A Billion Here, A Billion There

October 9, 2001

Following the attack upon the World Trade Center in New York (there are World Trade Centers in about ninety countries) the President has been throwing money around as though it were going out of style. (Which, of course, it is!)

First there were billions for the airlines. It is interesting that the airlines, in the richest country on earth, in what we are told is a booming economy, were faced with insolvency after only a few days of inaction. The President could have simply exempted the airlines from meeting their obligations during this period, but it is much easier-and, presumably, a boost to the economy--- just to throw billions at them.

Additional billions-indeed, tens of billions-were promptly designated for cleanup, sky marshals, heightened security measures, etc., etc. And we were told to buy and fly, as a means of stimulating the economy, and getting the country "back on track."

It is hard to believe that the bright lads in Washington don't know the folly of this. But if, as we suspect, they do, then the alternative may be worse: that they don't see any other solution. The drug addict realizes his addiction is killing him, but what else can he do? It hurts so much to stop!

Perhaps the managers of our economy believe it to be so sick that principles be damned, something has to be done! Putting people to work, even if the work is just standing around, is one way of forestalling immanent economic disaster, and injecting billions into the economy will surely put people to work. If things are going to go to pot, let it be in the next guy's administration.

But prosperity, if it is genuine and permanent, is based upon more than hiring people to do something that they wouldn't otherwise be hired to do. Prosperity results from people working to satisfy the ordinary needs and desires of their fellows, who willingly pay for the goods and services offered. In prosperous times, new goods and services are being produced to satisfy the ever-growing demand. Taking money from group A (most of us) to give to Group B (airline companies, sky marshals, defense contractors, etc.) adds nothing of value to the economy. Indeed, it would be better to let the airlines fail, and be taken over by new management, which, hopefully, would do a better job of it.

But won't hiring people put money in their pockets, to buy goods and services? Sure, but those from whose pockets it was taken could have done that anyway, had they wanted to. Alternatively, the money can simply be created, i.e., inflation, instead of being obtained via taxation. But the brunt of inflation falls hardest upon those with the most money. Obviously, the depreciation of currency means little to those with little currency to depreciate. So even if Uncle throws about newly-created billions, the effect will be, eventually, similar to that of simply seizing it from people who already had it. Even if those victims can "afford" (assume that simple justice has nothing to do with it, as, unfortunately, it doesn't) to lose the money, or the buying power thereof, they will eventually have to increase their own fees or charges to protect themselves. No one gains, in the long run. And this is surely known to our leaders, as it is, and has been, known to anyone who has ever given it any thought.

The frightening thing is that the long run may not be of concern. Ultimately, absent a genuine reform of the system, the economic house of cards will, indeed, must, collapse, but pumping billions into the system will improve the chances that the collapse won't be today, and probably not even tomorrow. Whew! What a relief!

The attacks on the Pentagon and World Trade Center have been likened to the attack upon Pearl Harbor. A considerable school of thought holds that the attack of the Japanese was brought about by the restrictions placed upon them by our government. Some would say that they were goaded into it; that the attack was actually desired and anticipated, as a means of putting Americans to work again, after all the usual economic jumpstarts had failed. Certainly, we have placed restrictions upon the Arab world---- not to mention bombings and missile attacks!---- which have engendered their hostility toward us. It is unthinkable, however (at least now) to consider that the attack, while unexpected, was greeted with relief by our leaders, who saw in it the opportunity to inflate on a grand scale, with no one so mean, petty, and un-American as to criticize the process. The result, however, is the same. A wonderful opportunity to expand the money supply, and hire lots of people.

If our economy is truly so perilously close to collapse as to require such last-ditch measures, then the Arab fanatics have won. What they haven't directly accomplished has been brought about by our own hand. Instead of a return to honest, constitutional, money, we have an economic super-nova: a brilliant flash followed by extinction. Either there is no desire to fix the economy properly and permanently, or there isn't time enough to accomplish it.

In any event, hold onto your hat! The winds of change are blowing mightily!

China is poised to become world's biggest gold consumer.

Gold Eagle twitter                Like Gold Eagle on Facebook