News & Analysis
In Praise of Gentle Deflation Against Greenbackers and Other Paper Promoters
Bernanke, the Reluctant Revolutionary ... Inside Ben Bernanke are two birds. The hawk hates inflation. The dove hates unemployment. On Aug. 1 the chairman of the Federal Reserve expressed his inner hawk. Despite the longest period of high unemployment since the Great Depression and inflation that's actually below the Fed's target, the rate-setting committee that he runs stood pat. At the end of a two-day meeting in Washington, the Federal Open Market Committee issued a statement acknowledging that the U.S. economy has "decelerated somewhat" but did not announce any fresh measures to stimulate growth. Doves were dismayed, if not surprised: "They really took a pass," says University of Oregon economist Tim Duy, who runs the Fed Watch blog. – BusinessWeek
Dominant Social Theme: Oh, no! Your money is worth more! The banksters must be at it again.
Free-Market Analysis: Ben Bernanke has gazed out over what Bob Casey calls the Greater Depression and ... decided to do nothing at all.
"Good!" we say. The only action Bernanke could take that we would favor would be dissolution of the facility over which he presides. But that is not going to happen any time soon, though sometime it might.
In the meantime, we will have to put up with continued slavish adulation of a bearded academic who apparently believes he can regularly fix the price and value of money for billions of people around the planet. Here's some fulsome text from the BusinessWeek article excerpted above:
Because of its demonstrated competence in crisis management, Bernanke's Fed is being pulled into solving problems that the White House and Congress should be dealing with but aren't. Housing? Under Bernanke the Fed has bought mortgage-backed securities to make loans cheaper and boost home sales. The fiscal cliff of spending cuts and tax hikes that threatens the economy at the start of 2013? The Fed's loose money policies, by stimulating growth, are compensating at least partially for the chilling effect on hiring and investment that fears of the cliff are already causing.
Bernanke is a reluctant revolutionary. After the global financial crisis of 2008-09 broke out, he pushed the nation's central bank into radical actions not attempted since its founding in 1913, including near-zero interest rates and more than $1 trillion worth of bond buying. He did it because he saw no choice. Every step of the way, he looked the part of a quiet academic who would rather be working on his next paper for the Journal of Money, Credit and Banking.
Let's get this straight. Bernanke is NOT a reluctant revolutionary. He is a pampered and egotistical academic from MIT who like any other modern-day figurehead is propped up by the powers-that-be to participate in the shadow play of directed history.
We mentioned above that Bernanke "apparently believes" that he can successfully fix the price and volume of money. But really it is difficult to tell what is in Bernanke's head, as with anyone's. Perhaps he does sincerely believe in his overwhelming brilliance. Or perhaps he is aware that he is yet another bit actor in the larger drama of global collapse.
We have little doubt where the power elite that seeks to run the world wants the global economy to end up. It seeks nothing less than a full-blown international catastrophe that will send people reeling into acquiescence of world government and world money.
Like miserable animals, people are being flogged into agreement via war, economic depression and a torrent of authoritarian laws and regulations. Within this context, fortunately, there is the Internet Reformation and the consequential education of free-market thinking and the Austrian school of the modern, laissez-faire economy.
The modern Austrian school, or variants of it anyway, are based on three primary principles.
The first is the glorious analysis of the business cycle, which shows us quite clearly that the world's booms and subsequent busts are caused by central banking manias.
There is NO ONE who can explain how someone like Bernanke knows how much money to print. It simply is impossible. Only currency competition and the marketplace itself can determine the demand for money and commensurate volume and value.
The second pillar of free-market economics is what Ludwig von Mises called "human action." This holds quite simply that people will do what is best for them no matter what government planners have decided. People are not potted plants but energetic and unpredictable actors.
The third principle of the modern-day free-market schools is that government planning is price-fixing. Econometrics, the idea that statistics can "model" society's inevitable future, is simply not feasible. Most if not all economists who provide assurances that their models are valuable should be out of a job.
A corollary to the third principle is that only the marketplace itself and competition can provide for optimal outcomes. Government itself, laws and regulations, never perform as advertised. Politicians, with the best of intentions, always fail.
Of course, as free-market thinking has made progress in the past decade, thanks to what we call the Internet Reformation, it has run into an inevitable backlash. Much of the backlash can be seen as being promoted by the power elite that is trying to build world government and wishes to confuse people about the value of free markets and freedom generally.
The major fulcrum of government power is money and the power elite retains the power over money by using various dominant social themes, scarcity-based promotions. These memes are intended to scare people into giving up power and wealth to specially prepared internationalist institutions.
One of these dominant social themes is the idea of central banking. But this meme is failing and thus the powers-that-be have come up apparently with two rebuttal memes.
The first one is the idea that the world should go on a formal gold standard or at least that gold should be part of a larger basket of currencies that will comprise "money."
The second clever elite meme is the idea that "government" rather than private sector "banksters" should control money. This is, of course, an absolutely ludicrous formulation as the power elite works via mercantilism and doesn't much care whether money is backed by a state-controlled gold standard or a state-controlled paper standard.
What can generally be said about gold and silver is that the elites hate such money metals and wish to control them. Under no circumstances are gold and silver to circulate freely.
The proponents of paper money have come on lately. Whether it is Greenbackerism, Georgism or social credit, these proponents claim that if only the "people" control "government" instead of the "banksters" all will be well with the world.
In fact, all these solutions mandate vast government control over money and none of them can answer the single most important question of all, which is: How do monetary controllers KNOW HOW MUCH TO PRINT? The short answer, along with the long answer, is that they do not and cannot.
One can complicate this single, salient observation with (mostly false) stories about political heroes who stood up to Money Power and were injured or killed for their troubles. But when one looks closely at these tales, as observers like economist Gary North have done, they prove not to stand up to scrutiny. Quotes are made up, facts falsified, etc.
In fact, money and currency are quite simple things! Modern free-market thinking provides us with an eloquent and brief solution. We do not need to complicate our lives with vast schemes that mandate all land must be owned in common or that interest is an abomination and must be done away with.
No, no ... free-market thinking is very simple – eloquently so – in this regard. Let people and regions compete! Keep Leviathan away from the market. Within this context, one observes that smaller is better and that regional and money and tribal and clan communities are preferable to vast official unions.
This is not such a dramatic observation after all. Our current elitist mania for ever-bigger governmental units is bound to fall apart at some point. The future of planet Earth is likely one of smaller, not larger, communities. There will be an inevitable devolution.
Within the context of smaller communities, money would (and will) inevitable blossom in numerous manifestations. Gold and silver will compete with paper solutions.
But if these solutions are not monopolized we shall see that a gentle price inflation offers us NATURAL LAW. If money is not overly controlled and monopolized we shall see, as hard-money economist Murray Rothbard argued, that a gentle deflation is within the NATURAL ORDER.
Absent controllers, money would be responsive to monetary conditions and its value would gently drift up over time as technology made various solutions of modernity more efficient and less expensive. This is why we know once again that free-market thinking provides us with reality-based solutions.
We don't need Fabian-esque paradigms like Georgism and social credit to complicate our lives and provide us with "sophisticated" outcomes. Eventually, the complexity of the modern Leviathan shall collapse and at that point fragmentation shall provide the opportunity for better living.
Hopefully, people shall seize the moment to build FREER societies. This is the natural way, the way of competitive money stuff generated and circulated without overwhelming coercion or the harsh manipulation of Money Power.
Do not let the sophists of state-mandated money standards or paper money issuance of any sort confuse you. They will shout that freedom is not free and that proponents of freedom are actually part of a totalitarian dialectic. They will argue that up is down, black is white and that, as Orwell said, liberty is simply a lie. Lord knows what compels them. But there IS such a thing as freedom and one does not need a large government to guarantee it.
A change is coming. We may have to go through tough times but eventually we shall find our moorings in smaller and better societies. It will be up to us, then, to seize the opportunity. Educate yourself about the REAL fundaments of livable communities – and then pass that education to family, friends and colleagues. Free-market thinking is not merely a theoretical alternative.
It is our aspiration as humans to create communities in which all can thrive and few, if any, are oppressed. There are many songs of Satan and few songs of self. There are many false prophets, as well, who will tell you that freedom is not free and that it is necessary to use the force of government to assure an optimal freedom.
Conclusion: Calm yourself. Breathe in and out. Listen to your heart beating, the wisest noise of all.