debt and obligation. We all know it, even the politicians know it. Yet instead of trying to fill it back up, we just keep on digging in the insane belief that the very act of digging will fill in the hole! Our actual debt owed is now about equal to our entire Gross Domestic Product and everyone in Washington is expecting it to double in the next decade, which means it will probably triple. That is impossible enough. On top of that there are the liabilities under Social Security, Medicare and Medicaid which are ten times that debt. There are only two ways out. One, Washington stops spending on anything but the essentials, the constitutionally authorized powers, and phases out its support of the welfare state, all of it. We all know that is not going to happen. Too many special interests and dependent voters ensure the workman will keep digging until he collapses and dies in the hole. The only other way out is to purposely inflate the currency to reduce the debt, destroying our economy and buying power and leading to the emergency that this administration is waiting for. Their reaction to it, if it happens under their watch, is perhaps even more frightening than empty shelves at Wal Mart. It is time to opt out of this insanity and its consequences. We and our children should not have to suffer the effects of this incomprehensible irresponsibility.

http://www.patricksamuels.com

Copyright © 2010 Secession University

One Response to A Case for Secession-Monetary Policy

  1. Darren Dimopoulos says:

    Hi there. I came about my way onto your site and merely wanted to compose a quick remark about this. I actually appreciate what you written here. God’s grace!

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